Estimated costs of uprating State Pension in frozen rate countries: 2020 to 2024
Published 14 February 2019
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This publication is available at https://www.gov.uk/government/publications/estimated-costs-of-uprating-state-pension-in-frozen-rate-countries/estimated-costs-of-uprating-state-pension-in-frozen-rate-countries
Background
The policy on uprating UK state pensions for overseas residents is that the annual index-linked increases are paid outside the UK where there is a legal requirement to do so. Examples of this are where UK State Pension recipients are living within the European Economic Area or where there is a reciprocal agreement between the UK and the host country that provides for uprating of the UK State Pension.
Around 510,000 recipients of the UK State Pension living overseas do not get State Pension increases – 84% of those live in Australia, Canada and New Zealand.
This publication updates figures last published in 2013 on the costs of uprating the State Pension in frozen rate countries.
Results and methodology
Estimated costs of uprating the State Pension in frozen rate countries each year
| Year | Estimated cost (£ millions) |
|---|---|
| 2019 to 2020 | £600 million |
| 2020 to 2021 | £610 million |
| 2021 to 2022 | £610 million |
| 2022 to 2023 | £630 million |
| 2023 to 2024 | £640 million |
| Total 2019/20 to 2023/24 | £3,090 million |
Note: Estimated costs have been rounded to the nearest ten million and are reported in nominal terms.
Estimates of projected costs
To produce estimates of projected costs we use the latest 5% extract of State Pension administrative data as a base, uprate the frozen State Pension amounts and forecast changes to the caseload and associated costs.
A summary of the approach:
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Use the latest March 2018 5% data extract available as a base – this gives us the population and State Pension amounts.
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Uprate the frozen State Pension amounts to the amounts they would be by March 2018 if they had been uprated. We calculate the uprated State Pension using the relevant indices for those parts of the State Pension that are from basic State Pension and additional pensions, or new State Pension, protected payments and extra State Pension.
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To estimate the costs for subsequent financial years we make adjustments to the underlying caseload and associated costs by:
- applying mortality rates to existing cases, based on age and gender
- adding forecasts of future State Pension claims, which are based on historical trends and expected changes in the population, and are adjusted for mortality
- uprating State Pension amounts using economic assumptions from the Office for Budget Responsibility
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The total cost for a given financial year is the difference between the uprated State Pension amounts and the frozen State Pension amounts.
As with all estimates of projected costs, there is a degree of uncertainty, however where possible we have taken steps to try to minimise any significant measurement error.
Statement of Compliance with the Code of Practice for Statistics
The Code of Practice for Statistics (the Code) is built around 3 main concepts, or pillars:
- trustworthiness – is about having confidence in the people and organisations that publish statistics
- quality – is about using data and methods that produce statistics
- value – is about publishing statistics that support society’s needs
The following explains how we have applied the pillars of the Code in a proportionate way.
Trustworthiness
DWP analysts work to a professional competency framework and Civil Service core values of – integrity, honesty, objectivity, and impartiality. The analysis in this release has been scrutinised and received sign off by the expert lead analyst.
We protect the security of our data in order to maintain the privacy of the citizen, fulfil relevant legal obligations and uphold our guarantee that no statistics will be produced that are likely to identify an individual, while at the same time taking account of our obligation to obtain maximum value from the data we hold for statistical purposes. All analysts are given security training and the majority of data accessed by analysts is obfuscated and access is business case controlled based to the minimum data required.
Quality
The cost estimates are derived from rich State Pension administrative data. The method has been quality assured by DWP analysts. It applies the relevant up-to-date State Pension rates to uprate frozen rate amounts and accounts for the fact that, in future years, the frozen rate State Pension caseload will change.
Value
This ad hoc analysis provides an update on a previous costing to provide users with more up-to-date information.
This will reduce the administrative burden of answering Parliamentary Questions, Freedom of Information requests and ad hoc queries to ensure timely responses to public queries around uprating the State Pension in frozen rate countries.
The figures have been seen in advance by Ministers and officials, in line with the Code, where pre-release access does not apply for an ad hoc analysis release.
Further information
Where to find out more:
Contact information
For press enquiries, contact DWP Press Office on: 0203 267 5125