The government started a fierce debate earlier this year when it announced plans to axe the Winter Fuel Payment for all but the poorest pensioners. Under new rules, UK retirees are only eligible for the allowance if they receive Pension Credit. But what about if you are a British national living overseas?
Some pensioners who live in parts of the European Economic Area and Switzerland are eligible for the Winter Fuel Payment if they meet a strict list of criteria, including new means-testing requirements. But quirks in the system mean not all European countries are treated equally, with some expats not eligible to apply for anything at all, even if their income is low.
Low-income pensioners living in Italy are able to apply for the benefit, for example, while those living in France are not. This all goes back to a “temperature test” introduced by former chancellor George Osborne in 2015.
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The Department for Work and Pensions (DWP) said Winter Fuel Payments are only payable to eligible pensioners in the EEA and Switzerland where the average winter temperature is the same or lower than the warmest region in the UK (the south west).
MoneyWeek asked the DWP for further information on how this is calculated, including whether overseas territories are included in the average for each country. Online reports suggest this could be the case.
This could be a factor in why countries like France are excluded (despite having some cold regions), given its overseas territories include islands like Guadeloupe, Martinique, Saint Barthélemy and Saint Martin.
Payments for expats: which countries are eligible for the Winter Fuel Payment?
Expats in seven countries lost the payment when Osborne introduced the temperature test in 2015. These included Cyprus, France, Gibraltar, Greece, Malta, Portugal and Spain.
At the time the new rules were announced, Michelle Mitchell, the former director of Age UK, said: “While the introduction of a temperature test could allay concerns about expats in hot countries receiving the payment, it is important that proposals for change do not complicate the system or result in those in need losing out.”
Existing rules mean a pensioner living in the French Alps would not qualify for the payment, while someone living in southern Italy might.
Under current rules, you may still be eligible if you live in one of the following locations:
- Austria
- Belgium
- Bulgaria
- Croatia
- Czech Republic
- Denmark
- Estonia
- Finland
- Germany
- Hungary
- Iceland
- Ireland
- Italy
- Latvia
- Liechtenstein
- Lithuania
- Luxembourg
- Netherlands
- Norway
- Poland
- Romania
- Slovakia
- Slovenia
- Sweden
- Switzerland
Winter Fuel Payment: how does means testing work for expats?
From this winter, expats will also have to pass a means test in order to qualify for the Winter Fuel Payment. This means the approach is in line with domestic policy.
Crucially, you will need to receive an equivalent benefit to Pension Credit in your home country. The government also stipulates the following additional criteria:
- You have reached official UK state pension age
- You receive a UK state pension
- You have a genuine and sufficient link to the UK – this could include having lived or worked in the UK
- The UK is responsible for paying your benefits
- You moved to an eligible country before 31 December 2020 and are covered by the Brexit Withdrawal Agreement
MoneyWeek has contacted the DWP to confirm what counts as an equivalent overseas benefit in the above list of eligible countries, as this information is not currently available on the government website.
How many expats receive the Winter Fuel Payment?
Last winter, 34,300 Winter Fuel Payments were made to recipients in EEA countries and Switzerland, costing the government £17.6 million in total.
This figure is small when you consider the fact that 10.7 million UK pensioners are set to lose their Winter Fuel Payment this year in total, according to figures from Age UK. However, those living overseas who rely on the payment are still likely to feel aggrieved.
Overall, Age UK says 82% of UK pensioners will not qualify for the benefit under the new rules. It is currently unclear what proportion of expats will be impacted.
More generally, pensioners should think carefully about the benefits they could lose if they decide to retire abroad. For example, while moving to the EEA or Switzerland won’t impact your state pension, relocating to a country like Australia, Canada or South Africa will mean it gets frozen.
The ramifications of a frozen state pension could be far more serious than losing the Winter Fuel Payment. Analysis from investment platform Interactive Investor shows that over 453,000 UK pensioners living abroad in retirement receive £3,000 in state pension payments annually on average – nearly £4,900 less than their counterparts who remain in the UK.
The discrepancy is partly because pensioners in some countries do not benefit from the state pension triple lock.
“Those contemplating retirement overseas should plan well in advance to ensure they’re able to enjoy a comfortable retirement,” says Myron Jobson, senior personal finance analyst at Interactive Investor. “It is worth considering seeking advice from a financial adviser to fully understand the implications of retiring abroad and plan accordingly,” he adds.
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