My Lords, I turn to the amendment to Clause 1 tabled by my noble friend Lord Randall of Uxbridge. As he is aware, it would in practice have no effect because it simply commits the Government to uprating UK state pensions, as they do now.
However, my noble friend spoke passionately at Second Reading, and again with great passion and commitment today. He eloquently shared with us the case studies of people impacted by the lack of reciprocal arrangements and the freezing of pensions. The long-standing policy of successive Governments for over 70 years has been that UK state pensions are payable worldwide and are uprated in countries overseas where there is a legal requirement to do so—for example, in countries where the UK has a reciprocal agreement that requires uprating. I look forward to the debate on the issue but, first, I would like to make some points about our reciprocal agreements with other countries.
The UK has reciprocal agreements with several countries, and most of these require uprating. There are only two reciprocal agreements which do not allow for uprating: those with Canada and New Zealand. A similar agreement existed with Australia until early 2001, when the Australian Government withdrew from it. Unlike the UK, Canada and New Zealand have residence-based state pensions. The reciprocal agreements with them broadly allow for periods of residence, employment or contributions in one country to be considered as periods of residence, et cetera, in the other for the purposes of entitlement to a state pension.
The systems in New Zealand and Canada are also means-tested to some extent. For example, New Zealand takes overseas pensions fully into account in its superannuation schemes. New Zealand law also requires that notional income is calculated if a pensioner does not claim his or her state pension from an overseas country. This means that any future state pension increases would be taken into account and the moneys would go to the respective Treasuries, so pensioners on the lowest incomes are unlikely to benefit from increases in their UK state pension. It might also mean an increased tax bill for some overseas residents and the loss of their welfare benefits in their chosen country of residence. This Government believe that our responsibility is to pensioners living in this country, rather than effectively making payments to other Treasuries.
The agreements with Canada and New Zealand were negotiated and agreed some time ago. The pattern of the UK’s reciprocal agreements with other countries is historic. It is based in part on Commonwealth ties but also on the political context at the time of concluding the agreement. That gives rise to inconsistencies. For example, we have an agreement with some Caribbean countries, such as Jamaica, but not with others. The agreement with Jamaica requires uprating. It has been suggested by some that uprating could form part of discussions on future free trade agreements—for example, with Australia and Canada. However, state pensions are not in scope of free trade agreements.
There are no plans to change the policy on uprating UK state pensions overseas. The Government have not entered into a new reciprocal social security agreement since 1992, as my noble friend Lord Randall referred to, and have no plans to enter into new agreements.
The noble Baroness, Lady Sherlock, asked about the number of pensioners living in frozen-rate countries. It is approximately 500,000. I regret that I do not have any numbers for veterans.
My noble friend Lord Randall raised, as did other noble Lords, the question of a moral obligation to rectify this anomaly. The policy on this issue is long-standing, as I have already said, and one of successive Governments. It has been in place for some 70 years and, although I know this will disappoint noble Lords, there are no plans to change it.
My noble friend and the noble Baroness, Lady Sherlock, talked about the impacts on the Windrush generation. UK state pensions are payable worldwide to eligible people based on their NI record. I regret to tell the noble Baroness that we do not know the number of people affected among the Windrush community.
My noble friend Lord Randall asked about pensioners who are resident overseas who have paid their NI contributions, so pensions payable abroad should be fully indexed. The rate of contribution paid is never earned entitlement to the indexation of pensions payable abroad. This reflects the fact that the UK scheme is primarily designed for those living in the UK.
My noble friend Lord Randall raised the issue of consistency across countries, and a particular point about Canada. Canada has a bilateral agreement with the UK that does not cover uprating. The UK sought a reciprocal agreement with Canada that included uprating, but this was rejected as legislation prevented Canada paying its pensions overseas.
My noble friend Lord Randall and other noble Lords raised the issue of the Government’s moral duty to uprate state pensions overseas. The decision to move abroad is voluntary and remains a personal choice, dependent on the circumstances of the individual. For a number of years, advice has been provided to the public that the UK state pension is not uprated overseas except where there is a legal requirement to do so.
Given that the amendment states that any uprating order made under the Bill would uprate abroad in cases where there was already a legal requirement to do so, I urge my noble friend to withdraw it because it has no practical effect, given that the Government are already required to do that in law. However, I welcome the opportunity he has presented to debate the broader issue of uprating overseas.