SOUTH AFRICA/UK- A British pensioner living in South Africa has lost a test case against the Secretary of State for Work and Pensions to instate an annual increase in the rate of all expatriates’ pensions in line with inflation.

Annette Carson was fighting for a review of UK pension legislation denying her and thousands of expatriate pensioners index-linked increases to their state pensions.

Last year she received permission from the High Court to challenge UK legislation which freezes the level of pensions given to those choosing to spend their retirement overseas.

Had she succeeded and, depending on the court’s ruling, it could have cost the government an estimated £330m a year to cover those affected.

Carson is one of more than 400,000 expatriate pensioners denied this annual increase in their state pension. Pensioners in Australia and several other countries including Canada and New Zealand are in the same position.

In other countries with bilateral social security agreements with the UK- including the US, Turkey and the Philippines- pensioners receive the same as their counterparts back home. During the case, the UK government argued that it would only link pensions in countries with whom their shared a bilateral agreement.

Australia terminated its agreement with the UK in March 2001 after the latter refused to include a bilateral agreement. Consequently the Australian government joined Carson in the case two months ago. Of the 750,000 UK pensioners living abroad, 220,000 are in Australia and denied the annual increase.

In a particularly extreme case, a 94-year-old living in Australia and who retired thirty years ago having paid national insurance throughout his working life, receives a weekly £6.75 opposed to £75.50 paid to UK pensioners.

Paul Dacam, a partner at the law firm Lovells who represented the Australian government, said: “we and our clients are obviously very disappointed at the outcome. It had been hoped that this case would have meant an end to this arbitrary discrimination by the UK government.

“However, given the very serious implications for British expatriates around the world, the claim will be pursued to the next level.”

Mrs Carson was granted permission to appeal.