Social Security: Reciprocal Agreements Overseas (Hansard, 11 March 1991)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, I regret no progress has been made in negotiating a reciprocal social security agreement with 7 Canada which would provide for British pensioners living there to receive index-linked pension increases. The cost of paying full United Kingdom rates of benefit in Canada would be about £104 million, while to do the same for all pensioners abroad would cost £337 million at April 1991 rates of benefit.

§ Lord Stallard
My Lords, I thank the noble Lord for that truly unoriginal and totally unacceptable reply. Is he aware that the pensioners we are discussing served this country and paid into the National Insurance Fund not one whit less than the British pensioners who now receive index-linked pensions here and in 30 other countries where we have reciprocal agreements? Would it not be more constructive to apply the same principles to the pensioners referred to in my Question, and so end what is becoming totally unjustified discrimination? That position is even more unjust when the Conservative Party is at this moment spending vast sums of money on trying to canvass the votes of those pensioners for the forthcoming election.

§ Lord Henley
My Lords, the noble Lord is correct that reciprocal arrangements exist with 31 countries to allow for pensions to be up-rated. However, that is not the case in a further 138 countries. As I have stated, it would cost a great deal to up-rate pensions in Canada and other parts of the world. It would cost £104 million to do so in Canada. The simple fact is that the pensioners who went to Canada knew the situation when they went there —they knew that their pensions would not be up-rated.

§ Lord Carter
My Lords, will the Minister confirm that the situation in Canada also applies in Australia, New Zealand, South Africa and in many other countries around the world? If people have paid for their pensions throughout their working lives, why should they not share the benefits on the same basis as every other pensioner? If it is a matter of the cost of doing so, could not the Government use some of the money that they are spending to bribe people to leave SERPS?

§ Lord Henley
My Lords, the noble Lord is quite correct as regards the situation in the four countries that he mentioned. In a total of another 134 countries pensions are not up-rated. As I have said, when those pensioners went abroad, they knew the situation. Probably the majority of those pensioners went abroad years before they became pensioners. They are probably also entitled to a partial Canadian pension. Therefore they are not entirely dependent on the partial UK pension that is not up-rated which they receive in Canada. We have no knowledge of cases of severe hardship.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that those of us who have negotiated reciprocal agreements in the past know well how difficult it is in a great many cases to reach a fair conclusion between the governments concerned? Is my noble friend further aware that up-rating pensions paid in an overseas country in accordance with changes in this country may be wholly irrelevant to the cost of living in the country concerned?

§ Lord Henley
My Lords, my noble friend is entirely correct. Inflation will differ from one country to the next. My noble friend is also correct in saying that it takes a great many years to negotiate such pension agreements. I understand that it took some 10 years to conclude our recent agreement with Norway.

§ Lord Stoddart of Swindon
My Lords, is the Minister aware that he has still not satisfied many of us on the matter of why pensioners who have paid exactly the same amount of contributions as pensioners here should have a dynamised pension here but not have a dynamised pension if they move abroad, especially to Commonwealth countries? Why are Commonwealth countries treated worse than many other countries outside the Commonwealth?

§ Lord Henley
My Lords, there are two points to stress here. As I have said, the pensioners we are discussing knew of the situation when they went abroad. They knew that their contributions would entitle them to a non-up-rated pension. My right honourable friend the Secretary of State must look to his available resources and use them as effectively as he can.

§ Lord Stoddart of Swindon
My Lords, the Minister must realise that pensions represent an insurance contribution and an insurance policy. If a person took out an insurance policy with, for example, the Prudential, and the Prudential did not honour the terms of the policy because the person had moved abroad, the company would be had up for fraud.

§ Lord Henley
My Lords, the noble Lord fails to understand how the national insurance scheme works in this country. It works on a pay-as-you-go basis. That means that this year's contributions go to this year's pensioners. My right honourable friend has to ensure that the resources are used as effectively as possible. The funds that an individual pensioner contributes are not earmarked for that individual pensioner.

§ Lord Stallard
My Lords, in replying to one of his noble friends, the Minister said that it takes a long time to negotiate pension agreements. We have been trying to obtain an agreement with Canada since about 1972. We have been negotiating for almost 20 years now. The Canadians have offered to help to fund the initial processes of the reciprocal agreement. There is no objection to the agreement from the Canadian side. The objection comes from the British side. The Minister said that the pensioners we are discussing knew the situation before they went abroad. However, that applies to the pensioners in the 31 countries with which the Government have reached reciprocal agreements. Why will the Government not reach a reciprocal agreement with Canada?

§ Lord Henley
My Lords, as the noble Lord has said, we started to negotiate with Canada some 18 or 19 years ago. The initial problems arose at the other end. I have been trying to stress that the problem is one of cost. The scheme would cost £104 million. What the Canadians have offered would by no means offset the cost to the National Insurance Fund in this country.

§ The Duke of Norfolk
My Lords, will my noble friend give us an assurance that the Government are continuing negotiations with Canada, and are not treating the matter as a closed subject? The sum of £104 million is a lot of money for our country, but it is an even greater sum for the pensioners concerned. I get the impression that the Government are not making any further effort to try to reach a conclusion.

§ Lord Henley
My Lords, we shall continue to negotiate, but I must stress that £104 million is a considerable sum of money as my noble friend has said.