By Sarah Toyne BBC News Online personal finance reporter

Australia will next week in the High Court accuse the UK government of operating a discriminatory pensions policy, BBC News Online has learned.

The dispute betweeen the two governments revolves around the UK's unwillingness to uprate in line with inflation the pensions of 220,000 British pensioners who live in Australia.

Australia's position is that the refusal of the UK to index pensions into Australia is discriminatory

Australian government statement

In March last year, Australia broke-off a 42-year-old bilateral social security agreement with Britain, saying it was no longer willing to top up British pensions using Australian taxpayers' money.

The public airing of the dispute will be another blow for the UK government which is facing mounting criticism over a range of pensions issues.

Intervention

Australia's Department of Family & Community Services - the equivalent of the UK's Department for Work & Pensions - now plans to make a representation in a human rights case brought by a South African pensioner, Anette Carson, due to be heard in April.

The hearing to determine whether Australia can proceed with a so-called intervention in the Carson case will take place on 20 March at the High Court.

A spokesman for the DWP said it was "aware of the application to intervene", but would not comment further in advance of the hearing.

An intervention is a procedure in which a government is able to make a representation in court in existing human rights cases. It does not imply the launching of any separate legal action.

In a statement, the Australian government said it "simply wishes to assist the court to understand the position in Australia with the additional objective of ensuring that any decision made by the court does not prejudice the position of Australian pensioners".

Frozen pensions

In April, the UK government will uprate the pensions of about 12 million Britons worldwide, except 490,000 of whom 220,000 live in Australia.

British pensioners living in 48 of the 54 Commonwealth countries, including Australia, have their pensions frozen either at the date they arrived in their new country of residence or at the date they first became eligible for a pension after emigration.

They are trying to hijack our case, which is a simple straightforward case which has gone through due process

Charles Poole, president of SAABP

However, British pensioners living in six other Commonwealth countries or in any part of the European Union, the United States and some other countries have their pensions upgraded to take account of inflation every year.

Many British pensioners overseas feel the current situation is a lottery, especially if they have paid UK national insurance contributions throughout their working lives.

The government's position, however, has always been that it will only index pensions for pensioners resident in the UK or in the EU or in one of the countries with which Britain has a reciprocal agreement that provides for indexing.

What does this mean?

In reality, there is a wide disparity between what pensioners receive.

For example, a single pensioner retiring abroad 20 years ago to a country without a reciprocal agreement would receive a pension of �32.85 a week.

This is �2,061.80 less a year than those pensioners who are in receipt of the full state pension of �72.50 a week.

Countries where pensions are uprated include

Austria Barbados France USA Switzerland Greece Source: UK government, Mar 00

The UK government has said it would be too expensive to uprate pensions, as it would cost an extra �330m a year.

Australian anger

In February, Peter Slipper, an Australian MP, called on the government to fund a test case against the UK government, under the human rights act.

Countries where pensions are frozen include

Australia Canada Hong Kong South Africa Zimbabwe New Zealand Trinidad & Tobago Source: UK government, Mar 00

Mr Slipper said that if the British government upgraded pensions, there would be a boost to the Australian economy of "at least $450m per year (�116m)" in increased pension entitlements.

At present, more than 60,000 British pensioners in Australia rely solely on the declining value of their UK pensions, according to the Australian government.

Some very poor UK pensioners receive means-tested benefits funded by the Australian government.

Not pleased

The South African Alliance of British Pensioners (SAABP), which is supporting Ms Carson's case, is not pleased about Australia's intervention.

Charles Poole, president, said the group had received correspondence in January that indicated the Australian government was only "monitoring" the case.

Mr Poole told BBC News Online: "They are trying to hijack our case, which is a simple straightforward case which has gone through due process."

In South Africa, there is no social security system for pensioners to fall back on - and SAABP said that some of its members were receiving only �7 a week from the British government.

The Department of Family & Community Services in Australia said it was seeking to intervene in the case..."because of its possible implications for British pensioners resident in Australia".