Annette Carson had spent most of her working life in the UK, and during that time she kept paying her full National Insurance Contributions (NICs) and UK taxes where applicable. She relocated to South Africa in 1989 for work purposes, and continued paying NICs to ensure that on retirement she would be eligible for the full UK State Pension. This she had started drawing in September 2000. She then realised that the amount she received would not be increased in line with her peers in the UK, and her pension was being “frozen” at the level at which she first started receiving it.
In 2002 Carson brought a legal action against the UK Government seeking Judicial review of its ‘frozen pension’ policy. The case contended that the failure of the UK Government to pay to pensioners resident in certain overseas countries the annual inflation uprating to their UK State Pension, which was paid to residents in other countries, constituted discrimination in contravention of the Human Rights Act 1998 based on EU Human Rights legislation. The UK State Pension was payable in countries like the UK, the European Economic Area (EEA) and a number of disparate countries (the United States, for example), whilst not being payable in predominantly Commonwealth countries such as Australia, Canada, New Zealand and South Africa. The civil action was held in the Administration Court of the Queens Bench Division of the High Court. Carson lost her case, with the Honourable Mr. Justice Burnton saying that the decision to uprate the UK State Pension was legislative rather than judicial. Justice Burnton said that he:
Understood how very many of the expatriate UK pensioners who do not receive uprated pensions have a strong and understandable sense of grievance……They feel that they have been deprived of an increasingly substantial part of the fruit of their contribtions……as a result, they have formed associations to press their cause for equal treatment”.
The United Kingdom is the only OECD country that discriminates between pensioners living in different overseas countries.
The Government argued that successive Governments have taken the view that increases in the UK State Pension were based on economic factors within the UK, and it would be unfair on UK tax payers to incu
Justice Burnton also stated that:r additional taxes to support those residents that have chosen to live abroad.
“…a government may lawfully decide to restrict the payment of benefits of any kind to those who are within its territorial jurisdiction, leaving the care and support of those who live elsewhere to the governments of the countries in which they live. Such a restriction may be based wholly or partly on considerations of cost, but having regard to the wide margin of discretion that must be accorded to the government, I do not think it one that a court may say is unreasonable or lacking in objective justification”.
Justice Burnton concluded that the decision as to whether expatriate UK pensioners received state pension benefits (including any annual increases) was a political decision, rather than a judicial one and he therefore dismissed the case, but he gave leave to appeal.
Costs were awarded against Carson.
The appeal was held before the Supreme Court of Judicature Court of Appeal (Civil Division) before Lord Justice Simon Brown, Lord Justice Laws, and Lord Justice Rix which was heard on 17 June 2003.
Lord Justice Laws conceded that the current situation was “haphazard”, quoting the UK Minister of State Jeff Rooker who, on 13 November 2000, said:
I have already said I am not prepared to defend the logic of the present situation. It is illogical. There is no consistent pattern. It does not matter whether it is in the Commonwealth or outside it. We have arrangements with some Commonwealth countries and not with others. Indeed, there are differences among Caribbean countries. This is an historical issue and the situation has existed for years”.
Successive UK Governments have taken the view that increases to the UK state pension are based on economic conditions in the UK and that it would be unfair on UK taxpayers to pay a higher level of taxes in order to pay pension increases to people who have chosen to become resident elsewhere in the world. Motions to pay the annual increases to those UK pensioners living abroad who do not currently receive these increases have been submitted to both Houses of Parliament in June and July 1995 during the passage of the Pensions Bill, which called for uprating to be paid. All were defeated with significant majorities. The UK only uprates the State Pension where there is a legal liability to do so – this includes all UK pensioners living in the UK, the EEA, and a number of other countries where there are bilateral agreements in place relating to the UK State Pension. Whilst bilateral agreements were agreed with Australia (1953), New Zealand (1956) and Canada (1959), they did not include the uprating of the UK State Pension. Australia cancelled its bilateral agreement with the UK in 2001 because the UK Government would not uprate the State Pension for those UK pensioners who had emigrated to Australia. This was not an issue when the UK joined the EEC since bilateral agreements were in place for all of the EEC countries except Denmark. These bilateral agreements did facilitate the uprating of the UK State Pension.
The three Law Justices dismissed the appeal; leave was given to Carson to appeal to the House of Lords
The Carson appeal was heard by the Appellate Committee of the House of Lords which was made up of: Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, and Lord Carswell.
Carson argued that she was being unfairly treated. She says she had paid the same National Insurance Contributions (NICs) as a United Kingdom resident and therefore she should receive the same pension. She is supported by associations of expatriate pensioners in South Africa and elsewhere. Lord Hoffman said:
Carson’s case is typical of over 400,000 United Kingdom pensioners living abroad in countries which do not have reciprocal treaty arrangements under which cost of living increases are payable. Arrangements exist for countries within EEA countries (European Union countries, Norway, Iceland and Liechtenstein) and a number of other countries such as the United States (“treaty countries”). However, there are no such treaties with South Africa, Australia, New Zealand and many other countries”.
Carson complained that she was being unfairly treated, since she had paid the same National Insurance] Contributions as a United Kingdom resident and therefore she should receive the same pension. She is supported by associations of expatriate pensioners in South Africa and elsewhere. Whilst the case had generated a good deal of passion. Lord Hoffman stated that:
The sense of grievance may be understandable but it is not justified. There is nothing unfair or irrational regarding the different treatment of people living abroad”.
Lord Hoffman agreed that there was no doubt that Carson was being treated differently compared to a pensioner who has the same contribution record but lived in the United Kingdom or a treaty country, but that in and of itself is not enough to amount to discrimination. Carson agreed that she could have no complaint if the United Kingdom had rigorously applied the principle that the UK state pension is for UK residents only and not payable to UK pensioners who had moved abroad, or who had, like her, relocated for work purposes. Lord Hoffman stated that it was unnecessary for the UK Government to try to justify the sums paid since it distracted attention from the main argument.
Lord Hoffman dismissed Carson’s appeal.
In Lord Rodger’s opinion, the fact that Carson gets less by way of pension does not constitute unlawful discrimination contrary to Article 14. He dismissed Carson’s appeal.
Lord Walker stated that he could understand Carson’s dissatisfaction at this state of affairs, but, in his opinion, she was not misled concerning what her entitlement would be. He believed that this was an issue of macro-economic policy which was within the responsibility of the UK government, and therefore he dismissed Carson’s appeal.
In Lord Nicholls’s opinion, Carson’s complaint would need to be specifically covered as a Convention right in Article 14 of the Convention (Prohibition of Discrimination) and on a ground stated in article 14. If this was true, then does Carson’s difference in treatment, i.e. alleged discrimination stand up to scrutiny? Sometimes, where the position is not so clear, a different approach is called for, in which case the court’s scrutiny may best be directed at considering whether the differentiation has a legitimate aim and whether the means chosen to achieve the aim is appropriate and not disproportionate in its adverse impact. Lord Nicholls had decided this was not the case and dismissed Carson’s appeal.
Lord Carswell had a dissenting opinion. Whilst it had been made clear in the Supreme Court that as far as UK law is concerned the difference in the way different cohorts of pensioners are treated is in accordance with the law, Carson and her fellow “frozen” pensioners can only hope that their appeals to logic and a sense of fair play will eventually prevail, contrary to their experience to date.
Lord Carswell considered the impact of the European Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”), as brought into play by the Human Rights Act 1998 and whether it was unlawful for the Government to operate legislation which has such an effect, and Carson had been discriminated against. The UK Government maintained that her case could not be compared to other, similar cases, and therefore she had failed to demonstrate discrimination. Lord Carswell stated that other judgments had missed the fact that Carson’s financial position cannot be directly compared with those of pensioners either in the United Kingdom or in other countries, since exchange rates, inflation rates and the cost of living vary between these countries, therefore her case could not be directly compared with theirs and that accordingly she had not been discriminated against. He stated that:
A broader approach might more readily yield a serviceable answer which corresponds with one’s instincts for justice”.
Lord Carswell stated that Carson and other pensioners who reside in countries in which their pensions are not uprated are unquestionably treated differently, to their disadvantage, by reason of their residence in those countries. It is a fallacy to use variation in exchange rates or the relative cost of living in different countries when comparing Carson, and other “frozen” pensioners compared with pensioners residing in the United Kingdom or in countries where pensions are uprated. That makes little sense. If some of them are not paid pensions at the same rate as others then that would, in his opinion, constitute discrimination for the purposes of Article 14. If the UK Government had submitted reasons of economic or state policy to justify the difference in treatment, then Lord Carswell would yield to its decision-making power in those fields. It has not done so. On the contrary, the reasons for the policy lie wholly in the cost of uprating. It is stated in paragraph 11 of the memorandum by the Department of Social Security (DSS) memorandum to the House of Commons Social Security Committee in the session 1996-7:
Agreeing to additional expenditure on pensions paid overseas would be incompatible with the government’s policy of containing the long term cost of the social security system to ensure that it remains affordable”.
The UK state pension was becoming too expensive to continue paying at the “full rate” to everyone who had paid into the social security system, so the UK Government had to find some means of keeping down the cost, and in so doing, deprived one cohort of pensioners from receiving the annual uprating.
However, Lord Carswell stated, once the UK Government started uprating the UK state pension for some pensioners living abroad, then there can be no justification for paying some and not others and less than their peers in the UK.
Lord Carswell therefore allowed the appeal and declared that regulation 3 of the Social Security Benefits Up-rating Regulations 2001 (SI 2001/910) is unlawful.
The judgment of the Law Lords was 4 to 1 in favour of the UK Government. The legal system had, by now, been exhausted, but that was not the end of the road…..
Carson was joined by 12 other Applicants from Australia and Canada who were in the same position as she was, and they had formed a class action to appeal the UK House of Lords judgment. The case was considered in the European Court of Human Rights (ECHR), Fourth Section (Lower Chamber) in Strasbourg, France on appeal from the Appellate Committee of the House of Lords in a hearing before Lech Garlicki (President); Nicolas Bratza; Giovanni Bonello; Ljiljana Mijovi; David Thór Björgvinsson; Ledi Bianku; and Mihai Poalelungi on 4 November 2008.
Those representatives from Canada included:
- Bernard Jackson – Bernard had spent 50 years working in the United Kingdom paying National Insurance Contributions in full. He emigrated to Canada on his retirement in 1986 and became eligible for a UK state pension in 1987;
- Venice Stewart – Venice had spent 15 years working in the United Kingdom paying National Insurance Contributions in full, before emigrating to Canada in 1964. She became eligible for a UK state pension in 1991.
- Ethel Kendall – Ethel had spent 45 years working in the United Kingdom paying National Insurance Contributions in full before retiring in 1976. She became eligible for a UK state pension in 1973, and she emigrated to Canada in 1986.
- Ken Dean – Ken had spent 51 years working in the United Kingdom paying National Insurance Contributions in full, before retiring in 1991. He became eligible for a UK state pension in 1988, and emigrated to Canada in 1994.
- Robert Buchanan – Robert had spent 47 years working in the United Kingdom paying National Insurance Contributions in full, before emigrating to Canada in 1985. He became eligible for a UK state pension in 1989.
- Terence Doyle – Terrence had spent 42 years working in the United Kingdom paying National Insurance Contributions in full, before retiring in 1995 and emigrating to Canada in 1998. He became eligible for a UK state pension in 2002.
- John Gould – John had spent 44 years working in the United Kingdom paying National Insurance Contributions in full, before retiring and emigrating to Canada in 1994. He became eligible for a UK state pension in 1998.
- Geoff Dancer – Geoff had spent 44 years working in the United Kingdom paying National Insurance Contributions in full, before emigrating to Canada in 1981. He became eligible for a UK state pension in 1986.
The applicants argued that the entitlement to a basic state pension was a “possession” within Article 1 of Protocol 1, and the Government were depriving them of part of that “possession” i.e. the annual uprating. They were being denied this uprating because they resided in mainly Commonwealth countries that the UK Government claimed did not have reciprocal agreements with the UK and these were termed “frozen countries”. All of these applicants had been adversely affected financially as they were not receiving the annual uprating to their UK state pension that was intended to help counteract inflation. As a result, their UK state pension was being eroded and it had less buying power year on year.
In addition, the applicants claimed that Article 14 also applied in conjunction with Article 1 of Protocol 1. They believed that previous interpretations of case law had been too narrow and superseded by more recent case law. Whilst the UK Government had maintained that moving abroad was a freedom of choice, for many, this was the only way they could be near their family. They felt that they were being unfairly discriminated against. This discrimination, based on grounds of where a person chooses to reside is central to the enjoyment of certain human rights such as the right to family life, freedom of movement, and human dignity. This is likely to have a greater impact on women since, statistically, they will live longer. Given this, the court is right to scrutinise the UK Government.
Age Concern were a “third party” in this case and they had carried out a number of focus groups that identified that receiving the annual increase to the UK state pension was important to retirees. In carrying out surveys of older Chinese immigrants one of the main reasons why they had not returned to their home of birth was because they would no longer receive the annual increase to their UK state pension. In addition, in terms of the “most desirable” countries for emigration, five out of the top 10 are “frozen” countries (Australia, Canada, China, New Zealand and South Africa), and therefore, it is highly likely that a large proportion of the older population had families residing in countries where the UK state pension was not uprated.
Pensioners become more frail as they get older – it is important that they have a support and welfare infrastructure around them, and in many cases this will be family.
Where families live abroad, then at some stage their parents are more likely join them and the Institute for Public Policy Research has produced a report that showed that 20% of older people had emigrated to be with family or for personal reasons i.e. not work related.
The UK Government argued that because the applicants were from outside the UK, it was fair and reasonable to treat them differently. Social Security benefits, of which the State Pension was one, were meant for residents of the UK such that they could enjoy certain minimum standards. Systems that existed in other countries were also tailored to individuals living in those countries.
In Carson’s House of Lord’s Appeal, Lord Hoffmann stated that those in need were:
generally recognised to be national in character … it does not extend to inhabitants of foreign countries”.
and that this was enshrined in UK domestic legislation. The Government agreed with Lord Hoffmann that it could not be the law that the United Kingdom was prohibited from treating expatriate pensioners generously unless it treated them in exactly the same way as pensioners at home.
The applicants contended that discrimination only occurs if similar situations are treated differently and that there is no difference between the three cohorts of pensioners (those residing in the UK, those living abroad in “frozen countries” and those living abroad where the uprating is paid)- they all share one common characteristic, and that is they spent the same time in the UK and paid the same social security contributions into the National Insurance Fund. In addition, the applicants contended, the need for a reasonable standard of living is the same for all three groups of pensioners. All of the UK domestic courts (other than Lord Carswell in the House of Lords appeal) agreed that the three groups of pensioners do not have to be treated the same when it came to uprating the UK state pension.
The UK state pension is designed to provide a
minimum standard of living for those living in the UK”,
and the Court found that the three groups of pensioners were not in relevantly analogous positions and therefore the UK Government had the right to treat them differently. As far back as 1983, there was case law regarding a British Pensioner who had emigrated to Australia who was denied an uprated pension. In addition, in Carson’s House of Lords appeal, the Government could have made the decision to not pay any UK state pension to “frozen” pensioners at all.
When looking at all UK pensioners living overseas, the Court could not find similarity between those pensioners who were resident in “frozen” countries and those resident in “unfrozen” countries. Social security contributions are used for other purposes besides paying the state pension – the National Health Service, for example. Even in those cases where there is proximity between “frozen” and “unfrozen” countries – Canada and the United State, for example, there is still differences in their social security provision, taxation, rates of inflation, interest and currency exchange rates to make it difficult to compare them.
The Court considers that these differences are “objective and reasonable” such that the UK Government can treat them differently, even though Age Concern in England made some powerful arguments as to why pensioners emigrate in the first place – ultimately, it is down to a matter of “personal choice”.
In addition, the UK Government claimed that it had made people aware that if they moved abroad, they may be moving to a “frozen” country where their UK state pension would not be uprated.
The Court decided that the Government can decide which countries it wants to have reciprocal social security agreements with and which ones it doesn’t, based on its own economic policies, therefore, in the Court’s opinion, the Government has not violated Article 14 taken in conjunction with Article 1 of Protocol No. 1.
The court therefore decided by six votes to 1 that there had been no violation of Article 14 of the Convention taken in conjunction with Article 1 of Protocol No 1.
The dissenting opinion came from the President of the Court, Lech Garlicki. He thought that the difference in treatment of different cohorts of pensioners had no objective and reasonable justification. He felt that the difference in treatment of different cohorts of pensioners has no objective and reasonable justification. There were four arguments that may have led to a different conclusion:
1. The UK State Pension is a compulsory system, and based on National Insurance contributions; Carson and the other Applicants had all paid into the same system as those pensioners living in the UK. The UK Government was happy to take these contributions, which were in turn, used to pay the UK State Pension to current pensioners at the time, and also the annual uprating to those pensioners. There was no difference between the contributions made by her and those of her peers in the UK. Now it was time for Carson to receive her UK state pension, but, because she had changed her “country of residence”, she and the other Applicants were treated differently. The UK does not incur additional costs because Carson and the other Applicants live abroad.
Considerations of social justice and equity require that persons who have duly contributed towards the pensions of others should not be treated differently in the subsequent calculations of their own pension”.
- 2. All countries have inflation. Much has been made regarding the difference in costs of living, exchange rates, and inflation in different countries, and it is difficult to accept that there is a difference between the different cohorts of pensioners – those living in the UK compared to those that don’t. The current regulations appear to penalise pensioners living in “frozen” countries, even though they have made contributions to the UK social security system all of their lives. This seems to be against the principle of individual freedom and therefore seems to be unjustified.
- 3. The system in the UK is illogical based on the statement made in November 2000 by the Minister of State, Mr. Jeff Rooker to the House of Commons
4. Whilst the UK courts maintained that the Carson case is more legislative than judicial this view does not prevail in the ECHR.
A violation that results from legislative omissions is still within the reach of European supervision”.
Carson and the 12 other Applicants appealed the decision from the ECHR Fourth Section. The case was heard publicly in the European Court of Human Rights (ECHR), Grand Chamber in Strasbourg, France on 2 September 2009 and 27 January 2010, with judgment handed down on 16 March 2010. This was appealed before Jean-Paul Costa (President), Christos Rozakis, Nicolas Bratza, Peer Lorenzen, Françoise Tulkens, Josep Casadevall, Karel Jungwiert, Nina Vaji?, Dean Spielmann, Renate Jaeger, Danut? Jo?ien?, Ineta Ziemele, Isabelle Berro-Lefèvre, Päivi Hirvelä, Luis López Guerra, Mirjana Lazarova Trajkovska, Zdravka Kalaydjieva.
The applicants argued that their following human rights had been violated:
- 1. Article 1 of Protocol No. 1 – “Right to property” on its own and in conjunction with Article 14 of the Convention
- 2. Article 8 of the European Convention on Human Rights in conjunction with Article 14 (six applicants)
The applicants argued that they were being discriminated against because they were not receiving the annual increase to their UK state pension whilst others in a similar position to them were.
The Court maintained that, under UK domestic law an under Article 1 of Protocol No. 1, the applicants do not have a right to receive the annual uprating. This had been dismissed by the ECHR Fourth Section and cannot be appealed.
The Court did not accept the UK Government’s objections to Article 1 of Protocol No. 1 for the 12 applicants that had not filed domestic proceedings in the UK, and given that Carson had already brought test cases which had failed in the UK domestic courts, there was no point in the applicants litigating in the UK.
The applicants maintained that the treating of “residence” was an aspect of “personal status” and was consistent with case law. In addition, their position is that whilst moving abroad is a question of “free choice” it is not so if it is driven by the need or desire to be close to family members.
The Government had conceded in the UK domestic courts that Carson’s “foreign residence” was protected under Article 14, but argued that moving abroad was a matter of choice.
The third parties, Age Concern and Help the Aged, emphasized the importance of family support in old age.
The Government argued that National Insurance Contributions paid into the National Insurance Fund cannot be equated to contributions to an occupational or private pension schemes. With regard to the UK state pension, there are no guaranteed entitlements.
The Court agreed unanimously that the complaint under Article 14 of the Convention taken in conjunction with Article 8 inadmissible; The rejected unanimously the UK Government’s preliminary objection concerning the admissibility of the complaints of the applicants, other than Carson herself; they agreed by eleven votes to six that there had been no violation of Article 14 of the Convention taken in conjunction with Article 1 of Protocol No. 1.
The six dissenting judges agreed that Article 14, taken in conjunction with Article 1 of Protocol No 1 had been violated, and that Article 14 on its own had also been violated. All of the Applicants were in the same boat even though their countries of residence may be different. The majority approach regarding “residence” seemed self contradictory, and inconsistent with the spirit of Article 14, and the conclusion of the majority regarding the characteristics of UK pensioners living in the UK and those living in “frozen” countries was wrong because, other than “country of residence”, there is no difference between UK pensioners living abroad – they all paid into the same system and therefore all of them are entitled to a UK State Pension which is based on the number of contributing years. Whilst the majority of the judges decided that even though all UK pensioners living abroad had made equal contributions to the National Insurance system that does not mean that they can be treated the same. The majority argued that the State pension has multiple sources, but those dissenting could not see the relevance of that and because all UK pensioners living abroad paid into the system they should all be treated the same. The right to a UK state pension and the right to be treated the same is based on the rules by which a pensioner receives a UK state pension.but those dissenting could not see the relevance of that and because all UK pensioners living abroad paid into the system they should all be treated the same. The right to a UK state pension and the right to be treated the same is based on the rules by which a pensioner receives a UK state pension but those dissenting could not see the relevance of that and because all UK pensioners living abroad paid into the system they should all be treated the same. The right to a UK state pension and the right to be treated the same is based on the rules by which a pensioner receives a UK state pension.
All pensioners living abroad (whether or not they received the annual increase) had a common characteristic – their buying power was decreased every year based on the drop in currency exchange rates. Those pensioners who lived in the UK received inflationary increases every year. Those pensioners living abroad who received the increase received the same increase as those in the UK regardless of the increase of the inflationary rate in their own country. For those countries that had higher inflationary rates then UK pensioners living in those countries would find their UK state pension depreciating compared to those pensioners living in the UK. Those pensioners living in countries like South Africa who did not receive annual increases found that their UK state pension was depreciating at an even faster rate. In Carson’s case this was significant. In the period 2000-2005 she found that her weekly UK state pension had fallen by 28%. Comparing this to a pensioner living in the UK the comparative loss increased further with time.
The dissenting judges could see no relevant differences between the those UK pensioners that lived abroad and received the annual increase and those that lived abroad and didn’t receive the increase, and could see no justification for such a radical difference in the UK state pension received. In addition, they were not persuaded by the UK government to decide otherwise and that their argument went against the spirit of Article 14 of the Convention.
Whilst the UK state pension system is designed to ensure that the financial needs of pensioners living in the UK are taken into account the dissenting judges could see no justification for treating them unfavorably and unequally. There will always be differences in the increases in inflation for each country and the impact that this has on the buying power of the UK state pension. The fall in the sterling exchange rate has been consistent for over a century, and the impact that this has on UK pensioners living overseas in “frozen” countries can cause irreparable deterioration in the real value of their UK state pension. The complete denial of any increases represents a disproportionate difference which cannot be justified.
UK pensioners living overseas do not receive health benefits, such as the National Health Service and nor do they pay UK taxes – this is no reason as to why they should not receive the annual increase since, UK taxes forgone are less than the housing, healthcare and social welfare benefits which are payable to pensioners living in the UK but not those who live abroad.
The UK Government prevailed; Carson and the other Applicants lost their appeal and they had run out of Courts to appeal to.