By Sarah Toyne BBC News Online personal finance reporter

British pensioners overseas have won the right to a judicial review to challenge the government's policy over "frozen" pensions.

The government will be asked to justify how they can possibly discriminate between some pensioners and others - all of whom have paid the same contributions

Graham Chrystie, lawyer

The case is being brought by Anette Carson, 60, who emigrated to South Africa about 12 years ago and is being supported by the South African Alliance of British Pensioners and the Canadian West Coast Pensioners' Association.

It is estimated that if the case is successful it could cost the UK government up to �250m a year or �3.2bn over a 12-year period.

If won, the case would have repercussions for about 470,000 other pensioners, many in Commonwealth countries, who have had their pensions frozen.

Under current rules, pensioners in about 150 countries, including 49 Commonwealth states, do not get their pensions uprated in line with increases in Britain.

Frozen out

Graham Chrystie, a pensions lawyer representing the South African Alliance of British Pensioners said: "This is the first breakthrough in 20 years for overseas pensioners who have been trying to get proper indexation.

"The government will be asked to justify how they can possibly discriminate between some pensioners and others - all of whom have paid the same contributions."

Only 43% of British State pensioners who live outside the UK,or 330,000 people, have index-linked pensions.

But 473,000 in about 150 countries do not get any increases.

The policy, which has existed since 1955, means that if you move to any country in the world where there is no reeciprocal pension agreement, it will be frozen at the rate paid when you left the UK.

Meagre living

This means that there are large British communities, such as in South Africa, Canada and Zimbabwe, where some pensioners must exist on a few pounds a week.

But an irony in the current rules means that if pensioners from these countries return to Britain for a holiday, they can get the full UK state pension during that time.

However, when they return their pension reverts to the old rate.

In one case, for example, a couple in South Africa, where there are 34,000 British pensioners, are receiving �12 a week from the British government.

They would get �136 a week if they lived in the UK.

Many of the people affected have worked for the British government, or fought in the armed forces.

There are also thousands of people who have continued to pay further national insurance contributions only to be told that they would not get a full pension.

Drugs or food

"My clients believe that it is disgusting," says Mr Chrystie.

"These people are extremely dignified despite their situation, but ladies have had to sell their wedding rings and engagement rings.

"It is terrible that someone who is 80 has to sell them in order to eat, while another woman has to choose between drugs and food to keep her cancer in recession.

"There is no comfort, it is the most meagre form of living and these people are entitled to much more."

Human rights

The pensioners groups are using the Human Rights Act to support the case.

Matrix, Cherie Booth's chambers, will be acting as counsel for Ms Carson.