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You are here: BAILII >> Databases >> Northern Ireland - Social Security and Child Support Commissioners' Decisions >> JWS v Department for Communities (RP) (Inherited pensions) [2018] NICom 39 (29 August 2018)
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Cite as: [2018] NICom 39
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JWS-v-Department for Communities (RP) [2018] NICom 39
Decision No: C1/18-19(RP)
SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992
SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998
RETIREMENT PENSION
Application by the claimant for leave to appeal
and appeal to a Social Security Commissioner
on a question of law from a Tribunal’s decision
dated 5 December 2016
DECISION OF THE SOCIAL SECURITY COMMISSIONER
1. This is a claimant’s application for leave to appeal from the decision of an appeal tribunal sitting at Belfast.
2. An oral hearing of the application has been requested. However, I consider that the proceedings can properly be determined without an oral hearing.
3. For the reasons I give below, I grant leave to appeal. However, I disallow the appeal.
REASONS
Background
4. The appellant claimed retirement pension (RP) from the Department for Social Development (the Department) from 13 February 1997 – having reached pensionable age on that date. He was awarded RP, which consisted of four elements, namely basic, additional, graduated and age-related pension. On 11 February 2016, sadly, the appellant’s wife died. Subsequently, the Department considered all the evidence and made a decision revising the amount of the appellant’s RP entitlement. The Department decided that the appellant was entitled to RP amounting to £187.65 weekly from and including 15 February 2016 and notified him accordingly. In the same letter the Department informed the appellant that he had “inherited” £9.83 of his late wife’s additional pension earned in the period from 7 April 1978 to 5 April 1997. However, the sum of £187.65 represented an increase of only 55 pence from the rate of RP he had previously received. The appellant appealed.
5. The appeal was considered by a tribunal consisting of a legally qualified member (LQM) sitting alone on 5 December 2016. The tribunal disallowed the appeal, maintaining the decision that the appellant was entitled to RP of £187.65 weekly. The appellant then requested a statement of reasons for the tribunal’s decision and this was issued on 27 February 2017. The appellant applied to the LQM for leave to appeal from the decision of the appeal tribunal. Leave to appeal was refused by a determination issued on 19 April 2017. On 15 May 2017 the appellant applied for leave to appeal from a Social Security Commissioner.
Grounds
6. The appellant submits that the tribunal has erred in law on the basis that:
(i) information he had been given by the Department indicated that he would inherit a higher amount from his late wife;
(ii) the procedure used for reducing the amount of the additional state pension unlawfully deprived him of his entitlement;
(iii) the Department had used incorrect figures and failed to justify its procedure;
(iv) its decision was contrary to common sense;
(v) the LQM who refused the appeal had also determined the question of whether to grant leave to appeal.
7. The Department was invited to make observations on the appellant’s grounds. Mr Woods of Decision Making Services (DMS) responded on behalf of the Department. He submitted that the tribunal had not erred in law as alleged and indicated that the Department did not support the application. The appellant duly responded to the Department’s observations, reiterating his grounds of application.
8. I am grateful to the appellant and to Mr Woods for their submissions. In particular, I am grateful to Mr Woods for his submissions in relation to the working out of the prescribed maximum additional pension, which I have appended to this decision.
The tribunal’s decision
9. The LQM has prepared a statement of reasons for the tribunal’s decision. From this I can see that the tribunal had documentary material before it consisting of the Department’s submission and a supplementary response. The appellant attended the tribunal hearing and gave oral evidence. For the Department, Mr Moran attended the hearing and made submissions.
10. The tribunal found that, prior to the death of his late wife, the appellant had entitlement to basic state pension of £115.95 weekly, with the addition of a £163.81 for pre-1997 additional pension, £11.14 graduated retirement pension, and an age addition of £0.25. It found that this sum was subject to the deduction of £57.30 for pre-1988 guaranteed minimum pension and £46.77 for post-1988 guaranteed minimum pension, resulting in a total entitlement figure of £187.08.
11. The tribunal accepted a submission from the Department that the maximum additional pension payable was £164.36. It found that, whereas the appellant had been receiving additional pension of £163.81 prior to his wife’s death, the maximum additional pension which he could inherit from his late wife was £0.55 (as £164.36 minus £163.81 equals £0.55). Therefore, on his wife’s death, the tribunal found that the appellant was entitled only to an increase of £0.55 in the pre-1997 additional state pension element of his RP.
12. The appellant had argued that the Department had incorrectly calculated his entitlement. He submitted that the additional pension he actually received was £59.73 (being the amount of maximum additional pension, namely £163.81, less £57.30 for pre-1988 guaranteed minimum pension and £46.77 for post-1988 guaranteed minimum pension). He submitted that when the sum of £9.83 inherited from his wife was added to £59.73, the resulting £69.56 was well below the maximum additional pension rate of £164.36. However, the tribunal upheld the Department’s calculation and disallowed the appeal.
Relevant legislation
13. Legislation governing retirement pensions appears at sections 43 to 55C of the Social Security Contributions and Benefits (NI) Act 1992 (the 1992 Act). Category A retirement pension is provided for at section 44(1) and 44(3) of the 1992 Act. This reads:
44—(1) A person shall be entitled to a Category A retirement pension if
(a) the person attained pensionable age before 6 April 2016, and
(b) he satisfies the relevant conditions or condition;
and, subject to the provisions of this Act, he shall become so entitled on the day on which he attains pensionable age and his entitlement shall continue throughout his life.
(3) A Category A retirement pension shall consist of—
(a) a basic pension payable at a weekly rate; and
(b) an additional pension payable where there are one or more surpluses in the pensioner’s earnings factors for the relevant years or where the pensioner has one or more units of additional pension.
14. Calculation of the additional pension for a person such as the appellant, who reached pension age before 6 April 1999, is governed by section 45 of the 1992 Act. This provides, so far as relevant:
45.—(1) The weekly rate of the additional pension in a Category A retirement pension in any case where the pensioner attained pensionable age in a tax year before 6th April 1999 shall be the sum of the following—
(a) in relation to any surpluses in the pensioners earnings factors, the weekly equivalent of 1¼ per cent. of the adjusted amount of the surpluses mentioned in section 44(3)(b) above; and
(b) if the pensioner has one or more units of additional pension, a specified amount for each of those units.
…
51.—(1) A man (“the pensioner”) whose wife died while they were married is entitled to a Category B retirement pension if—
(a) they were both over pensionable age at the time of the death,
(b) the pensioner attained pensionable age before 6 April 2010, and
(c) the wife satisfied the relevant contribution condition.
…
15. Further by section 52 of the 1992 Act:
52.—(1) This section has effect where, apart from section 43(1) above, a person would be entitled both—
(a) to a Category A retirement pension; and
(b) to a Category B retirement pension by virtue of the contributions of a spouse or civil partner who has died.
(2) If by reason of a deficiency of contributions the basic pension in the Category A retirement pension falls short of the full amount, that basic pension shall be increased by the lesser of—
(a) the amount of the shortfall, or
(b) the amount of the basic pension in the rate of the Category B retirement pension,
“full amount” meaning for this purpose the sum specified in section 44(4) above as the weekly rate of the basic pension in a Category A retirement pension.
(3) If the additional pension in the Category A retirement pension falls short of the maximum amount specified in regulations, that additional pension shall be increased by the lesser of—
(a) the amount of the shortfall, or
(b) the amount of the additional pension in the Category B retirement pension.
…
16. By section 42(1) of the Pensions Schemes (NI) Act 1993:
42.—(1) Where for any period a person is entitled both—
(a) to a Category A or Category B retirement pension, a widowed mother’s allowance, a widowed parent’s allowance or a widow’s pension under the Social Security Contributions and Benefits (Northern Ireland) Act 1992; and
(b) to one or more guaranteed minimum pensions,
the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal—
(i) to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day, or
(ii) to the weekly rate of the pension mentioned in paragraph
(b) (or, if there is more than one such pension, their aggregate weekly rates), whichever is the less.
…
17. By regulation 2 of the Social Security (Maximum Additional Pension) Regulations (NI) 2010:
2.— (A1) This regulation applies to a survivor whose relevant day is before 6th April 2016.
(1) For the purposes of section 52(3) (increase of additional pension in the Category A retirement pension for surviving spouses or surviving civil partners), the maximum additional pension shall be the amount of additional pension to which a person is entitled where that person—
(a) has reached pensionable age on the survivor’s relevant day; and
(b) in respect of each relevant year has an earnings factor specified in paragraph (3).
…
(3) For the purposes of paragraph (1)(b), the specified earnings factor is an earnings factor which—
(a) is equal to 53 times that year’s applicable limit, before any increase under section 130 of the Administration Act (revaluation of earnings factors); and
(b) is derived from earnings on which primary Class 1 contributions were paid.
…
Assessment of leave application
18. An appeal lies to a Commissioner from any decision of an appeal tribunal on the ground that the decision of the tribunal was erroneous in point of law. However, the party who wishes to bring an appeal must first obtain leave to appeal.
19. Leave to appeal is a filter mechanism. It ensures that only appellants who establish an arguable case that the appeal tribunal has erred in law can appeal to the Commissioner.
20. An error of law might be that the appeal tribunal has misinterpreted the law and wrongly applied the law to the facts of the individual case, or that the appeal tribunal has acted in a way which is procedurally unfair, or that the appeal tribunal has made a decision on all the evidence which no reasonable appeal tribunal could reach.
21. The appellant argues that the Department’s calculation has negated the purpose of the regulations regarding inheritance of the additional state pension, thereby depriving the survivor of his or her legal entitlement. He submits that the Department errs by using a figure of £163.81 in its calculations as his additional pension entitlement. He submits that the actual figure for additional pension is £59.73, which is well below the maximum permitted by regulations. The appellant’s grounds challenge whether the tribunal has applied the relevant law correctly to his case.
22. In essence, the difference between the appellant and the Department is the question of whether the “inherited” sum takes his entitlement beyond the maximum amount specified by law. As this is a matter of legal interpretation which merits closer scrutiny, I consider that the appellant establishes an arguable case and I therefore grant leave to appeal. I proceed to consider and treat the application as if it were an appeal.
Assessment of appeal
23. The law relating to RP is difficult to follow and it derives from a number of different legislative sources. It employs technical terms which are not clear to people lacking relevant expertise, and is far from transparent. In deciding this appeal, I will consider the legislation which is relevant and assess whether it has been correctly applied by the tribunal in this case.
24. It is not in dispute that, at the material time, the appellant satisfied the conditions of entitlement to a Category A pension under section 44(1) of the 1992 Act, and that he was entitled to a basic element at £115.95 weekly, as prescribed by section 44(4) of the 1992 Act and Article 4 of the Social Security Benefits Up-Rating Order (NI) 2015 (2015, No.124).
25. A further element of the appellant’s RP which is not disputed is graduated retirement benefit. Arising from section 35 of the National Insurance Act (NI) 1966, this is an increase in the weekly rate of RP based on Class 1 national insurance contributions paid between 1961 and 1975. The old provisions and regulation making powers from that period continue in force under section 62 of the 1992 Act. The rate payable to the appellant is based upon his personal contributions and was £11.17 at February 2016.
26. It is similarly not in dispute that the appellant’s RP should include an age related addition of £0.25 per week, which was payable to the appellant upon reaching his 80th birthday. This addition was introduced under legislation in 1971, and continues in force under section 79 of the 1992 Act, but has never been uprated.
27. As indicated above, the actual substance of the dispute in this appeal arises from the treatment of the additional pension element of the appellant’s RP. However, I will first set out how it is calculated.
28. Additional pension is payable under section 44(3) of the 1992 Act, “where there are one or more surpluses in the pensioner’s earnings factors for the relevant years or where the pensioner has one or more units of additional pension”. As the appellant reached retirement age before 6 April 1999, an older form of calculation would be used to calculate his additional pension, based on pre-1997 “earnings factors” in accordance with section 45(1) of the 1992 Act. Earnings factors are the amount of income in the contribution year on which the appellant would have paid Class 1 national insurance contributions. The detail of that particular calculation is not necessary for present purposes, as the gross amount of Category A additional pension prior to the death of the applicant’s wife, namely £163.81 in the relevant year, is not in dispute.
29. However, a further adjustment is made to additional pension under legislation. The legal basis for this deduction lies in the Pension Schemes Act (NI) 1993 (the 1993 Act). That legislation permitted individuals to contract out of the former State Earnings Related Pension Scheme (SERPS) and to pay a lower rate of national insurance contributions. The 1993 Act provided a safety net behind the contracted-out approved occupational or personal pension entitlement of all individuals. They are entitled to receive at least a guaranteed minimum pension (GMP) from their schemes based on the total contributions paid. In the appellant’s case, this amounted to £104.08 in the relevant year, which was not disputed.
30. However, by section 42(1) of the 1993 Act, where a claimant is entitled to both RP and GMP, the rate of the RP must be reduced by the lesser of (i) that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day, or (ii) the weekly rate of the GMP. In this case, the rate of RP was reduced by the weekly rate of the GMP, consisting of pre-1988 GMP of £57.31 and post-1988 GMP of £46.77, totalling £104.08.
31. The Department’s calculation of the appellant’s RP entitlement prior to his wife’s death is as follows:
Basic State Pension at £115.95 weekly
Additional Pension at £163.81 weekly
Graduated Retirement Benefit at £11.14 weekly
Age Addition at £0.25 weekly
32. The total of these elements is £291.15. However, from this figure the Department deducted the £104.08 for GMP, leaving £187.07. This calculation is in accordance with legislation. However, at this point, the effect of the death of the applicant’s wife falls to be considered.
33. A widower can become entitled to Category B retirement pension based upon the national insurance contributions of his late spouse (see section 51 of the 1992 Act). The amount of such a pension is specified in section 52 of the 1992 Act. This provides at section 52(2) that a Category A pension which is short of the full amount of the basic pension due to a deficiency of contributions can be increased by the amount of the shortfall or the amount of the Category B pension, whichever is lesser. In the present case, the basic amount cannot be increased as the appellant has the full amount of £115.95 weekly.
34. In relation to the additional pension element, it further provides at section 52(3) that, if the additional pension in the Category A pension falls short of the maximum amount specified in regulations, that additional pension shall be increased by the lesser of the amount of the shortfall, or the amount of the additional pension in the Category B retirement pension. Applying the relevant legislation, the Department calculated that the additional pension element of Category B pension based on the appellant’s late wife’s national insurance contributions, amounted to £9.83, which is again an undisputed figure.
35. The applicant submits that his Category A pension should therefore be increased by the sum of £9.83. However, the legislation specifically requires that the element of additional pension can only be increased by the lesser of the amount of the shortfall from the amount of maximum pension or the figure which was calculated as £9.83. In other words, by section 52(3), set out above, the amount of any increase may be capped by reference to a maximum amount specified in regulations. The relevant provision is regulation 2 of the Social Security (Maximum Additional Pension) Regulations (NI) 2010, which is set out above.
36. In the Department’s submissions to the tribunal, a figure of £164.36 was submitted as the maximum additional pension. I observed that the working out of this figure nowhere appeared in the papers, and directed Mr Woods to demonstrate how that figure was arrived at. Mr Woods has responded by a comprehensive calculation, which I accept. I mean no disrespect to Mr Woods by not including his working out in the body of this decision. However, I include his calculation as an Appendix to this decision. I accept that the figure of £164.36 is the amount of maximum additional pension payable in 2015-16.
37. This takes us back to the basic difference between the parties. The Department submits that the amount of additional pension which falls to be awarded from the pension of his late wife is the shortfall between £164.36 and the amount of his own additional pension, namely £163.81. The figure of £0.55 awarded to the appellant represents the shortfall, rather than the full amount of £9.83.
38. The appellant submits that the shortfall is not £0.55. As I observed above, he submits that his additional pension element was reduced by the GMP. This, by the logic of his submission, would lead to a shortfall in the region of £104.63. Therefore, he submits that he should receive the full sum of £9.83.
39. A key provision is section 42(1) of the Pensions Schemes (NI) Act 1993. This provides for the deduction of GMP from RP. For convenience, I will set it out again:
42.—(1) Where for any period a person is entitled both—
(a) to a Category A or Category B retirement pension, a widowed mother’s allowance, a widowed parent’s allowance or a widow’s pension under the Social Security Contributions and Benefits (Northern Ireland) Act 1992; and
(b) to one or more guaranteed minimum pensions,
the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal—
(i) to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day, or
(ii) to the weekly rate of the pension mentioned in paragraph (b) (or, if there is more than one such pension, their aggregate weekly rates), whichever is the less.
40. I consider that the important thing to note is that it is the overall RP which falls to be reduced by the amount of the GMP or by the part of additional pension attributable to earnings factors for particular tax years. The appellant’s argument is that his additional pension has been reduced by the deduction of his GMP. However, I do not consider that this is a sustainable argument in the face of the legislation. There is no warrant for saying that the additional pension element in isolation has, or should have, been reduced. It remains at £164.36, whereas RP is reduced overall by the GMP.
41. I am reinforced in my view by the decision of the late Commissioner Turnbull in R(P)1/03. Although applying the equivalent legislation in Great Britain, I consider that his approach would lead to the same outcome if applied to the legislation in Northern Ireland.
42. I therefore disallow the appeal.
43. As I have acknowledged, this is a complicated area of law with unfamiliar terminology. The applicant had been sent a letter to advise him that he would ‘inherit’ £9.83 of his late wife’s pension. This was entirely misleading and confusing, in the light of the correct position on entitlement. I would encourage the Department to give careful consideration to the content of the letters it issues in such cases and to recall that it is dealing with individuals who are both elderly and recently bereaved. Greater clarity in letters such as this would avoid much stress and save public resources.
(signed) O Stockman
Commissioner
15 August 2018
Appendix
Submissions of Mr Woods, DMS
The Commissioner has directed the Department to demonstrate, by reference to the relevant legislation and by setting out its calculations, how the Department has arrived at the figure for maximum additional pension for 2015-16 of £164.36 in the applicant’s case.
As stated in my observations the prescribed maximum is set by the Social Security (Maximum Additional Pension) Regulations (Northern Ireland) 2010:
Citation, commencement and interpretation
1.—(1) These Regulations may be cited as the Social Security (Maximum Additional Pension) Regulations (Northern Ireland) 2010 and shall come into operation on 6th April 2010. (1) In these Regulations—
“applicable limit” has the meaning given by section 44(7)(c)(c);
“relevant year” has the meaning given by section 44(7)(a);
“survivor” means a surviving spouse or surviving civil partner.
(2) In these Regulations a reference to a section by number alone is a reference to the section so numbered in the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
Prescribed maximum additional pensionThis section has no associated Explanatory Memorandum
2.—(1) For the purposes of section 52(3) (increase of additional pension in the Category A retirement pension for surviving spouses or surviving civil partners), the maximum additional pension shall be the amount of additional pension to which a person is entitled where that person—
(a) has reached pensionable age on the day specified in paragraph (2); and
(b) in respect of each relevant year has an earnings factor specified in paragraph (3).
(2) For the purposes of paragraph (1)(a), the day specified is the day on which the survivor would, but for section 43 (persons entitled to more than one retirement pension), have become entitled to both—
(a) a Category A retirement pension; and
(b) a Category B retirement pension by virtue of the contributions of a spouse or civil partner who has died,
or would have become so entitled if the survivor’s entitlement to a Category A or Category B retirement pension had not been deferred.
(3) For the purposes of paragraph (1)(b), the specified earnings factor is an earnings factor which—
(a) is equal to 53 times that year’s applicable limit, before any increase under section 130 of the Administration Act (revaluation of earnings factors); and
(b) is derived from earnings on which primary Class 1 contributions were paid.
The prescribed maximum is therefore the maximum additional pension that is payable had a claimant made the maximum possible contributions.
Section 45 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 provides for additional pension:
The additional pension in a Category A retirement pension
45.—(1) N/a
(2) The weekly rate of the additional pension in a Category A retirement pension in any case where the pensioner attained pensionable age in a tax year after 5th April 1999 shall be the sum of the following—
(a) in relation to any surpluses in the pensioner’s earnings factors for the tax years in the period beginning with 1978-79 and ending with 1987-88, the weekly equivalent of 25/N per cent. of the adjusted amount of those surpluses; and
(b) in relation to any surpluses in the pensioner’s earnings factors in a tax year after 1987-88 but before the first appointed year, the weekly equivalent of the relevant percentage of the adjusted amount of those surpluses; and
(c) in relation to any tax years falling within subsection (3A) below, the weekly equivalent of the amount calculated in accordance with Schedule 4A to this Act; and
(d) in relation to the flat rate introduction year and subsequent tax years, the weekly equivalent of the amount calculated in accordance with Schedule 4B to this Act;
(3) In subsection (2)(b) above, “relevant percentage” means—
(a) 20/N per cent., where the pensioner attained pensionable age in 2009-10 or any subsequent tax year;
(b) (20+X)/N per cent., where the pensioner attained pensionable age in a tax year falling within the period commencing with 1999-2000 and ending with 2008-9.
(3A) The following tax years fall within this subsection—
(a) the first appointed year;
(b) subsequent tax years before the flat rate introduction year.
(4) In this section—
(a) X = 0·5 for each tax year by which the tax year in which the pensioner attained pensionable age precedes 2009-10; and
(b) N = the number of tax years in the pensioner’s working life which fall after 5th April 1978;
but paragraph (b) above is subject, in particular, to subsection (5) and, where applicable, section 46 below.
(5) Regulations may direct that in prescribed cases or classes of cases any tax year shall be disregarded for the purpose of calculating N under subsection (4)(b) above, if it is a tax year after 5th April 1978 in which the pensioner—
(a) was credited with contributions or earnings under this Act by virtue of regulations under section 22(5) above, or
(b) was precluded from regular employment by responsibilities at home, or
(c) in prescribed circumstances, would have been treated as falling within paragraph (a) or (b) above,
but not so as to reduce the number of years below 20.
(6) For the purposes of subsections (1) and (2) above, the weekly equivalent of any amount shall be calculated by dividing that amount by 52 and rounding the result to the nearest whole penny, taking any ½p as nearest to the next whole penny.
(7) Where the amount falling to be rounded under subsection (6) above is a sum less than ½p, the amount calculated under that subsection shall be taken to be zero, notwithstanding any other provision of this Act or the Administration Act.
(8) The sums which are the weekly rate of the additional pension in a Category A retirement pension are subject to alteration by orders made by the Department under section 132 of the Administration Act.
Section 44(5A) provides:
(5A) For the purposes of this section and section 45 and Schedules 4A and 4B to this Act below—
(a) there is a surplus in the pensioner’s earnings factor for a relevant year if that factor exceeds the qualifying earnings factor for that year,
(b) the amount of the surplus is the amount of that excess, and
(c) for the purposes of section 45(1) and (2)(a) and (b) below, the adjusted amount of the surplus is the amount of that excess, as increased by the last order under section 130 of the Administration Act to come into operation before the end of the final relevant year.
Section 44(7) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 provides:
(7) In this section—
(a) “relevant year” means 1978-79 or any subsequent tax year in the period between—
(i) (inclusive) the tax year in which the pensioner attained the age of 16, and
(ii) (exclusive) the tax year in which he attained pensionable age;
(b) “final relevant year” means the last tax year which is a relevant year in relation to the pensioner;
(c) “the applicable limit” means—
(i) in relation to a tax year before 2009-10, the upper earnings limit;
(ii) in relation to 2009-10 or any subsequent tax year, the upper accrual point.
Section 121(1) provides the following definitions:
“first appointed year” means such tax year, no earlier than 2002-03, as may be appointed by order, and “second appointed year” means such subsequent tax year as may be so appointed.
“the upper accrual point” is £770;
“the flat rate introduction year” means such tax year as may be designated as such by order;
Section 44A(5) provides:
The low earnings threshold for the first appointed year and subsequent tax years shall be £9,500 (but subject to section 130A of the Administration Act).
The lower earnings limit and the upper earnings limit have been defined by the Social Security (Contribution) Regulations (Northern Ireland) 1975, then the Social Security (Contributions) Regulations (Northern Ireland) 1979 and then the Social Security (Contributions) Regulations 2001, each as amended by regulations for each tax year between 1978-79 and 2014-15.
The low earnings threshold has been amended each year starting with by the Social Security Pensions (Low Earnings Threshold) Oder (Northern Ireland) 2002 until Social Security Pensions (Low Earnings Threshold) Oder (Northern Ireland) 2015, with only the year changing in the name of the Orders.
In the case of the maximum additional pension calculation the final relevant year is 2014-15.
The first appointed year as appointed by Article 2 of the Additional Pension (First Appointed Year) Order (Northern Ireland) 2001 is 2002/03.
The flat rate introduction year is 2012-13 as designated by Article 2 of the Social Security Pensions (Flat Rate Introduction Year) Order (Northern Ireland) 2012.
The calculation
There are 4 calculations to be made in order to arrive at the maximum additional pension figure for 2015-16, those under section 45(2)(a) to (d):
Section 45(2)(a)
In relation to any surpluses in the pensioner’s earnings factors for the tax years in the period beginning with 1978-79 and ending with 1987-88, the weekly equivalent of 25/N per cent. of the adjusted amount of those surpluses.
The difference between the earnings factor [53 times the weekly upper earnings level] and the qualifying earnings factor [53 times the weekly lower earnings level] gives the maximum earnings surplus that can be used for contributions. This figure is then “increased by the last order under section 130 of the Administration Act to come into operation before the end of the final relevant year”. In this case by the Social Security Revaluation of Earnings Factors Order (Northern Ireland) 2014. N in this case is 37 the maximum number of tax years in the pensioner’s working life which can fall after 5th April 1978.
Qualifying Revalued
Earnings Earnings Surplus Revaluation Surplus
Year Factor Factor Earnings Percentage Earnings
1978-79 6360 910 5450 741.7 £45,872.65
1979-80 7155 1014 6141 642.9 £45,621.49
1980-81 8745 1196 7549 520.7 £46,856.64
1981-82 10600 1404 9196 419.8 £47,801.73
1982-83 11660 1534 10126 372.1 £47,804.85
1983-84 12455 1690 10765 338.4 £47,193.76
1984-85 13250 1768 11482 305.9 £46,605.44
1985-86 14045 1846 12199 280.8 £46,453.79
1986-87 15105 1976 13129 249.7 £45,912.11
1987-88 15635 2028 13607 225.6 £44,304.39
Total Surplus Earnings pre 1988 £464,426.85
Additional Pension pre 1988 is therefore:
£464,426.85 x 25% = £116,106.7125 ÷ 37 = £3,138.0193 ÷ 52 = £60.35
Section 45(2)(b)
In relation to any surpluses in the pensioner’s earnings factors in a tax year after 1987-88 but before the first appointed year, the weekly equivalent of the relevant percentage of the adjusted amount of those surpluses. The first appointed year is 2002-03 as per Article 2 of the Additional Pension (First Appointed Year) Order (Northern Ireland) 2001.
Again the difference between the earnings factor [53 times the weekly upper earnings level] and the qualifying earnings factor [53 times the weekly lower earnings level] gives the maximum earnings surplus that can be used for contributions. This figure is then “increased by the last order under section 130 of the Administration Act to come into operation before the end of the final relevant year”. In this case by the Social Security Revaluation of Earnings Factors Order (Northern Ireland) 2014.
Qualifying Revalued
Earnings Earnings Surplus Revaluation Surplus
Year Factor Factor Earnings Percentage Earnings
1988-89 16165 2132 14033 199.5 £42,028.84
1989-90 17225 2236 14989 170.3 £40,515.27
1990-91 18550 2392 16158 151.9 £40,702.00
1991-92 20670 2704 17966 128.8 £41,106.21
1992-93 21465 2808 18657 114.8 £40,075.24
1993-94 22260 2912 19348 104.6 £39,586.01
1994-95 22790 2964 19826 98.5 £39,354.61
1995-96 23320 3016 20304 90.1 £38,597.90
1996-97 24115 3172 20943 84.9 £38,723.61
1997-98 24645 3224 21421 76.1 £37,722.38
1998-99 25705 3328 22377 68.4 £37,682.87
1999-00 26500 3432 23066 61.6 £37,277.89
2000-01 28355 3484 24871 52 £37,803.92
2001-02 30475 3744 26731 40.2 £39,080.72
Total Surplus Earnings 1988 to 2002 £550,257.47
Additional Pension 1988 to 2002 is therefore:
£550,257.47 x 20% = £110,051.494 ÷ 37 = £2974.3647 ÷ 52 = £57.20
Section 45(2)(c)
In relation to any tax years falling within subsection (3A) below, the weekly equivalent of the amount calculated in accordance with Schedule 4A to this Act.
Schedule 4A provides:
SCHEDULE 4A
Additional Pension: Accrual Rates for Purposes of Section 45(2)(c)
PART I
The Amount
1.—(1) The amount referred to in section 45(2)(c) above is to be calculated as follows—
(a) take for each tax year concerned the amount for the year which is found under the following provisions of this Schedule;
(b) add the amounts together;
(c) divide the sum of the amounts by the number of relevant years;
(d) the resulting amount is the amount referred to in section 45(2)(c) above, except that if the resulting amount is a negative one the amount so referred to is nil.
(2) For the purpose of applying sub-paragraph (1) above in the determination of the rate of any additional pension by virtue of section 39C(1) or 48B(2) above, in a case where the deceased spouse died under pensionable age or by virtue of section 39C(1) or 48B(2) above, in a case where the deceased civil partner died under pensionable age, the divisor used for the purposes of sub-paragraph (1)(c) above shall be whichever is the smaller of the alternative numbers referred to below (instead of the number of relevant years).
(3) The first alternative number is the number of tax years which begin after 5th April 1978 and end before the date when the entitlement to the additional pension commences.
(4) The second alternative number is the number of tax years in the period—
(a) beginning with the tax year in which the deceased spouse or civil partner attained the age of 16 or, if later, 1978-79; and
(b) ending immediately before the tax year in which the deceased spouse or civil partner would have attained pensionable age if he had not died earlier.
(5) For the purpose of applying sub-paragraph (1) above in the determination of the rate of any additional pension by virtue of section 48BB(5) above, in a case where the deceased spouse or civil partner died under pensionable age, the divisor used for the purposes of sub-paragraph (1)(c) above shall be whichever is the smaller of the alternative numbers referred to below (instead of the number of relevant years).
(6) The first alternative number is the number of tax years which begin after 5th April 1978 and end before the date when the deceased spouse dies.
(7) The second alternative number is the number of tax years in the period—
(a) beginning with the tax year in which the deceased spouse or civil partner attained the age of 16 or, if later, 1978-79; and
(b) ending immediately before the tax year in which the deceased spouse or civil partner would have attained pensionable age if he had not died earlier. (8) In this paragraph “relevant year” has the same meaning as in section 44 above.
Surplus Earnings Factor
2.—(1) This Part of this Schedule applies if for the tax year concerned there is a surplus in the pensioner’s earnings factor.
(2) The amount for the year is to be found as follows—
(a) calculate the part of the surplus for that year falling into each of the bands specified in the appropriate table below;
(b) multiply the amount of each such part in accordance with the last order under section 130 of the Administration Act to come into operation before the end of the final relevant year;
(c) multiply each amount found under paragraph (b) above by the percentage specified in the appropriate table in relation to the appropriate band;
(d) add together the amounts calculated under paragraph (c) above.
(3) N/a
(4) The appropriate table for persons attaining pensionable age on or after 6th April 2009 where the tax year concerned falls before 2010-11is as follows—
TABLE 2
Amount of surplus Percentage
Band 1. Not exceeding LET 40
Band 2. Exceeding LET but not exceeding 3LET - 2QEF 10
Band 3. Exceeding 3LET - 2QEF 20
(4A)The appropriate table for persons attaining pensionable age on or after 6th April 2009 where the tax year concerned is 2010-11 or a subsequent tax year is as follows—
TABLE 2A
Amount of surplus Percentage
Band 1. Not exceeding LET 40
Band 2. Exceeding LET 10
(5) Regulations may provide, in relation to persons attaining pensionable age after such date as may be prescribed, that the amount found under this Part of this Schedule for the second appointed year or any subsequent tax year is to be calculated using only so much of the surplus in the pensioner’s earnings factor for that year as falls into Band 1 in the table in sub-paragraph (4) above.
(6) For the purposes of the tables in this paragraph—
(a) the value of N is 0.5 for each tax year by which the tax year in which the pensioner attained pensionable age precedes 2009-10;
(b) “LET” means the low earnings threshold for that year as specified in section 44A above;
(c) “QEF” means the qualifying earnings factor for the tax year concerned.
(7) In the calculation of “2QEF” the amount produced by doubling QEF shall be rounded to the nearest whole £100 (taking any amount of £50 as nearest to the previous whole £100).
(8) In this paragraph “final relevant year” has the same meaning as in section 44 above.
Table 2 is used for calculations between 2002-03 and 2009-10. Band 1 uses the amount between the Qualifying Earnings Factor and the Lower Earnings Threshold for that particular year. Band 2 uses the amount between the Lower Earnings Threshold and (3 times the Lower Earnings Threshold – 2 times the Qualifying Earnings Factor [rounded in line with paragraph (2)(7)]). Band 3 uses the amount above (3 times the Lower Earnings Threshold – 2 times the Qualifying Earnings Factor [rounded in line with paragraph (2)(7)]) to the Upper Earnings Level (until 2008-09) or the Upper Accrual Point (from 2009-10).
The revaluation percentages are in line with the last order under section 130 of the Administration Act to come into operation before the end of the final relevant year. Again, in this case by the Social Security Revaluation of Earnings Factors Order (Northern Ireland) 2014.
The calculations are as follows using the maximum contributions.
Table 2 Calculations 2002-03 to 2009-10
Surplus Surplus Revalued Accrual Calculated
Year Earnings Perc Surplus Rate Amount
2002-03
Band 1 3900 to 10800 6900 40.1 9666.90 40 £3,866.76
Band 2 10800 to 24600 13800 40.1 19333.80 10 £1,933.38
Band 3 24600 to 31005 6405 40.1 8973.41 20 £1,794.68
Total £7,594.82
2003-04
Band 1 4004 to 11200 7196 35.3 9736.19 40 £3,894.48
Band 2 11200 to 25600 14400 35.3 19483.20 10 £1,948.32
Band 3 25600 to 31535 5935 35.3 8030.06 20 £1,606.01
Total £7,448.81
2004-05
Band 1 4108 to 11600 7492 30.3 9762.08 40 £3,904.83
Band 2 11600 to 26600 15000 30.3 19545.00 10 £1,954.50
Band 3 26600 to 32330 5730 30.3 7466.19 20 £1,493.24
Total £7,352.57
2005-06
Band 1 4264 to 12100 7836 25.2 9810.67 40 £3,924.27
Band 2 12100 to 27800 15700 25.2 19656.40 10 £1,965.64
Band 3 27800 to 33390 5590 25.2 6998.68 20 £1,399.74
Total £7,448.81
2006-07
Band 1 4368 to 12500 8132 21.1 9847.85 40 £3,939.14
Band 2 12500 to 28800 16300 21.1 19739.30 10 £1,973.93
Band 3 28800 to 34185 5385 21.1 6521.24 20 £1,304.25 Total £7,217.32
2007-08
Band 1 4524 to 13000 8476 16.3 9857.59 40 £3,943.04
Band 2 13000 to 30000 17000 16.3 19771.00 10 £1,977.10
Band 3 30000 to 35510 5510 16.3 6408.13 20 £1,281.63
Total £7,201.76
2008-09
Band 1 4680 to 13500 8820 11.6 9843.12 40 £3,937.25
Band 2 13500 to 31100 17600 11.6 19641.60 10 £1,964.16
Band 3 31100 to 40810 9710 11.6 10836.36 20 £2167.27
Total £8,068.68
2009-10
Band 1 4940 to 13900 8960 8.3 9703.68 40 £3,881.47
Band 2 13900 to 31800 17900 8.3 19385.70 10 £1,938.57
Band 3 31800 to 40810 9010 8.3 9757.83 20 £1,951.57
Total £7,771.61
Table 2A Calculations 2010-11 and 2011-12
2010-11
Band 1 5044 to 14100 9056 7 9689.92 40 £3,875.97
Band 2 14100 to 40810 26710 7 28579.70 10 £2,857.97
Total £6,733.94
2011-12
Band 1 5304 to 14400 9096 4.6 9514.42 40 £3,805.77
Band 2 14400 to 40810 26410 4.6 27624.86 10 £2,762.49
Total £6,538.25
Total calculated amount 2002-03 to 2011-12 = £7,594.82 + £7,448.81 + £7,352.57 + £7,289.64 + £7,217.32 + £7,201.76 + £8,068.68 + £7,771.61 +£6,733.94 + £6,568.25 = £73,247.40.
Additional Pension 2002 to 2012 is therefore:
£73,247.40 ÷ 37 = £1,979.66 ÷ 52 = £38.07
Section 45(2)(d)
In relation to the flat rate introduction year and subsequent tax years, the weekly equivalent of the amount calculated in accordance with Schedule 4B to this Act
Schedule 4B provides:
SCHEDULE 4B
Additional Pension: Accrual Rates for Purposes of Section 45(2)(d)
PART I
Amount for purposes of section 45(2)(d)
1.—(1) The amount referred to in section 45(2)(d) or (2A)(b) above is to be calculated as follows—
(a) calculate the appropriate amount of each of the relevant years within section 45(2)(d) or (2A)(b) (as the case may be) above to which Part 2 of this Schedule applies;
(b) calculate the appropriate amount of each of the relevant years within section 45(2)(d) or (2A)(b) (as the case may be) above to which Part 3 of this Schedule applies;
(c) add those amounts together.
(2) But if the resulting amount is a negative one, the amount referred to in section 45(2)(d) or (2A)(b) (as the case may be) above is nil.
Part 2
Normal rules: employment not contracted-out
Application
2. this Part applies to a relevant year if the contracted-out condition is not satisfied in respect of any tax week in the year.
Appropriate amount for year
3. The appropriate amount for the year for the purposes of paragraph 1 above is either—
(a) the flat rate amount for the year (if there is a surplus in the pensioner’s earnings factor for the year which does not exceed the LET), or
(b) the sum of the flat rate amount and the earnings-related amount for the year (if there is such a surplus which exceeds the LET).
4. the flat rate amount for the year is calculated by multiplying the FRAA in accordance with the last order under section 130AA of the Administration Act to come into force before the end of the final relevant year.
5. The earnings-related amount for the year is calculated as follows—
(a) take the part of the surplus for the year which exceeds the LET but does not exceed the UAP;
(b) multiply that amount in accordance with the last order under section 130 of the Administration Act to come into force before the end of the final relevant year;
(c) multiply the amount under sub-paragraph (b) above by 10 per cent;
(d) divide the amount found under sub-paragraph (c) above by 44.
PART 3 – n/a
PART 4 – n/a
PART 5
Interpretation
12. In this Schedule—
“the FRAA” has the meaning given by paragraph 13 below;
“the LET”, in relation to a tax year, means the low earnings threshold for the year as specified in section 44A above;
“the QEF”, in relation to a tax year, means the qualifying earnings factor for the year;
“relevant year” and “final relevant year” have the same meaning as in section 44 above;
“the UAP” means the upper accrual amount.
13.—(1) “The FRAA” means the flat rate accrual amount.
(2) That amount is £72.80 for the flat rate introduction year and subsequent years (but subject to section 130AA of the Administration Act).
The FRAA was amended by Article 2 of the Social Security Pensions (Flat Rate Accrual Amount) Order (Northern Ireland) 2014 to £92.00.
The revaluation percentages are in line with the last order under section 130 of the Administration Act to come into operation before the end of the final relevant year. Again, in this case by the Social Security Revaluation of Earnings Factors Order (Northern Ireland) 2014. The calculations are as follows, again with maximum contributions taken into account.
Revalued Multiplier Divisor
Surplus % Surplus 10% 44
2012-13
Band 1 FRAA
5564 to 14700 £92.00
Band 2
14700 to 40810 26110 2.7 26,814.97 10 2681.50 44 £60.94
Total £152.94
Weekly ÷ 52 £2.9412
2013-14
Band 1 FRAA
5564 to 14700 £92.00
Band 2
15000 to 40810 25810 0.9 26,042.29 10 2604.23 44 £59.19
Total £151.19
Weekly ÷ 52 £2.9074
2014-15
Band 1 FRAA
5564 to 14700 £92.00
Band 2
15100 to 40810 25710 0 25710.00 10 2571.00 44 £58.43
Total £150.43
Weekly ÷ 52 £2.8929
Total Additional pension for years 2012-13 to 2014-15 is £2.9412 + £2.9074 + £2.8929 = £8.7445. Rounded giving £8.74.
Final calculation - the sum of Section 45(2)(a) to (d)
The prescribed maximum additional pension is therefore the sum of the figures calculated under Section 45(2)(a) to (d) as calculated above:
Section 45(2)(a) £ 60.35
Section 45(2)(b) £ 57.20
Section 45(2)(c) £ 38.07
Section 45(2)(d) £ 8.74
Total £164.36
The prescribed maximum additional pension for 2015-16 is therefore £164.36 and this applies to all those on State Retirement Pension.