Retiring abroad? Frozen state pension could cost you £70,000

• The triple lock ensures that the state pension rises each year by the highest of three measures: 2.5%, inflation, or average earnings growth
• British citizens who retire outside the UK may find their state pension “frozen”
• British pensioners could miss out on nearly £70,000 in state pension payments over 20 years if their entitlements are frozen when they move overseas
• It is estimated that approximately 450,000 British pensioners are currently affected by the government’s frozen pension policy.

UK citizens who retired overseas before the triple lock was introduced 15 years ago, and whose state pension entitlements have been frozen, would have missed out on nearly £26,000 in payments, according to new calculations by interactive investor.

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The triple lock, introduced by the Conservative–Liberal Democrat coalition government in 2010, ensures that the state pension rises each year by the highest of three measures: 2.5%, inflation, or average earnings growth.

However, British citizens who retire outside the UK may find their state pension “frozen”, meaning it remains at the rate it was when they first started receiving it abroad, with no annual increases for inflation or wage growth.

The triple lock came into effect in the 2011-12 financial year (from April 2011), meaning that someone who moved overseas in 2010 would not have benefited from any uprating of their state pension under the triple lock.

This would have resulted in a state pension entitlement £25,832 lower than that of a counterpart who remained in the UK. This figure is based on the full rate basic state pension, which was replaced by the new state pension in April 2016 for those reaching state pension age on or after that date.

Those whose state pension entitlements were frozen after moving abroad 10, five, or one year ago could have missed out on £13,162, £7,391 and £471 respectively, compared to individuals who remained in the UK. The figures for five and one year are based on the full rate of new state pension.

Whether a British citizen’s state pension is frozen depends on the country they move to. Retirees relocating to a country within the European Economic Area, Gibraltar, Switzerland, or a country with a social security agreement with the UK (except Canada, Australia, New Zealand) will continue to receive annual increases in their pension.

The All-Party Parliamentary Group (APPG) on Frozen British Pensions estimates that approximately 450,000 British pensioners are currently affected by the government’s frozen pension policy.

Source: interactive investor.

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Many pensioners dream of spending their golden years overseas - whether it’s for a warmer climate, an improved quality of life or to be closer to family and friends. But while the lifestyle may be appealing, it’s vital to consider how such a move could affect your state pension entitlement.

“If you move to a country where the UK has no uprating agreement, like Australia or Canada, your state pension will be frozen at the level you first receive it. That means you won’t benefit from the valuable triple lock increases that pensioners in the UK enjoy each year, and over time, that can seriously erode your spending power.”

The £70,000 future cost of a frozen state pension

British pensioners considering retirement abroad during the current tax year could miss out on nearly £70,000 in state pension payments over 20 years if their entitlements are frozen when they move.

This estimate assumes full state pension payments are uprated by 3.7% in 2025 (the Office for Budget Responsibility’s inflation forecast for September 2025), and by 2.5% per year thereafter in line with the triple lock.

Even over shorter time frames, the gap between UK and frozen overseas payments is significant: £37,477 over 15 years, £15,838 over 10 years, £3,666 over five years, and £443 over one year.

Source: interactive investor. Assumes that full state pension payments are uprated by 3.7% (the OBR’s inflation forecast for September 2025) and then 2.5% each year in line with the triple lock.

Myron Jobson says: “Planning ahead is key. Make sure you’ve checked whether your chosen destination is affected and consider topping up any gaps in your national insurance record to maximise what you’re entitled to. Deferring your state pension can boost the amount you get, though it won’t help with uprating in frozen countries.

“Most importantly, building a strong private pension pot can help provide the financial cushion you’ll need to maintain your standard of living abroad, regardless of state pension freezes. Budgeting carefully and preparing for rising living costs can go a long way in making your retirement overseas both comfortable and secure.”

“It is worth considering seeking advice from a financial adviser to fully understand the implications of retiring abroad and plan accordingly.”