Commissioner's File: CIS 276/98
Mr Commissioner Rowland
15 September 1998
SOCIAL SECURITY CONTRIBUTIONS AND BENEFITS ACT 1992
SOCIAL SECURITY ADMINISTRATION ACT 1992
APPEAL FROM DECISION OF SOCIAL SECURITY APPEAL TRIBUNAL ON A QUESTION OF LAW
DECISION OF THE SOCIAL SECURITY COMMISSIONER
Claim for: Income Support
Appeal Tribunal:Norwich SSAT
1. This is an appeal by the claimant, bought with the leave of the tribunal chairman and admitted by a Commissioner despite its lateness, against the decision of the Norwich social security appeal tribunal dated 3 December 1996 whereby they held that the claimant's service invaliding pension was not a "war disablement pension" for the purposes of paragraph 16(a) of Schedule 9 to the Income Support (General) Regulations 1987 and that, consequently, the pension was to be taken into account in full as income without any part of it being disregarded
2. I held an oral hearing of the appeal at which the claimant appeared in person and Ms Rachel Perez, of the Office of the Solicitor to the Departments of Social Security and Health, appeared for the adjudication officer who supported the appeal. I am grateful to both of them for their helpful submissions.
3. It is convenient to start by considering in general terms the status of a service invaliding pension. There is, in effect, one Armed Forces Pension Scheme but the legal basis for the scheme is complicated by the fact that it depends upon prerogative instruments made under various statutes covering the different services. For the Royal Navy and the Royal Marines, the prerogative instrument is an Order in Council made under section 3 of the Naval and Marine Pay and Pensions Act 1865. For the Army it is a Royal Warrant made under section 2 of the Pension and Yeomanry Pay Act 1884. For the Royal Air Force, provision is made in part of the Queen's Regulations for the Royal Air Force made under section 2 of the Air Force (Constitution) Act 1917. Separate provision is made for reserve forces. The present claimant was an airman in the Royal Air Force and so I need consider only the Queen's Regulations for the Royal Air Force. By QR3023(2), an airman who is invalided from the Service having completed at least 5 years qualifying service may be awarded a service invaliding pension, based upon his rank and length of service, subject to the power of the Defence Council to decide otherwise at their discretion. Whenever a person is invalided out of the service, his case is referred to a medical board who decide whether he is suffering from disablement due to service (that is, attributable to, or aggravated by, his service) in which case he will be entitled to a disablement pension under article 10 of the Naval, Military and Air Force etc., (Disablement and Death) Service Pensions Order 1983 if his disablement due to service is assessed at at least 20% or to a lump sum disablement gratuity if it is assessed at less than 20% but not less than 1%. Disablement pensions and gratuities under the 1983 Order are administered by the War Pensions Agency and are entirely separate from service invaliding pensions. However, by QR3023(5), a person who has been invalided out of the Service and whose disablement due to service has been assessed at at least 20% by a medical board may be awarded a "service attributable pension", subject to the Defence Council's discretionary power to decide otherwise. The "service attributable pension" may be the service invaliding pension awarded under QR3023(2) but it may be a greater amount and airmen not eligible for a service invaliding pension (not having completed sufficient qualifying service) are eligible for a "service attributable pension". Any "service attributable pension" (whether or not it is a service invaliding pension) is not taxable. Furthermore, if a person has been awarded a service invaliding pension and a medical board has assessed disablement due to service at less than 20% but not less than 1%, the service invaliding pension will generally be treated as though it were a "service attributable pension" and become tax-free. (The helpful booklet AFPS1, issued by the Ministry of Defence, suggests that the service invaliding pension "may" be treated as a "service attributable pension" but a letter addressed to the claimant, from RAF Innsworth where Royal Air Force pensions are administered, says that that will be done "automatically" following an assessment by a medical board. I suspect that the truth is that there is a general rule that a service invaliding pension will be treated as a "service attributable pension" whenever disablement due to service is assessed at at least 1% but that the Defence Council retains the power to decide otherwise in a particular case.)
4. "Service attributable pensions" and those service invaliding pensions treated as such are tax-free because, when a medical board has, on a referral following retirement or discharge on medical grounds, decided that the person was suffering disablement due to service, it is generally accepted that the medical unfitness was attributable to, or aggravated by, naval, military or air-force service. The consequence is that 315(2)(b) or (c) of the Income and Corporation Taxes Act 1988 (formerly section 365(2)(b) or (c) of the Income and Corporation Taxes Act 1970) applies. Section 315 of the 1988 Act provides:-
315.-(1) Income from wounds and disability pensions to which this subsection applies shall be exempt from income tax and shall not be reckoned in computing income for any purposes of the Income Tax Acts.
(2) Subsection (1) above applies to-
(a) wounds pensions granted to members of the naval, military or air forces of the Crown;
(b) retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by naval, military or air-force service;
(c) disabled or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service;
(d) disablement pensions granted to persons who have been employed in the nursing services of any of the naval, military of air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service; and
(e) injury and disablement pensions payable under any scheme made under the Injuries in War (Compensation) Act 1914, the Injuries in War Compensation Act 1914 (session 2), and the Injuries in War (Compensation Act 1915, or under any War Risks Compensation Scheme for the Mercantile Marine.
(3) Where the amount of any retired pay or pensions to which subsection (1) applies is not wholly attributable to disablement or disability, the relief conferred by that subsection shall extend only to such part as is certified by the Secretary of State for Social Services, after consultation with the appropriate government department, to be attributable to disablement or disability.
5. In the present case, the facts are not in dispute and all the material evidence was before the tribunal. The claimant was discharged from the Royal Air Force on 6 February 1975 on medical grounds and, as he had completed sufficient qualifying service, he was awarded a service invaliding pension from 7 February 1975. He was told that it was taxable and that deductions would be made at source. His case was referred to a medical board who found his condition to have been aggravated by his service in the Royal Air Force and assessed the disablement due to service at 6-11%. On 25 June 1975, he received a letter, sent on behalf of the Director General of Defence Accounts, saying:-
"In consequence of your having been granted a disability award for the disability on account of which you were invalided from the Royal Air Force, your Royal Air Force service pension is exempt from income tax under Section 365 Income and Corporation Taxes Act 1970, with effect from the date of the Department of Health and Social Security award, i e 7 February 1975.
You should retain this letter for production, if necessary, to the Inland Revenue."
It was therefore clear that it had been accepted that the claimant's service invaliding pension had been granted on account of medical unfitness aggravated by air-force service.
6. The claimant claimed income support in 1991 and, ever since, has been conducting a running battle with the Benefits Agency, in both Cumbria and Norfolk, over the status of his service invaliding pension. Adjudication officers have treated it as an occupational pension and have taken it into account in full when calculating the claimant's entitlement to income support. Following an increase in the amount of his pension in 1995, an adjudication officer issued another decision along the same lines as the earlier ones and the claimant appealed to the tribunal.
7. Before the tribunal, the claimant contended that his service invaliding pension was not an occupational pension but was a "war disablement pension" and that £10 should be disregarded, under paragraph 16(a) of Schedule 9 to the 1987 Regulations, in assessing his entitlement to income support. The tribunal rejected that submission, giving clear reasons:-
"There appears to be no precise definition within the social security legislation of the phrase "a war disablement pension" as used in 16(a). It was the view of the tribunal however that its only possible meaning is a pension paid under the legislation administered by the War Pensions Agency and must be limited to such payments. We therefore do not consider that the £10 disregard applies to the pension being paid to [the claimant]."
In other words, they would have accepted that a disablement pension paid under the 1983 Order was a "war disablement pension" but they were not prepared to accept that a service invaliding pension could be a "war disablement pension".
8. It is true that there is no definition of the phrase "war disablement pension" to be found in either the 1987 Regulations or in any relevant part of the Social Security Contributions and Benefits Act 1992. However, when the 1987 Regulations were first introduced, they were made under the Social Security Act 1986 and section 84(1) of the 1986 Act provided that, for the purposes of that Act and unless the context otherwise required,
"'war disablement pension' means -
(a) any retired pay, pension or allowance granted in respect of disablement under powers conferred by or under the Air Force (Constitution) Act 1917, the Personal Injuries (Emergency Provisions) Act 1939, the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939, the Polish Resettlement Act 1947 or Part VII or section 151 of the Reserve Forces Act 1980;
(b) without prejudice to paragraph (a) of this definition, any retired pay or pension to which sub-section (1) of section 365 of the Income and Corporation Taxes Act 1970 applies".
In the absence of any other definition, the phrase "war disablement pension" in the 1987 Regulations had, when first made, the meaning given to that phrase by section 84(1) of the 1986 Act (see section 11 of the Interpretation Act 1978) and that is presumably why no definition was included in the Regulations themselves. Ideally, those responsible for the subordinate legislation should have inserted a definition into the Regulations following the 1992 consolidation of the primary legislation under which there was no general interpretation section in the Social Security Contributions and Benefits Act 1992 and no necessity for a definition of "war disablement pension" in the interpretation section applying to Part VII. However, it is common ground, and I accept, that such an insertion was not strictly necessary because the phrase "war disablement pension" in the 1987 Regulations did not change its meaning upon the repeal of the 1986 Act but has retained its original meaning given by section 84(1) of that Act.
9. I rather doubt that a service invaliding pension paid to an airman falls within the scope of paragraph (a) of the definition in section 84(1) of the 1986 Act, as being "granted in respect of disablement", but that point was not argued before me and I need not determine it. What is clear is that, by virtue of paragraph (b) of that definition, any "service attributable pension", or any tax-free service invaliding pension (i.e., one awarded where it has been accepted that the unfitness which led to the retirement or discharge was attributable to or aggravated by relevant service), is a "war disablement pension" for the purposes of the 1987 Regulations,
10. It follows that the service invaliding pension awarded to the claimant in the present case was a "war disablement pension" and that the local adjudication officer and the tribunal erred in law in deciding otherwise. Nevertheless, I consider that the local adjudication officer was right to regard the service invaliding pension as an occupational pension. The concepts of occupational pension and "war disablement pension" are not mutually exclusive. The scheme of the 1987 Regulations is that an occupational pension is not a form of earnings (see regulation 35(2)(d)) and therefore is to be taken into account as "income other than earnings" under regulation 40, subject to Schedule 9 which provides, by paragraph 16(a), that, subject to certain limitations, there is to be disregarded £10 of any such income that is also a "war disablement pension".
11. Ms Perez submitted that I should limit my decision to a statement to the effect that the claimant's entitlement to income support should be reassessed on the basis that his service invaliding pension was a "war disablement pension", but I consider that my decision should also make clear the period for which it is to have effect. The adjudication officer's decision against which the claimant appealed was clearly a review and a revision of the existing award of income support on the grounds that there had been a change of circumstances (the increase in the amount of service invaliding pension) and it seems to me that the claimant's case before the tribunal was in substance that the adjudication officer ought not only to have had regard to the change of circumstances but also to have reviewed the relevant decision and all earlier decisions on the ground that they were erroneous in point of law. Ms Perez accepted that it appeared that all the adjudication officers had been labouring under a misapprehension as to the scope of the phrase "war disablement pension". Unless there is some material fact of which I am unaware (in which case my decision may itself be reviewed), it seems clear that regulation 64A(3) of the Social Security (Adjudication) Regulations 1986 (now regulation 57(3) of the 1995 Regulations) applies so as to remove the normal limitation on the period in respect of which additional benefit may be paid on review under regulation 69 (now regulation 63). Accordingly, my decision can be effective from the date from which the claimant was first awarded income support.
12. I allow the claimant's appeal. I set aside the decision of the Norwich social security appeal tribunal dated 3 December 1996 and I give the decision the tribunal should have given. All awards of income support made to the claimant from August 1991 are reviewed and revised on the basis that the claimant's service invaliding pension is a "war disablement pension" for the purposes of paragraph 16(a) of Schedule 9 to the Income Support (General) Regulations 1987. If there is any dispute as to the amount of benefit to be paid in consequence of this decision, the matter must be referred back to me or to another Commissioner.
15 September 1998
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