Australian minister for families, Jenny Macklin has let slip that Work and Pensions Secretary Iain Duncan Smith has given a commitment to her that Britain would open talks with Australia about the issue.
She also hinted that the British government will talk with expat pensioners in Australia about proposals they have made to scrap the policy of not index-linking their state pension payments.
However, a spokesman said the British government has no plans to change the policy.
The issue at stake is Britain’s insistence on pegging state pension payments to around 500,000 expats in more than 100 countries to the amount of the first payment, while expats in the European Union and some other countries pick up payments that keep pace with UK inflation.
Around half of the expats live in Australia, where they receive social security payments to top up their pensions.
Agreement to look at options
The Australian government estimates this costs £71 million a year in benefits.
“All UK pensioners paid into the National Insurance Fund under the same rules, in good faith, and the Australian government believes they should be paid their pensions under the same conditions no matter where they now live,” said Macklin.
“I made my feelings on this issue clear to my UK counterpart. He’s now agreed to look at the options that have been proposed by UK pensioners in Australia – it’s a positive step forward on an important issue.”
Expat state pension payments have been contested for many years.
Campaigners exhausted efforts for redress through the courts when the European Court of Justice rejected their arguments and ruled in favour of the British government last year.
However, the campaigners have continued to seek a resolution by trying to pressure the government to change the rules.
A number of proposals are before the government – from phasing in increased pension payments for old expats to index-linking the pensions for every country.
No change in policy
The Department of Work and Pensions has no plans to change the state pensions policy for expats.
“The UK state pension is payable worldwide, but is only uprated abroad where we have a legal requirement or reciprocal agreement,” said a spokesman.
“We will continue to speak to officials as part of a wider commitment to exchange views on a range of policies. The government has no plans to change its current arrangements for uprating pensions paid abroad.”