The British Pensions in Australia (BPiA) says the UK would be better off in the long run if it paid all expats their deserved pension entitlement. Picture: Thinkstock

BRITAIN appears to have backed away from a commitment to hold talks with Australia to resolve a decades-old anomaly that short-changes British expat pensioners living Down Under, because of the cost.
But groups like British Pensions in Australia (BPiA) disagree, saying the UK would be better off in the long run if it paid all expats their deserved pension entitlement.

It's an argument that has dragged on for some 20 years, and impacts around 250,000 UK citizens who have decided to see out their lives in Australia.

Under rules going back to the 1950s, the British government legislates to index pensions each year to account for inflation.

But this excludes Brits living in Australia, which means their pension remains unchanged from the when they retire.

In Britain, the weekly pension has doubled in the past 20 years.

The ruling also impacts 150,000 expats that live in Canada, 38,000 in South Africa and 45,000 in New Zealand, and many more that live in other countries.

But expats move to countries like the United States or Israel, they get the full indexed pension because of bi-lateral agreements with Britain.

The fact all people working in Britain pay into National Insurance scheme at the same rate to fund the state pension doesn't seem to matter.

And consecutive UK governments from both sides of the political spectrum don't appear to want to engage in new
agreements to level the playing field - despite usually being supportive on the issue when in opposition.

BPiA chairman Jim Tilley said the approach of government is contrary to all of the core values of British society to treat people fairly, equally and without discrimination.

"These guys are a bunch of hypocrites," Tilley told AAP.

Tilley has the support of senior Australian Labor government minister Jenny Macklin, who believes the ruling is discriminating and has pursued the UK government for change.

In October last year she appeared to make some headway, after getting a commitment from Britain's secretary of state for work and pensions Iain Duncan Smith to open discussions.

But last week's visit to Australia by UK foreign minister William Hague appeared to dash hopes of change.

Quizzed on the issue of frozen UK pensions in Sydney, Hague said he could not hold out any prospect of change.

"As a new government in Britain we have inherited a huge budget deficit ... so there is no prospect of us being able to take on a major new area of expenditure," Hague told the Menzies Research Centre.

A spokesperson for Macklin told AAP it was disappointing the British government was seemingly backing away from the commitment made by Duncan Smith.

"This is a matter of substantial unfairness to British pensioners living in Australia," the spokesperson said.

"The Australian government will continue to push the UK to change its pension policy as a matter of priority, whenever possible."

BPiA and its sister group, the International Consortium of British Pensioners, say they won't be fobbed-off by the British government crying poor.

The groups argue paying the UK pension equally is affordable and will be beneficial for the UK budget in the long term.

Tilley says not only are over 550,000 British pensioners living abroad not getting their fair share, the ruling is discouraging tens of thousands of people leaving the UK, who would otherwise like to join their families abroad,
or return to their home lands.

A study conducted by global forecaster Oxford Economics in 2011 into the uprating of frozen-rate pensions estimated it would cost the UK Treasury 630 million pounds - or more than $A950 million in today's dollars - to pay all expats equally in the first year.

But by 2018 it would have a positive budgetary impact, rising to 1.1 billion pounds in the 15th year of
implementation and 7.2 billion pounds in the 20th year.

This is because the forecaster expects bringing the pension rates into line would encourage between 19,000 and
43,000 people to move abroad each year - saving an estimated 7700 pounds per pensioner in healthcare
spending and other age and pension-related benefits.

There would also be benefits for Australia if the issue was resolved.

Tilley, a former national financial controller at BHP Billiton, estimates it would bring in an additional $A450 million
into Australia and save Centrelink $150 million a year in means-tested top-up pension payments.

Tilley has vowed to fight for justice.

"Each year they (the government) legislate to discriminate against us, ... they should be ashamed of themselves,"