UK Social Security and Child Support Commissioners' Decisions

[2001] UKSSCSC CP_4479_2000 (17 September 2001)

 


THE SOCIAL SECURITY COMMISSIONERS

Commissioner's Case no: CP 4479 2000

SOCIAL SECURITY ACTS 1992 - 1999

PENSION SCHEMES ACT 1993

APPEAL FROM A DECISION OF AN APPEAL TRIBUNAL

ON A QUESTION OF LAW

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Commissioner David Williams

Commissioners' case no: CP 4479 2000

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. I allow the appeal.
2. The appellant (and claimant) is appealing against the decision of the Birmingham appeal tribunal on 14 July 2000 that his entitlement to additional retirement pension was £83.78 subject to any relevant deductions, and that his case was referred to the Benefits Agency for his award of retirement pension to be revised.
3. For the reasons below, the decision of the tribunal is erroneous in law. I set it aside. It is expedient that I take the decision that the tribunal should have taken. This is:

(1) The decision about the guaranteed minimum pension:

The case is referred to the Inland Revenue for an officer of the Board to issue notification of the decision taken under section 170 of the Pension Schemes Act 1993 about the appellant's guaranteed minimum pension, in accordance with section 170(7) of that Act, section 18 of the Social Security Act 1998 and regulation 28 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999. I direct the officer that if the decision issued does not include a statement of reasons as indicated in regulation 28(1)(b) then the officer is to issue with the decision a sufficient statement of reasons to comply with the alternative requirement in regulation 28(1)(b). The officer is directed to copy any such notification and, if in addition, the reasons for the decision, to me on issue.

It is for the appellant to decide if he wishes to appeal against that decision once notified, within the time limit laid down by regulation 31(1) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, notification being to the relevant National Insurance Contributions office. The appellant and his representatives are directed to inform me, at the latest by a submission made on the last day for appealing under that regulation, whether he is exercising the right of appeal. If he is, I direct that further consideration of this aspect of this decision be adjourned until the appeal has been heard. The appellant and representative are to inform me of the decision of the tribunal within seven days of the issue of that decision or, if they ask for it, within seven days of receiving the full statement of reasons, and whether they are seeking leave to appeal against that decision.

(2) The decision about the additional pension:

I direct the Secretary of State to provide a full submission on the calculation of the appellant's additional pension entitlement under section 45 of the Social Security Contributions and Benefits Act 1992 and any other relevant statutory provisions or regulations. Alternatively, the Secretary of State is to provide, and is to provide an explanation of, any computer generated decision made under section 45.

That submission is to be made within one month of the date of issue of this direction. The submission is to be copied to the appellant and representative on receipt, and the appellant and representative have one month from the date of receiving that submission to make any further submission they wish about entitlement to the additional pension.

(3) The decision about offsetting the guaranteed minimum pension against the Category A pension under section 46 of the Pension Schemes Act:

I adjourn this aspect of the decision until the guaranteed minimum pension has been established under decision (1) above, and the submissions have been received under decision (2) above.

4. I held an oral hearing of this case at Birmingham Crown Court on 16 August 2001. The appellant attended and was represented by Mrs Ferneyhough of the Birmingham Tribunal Unit. The Secretary of State for Work and Pensions (as successor to the Secretary of State for Social Security) was represented by Mr Chang of the Office of the Solicitor to the Department for Work and Pensions. (In this decision I refer to both the Department and its predecessor as "the Department"). The Board of Inland Revenue ('the Board") was not represented at the hearing, but a full written submission from the Board had been submitted to me and the parties by Mr Greer of the Inland Revenue Solicitor's Office. I am most grateful to Mrs Ferneyhough and Mr Chang for their help in this case, and also to Mr Greer for his detailed written submission. I directed the oral hearing as a preliminary hearing. I did so because the appeal, as it came to me, raised issues about whom were the parties to the appeal and what decisions were under appeal. I directed that the Inland Revenue should be joined as a party to the oral hearing so that this could be sorted out.

The facts

5. The primary facts are not in dispute. The appellant was born in 9 June 1934. In 1999, when he was 65, he claimed retirement pension for himself and his wife. He had previously been claiming incapacity benefit, and his wife was claiming disability living allowance. He had stopped work. He was awarded a Category A retirement pension from and including his 65th birthday. He was first awarded Category A basic pension and graduated retirement benefit. Due to problems with a computer, entitlement to additional pension was confirmed later, in October 1999. It is this confirmation which the appellant challenged by way of appeal.

The original decision under appeal

6. The decision in October 1999 was that the appellant's entitlement to "additional retirement pension (SERPS)" was £84.23, that his "contracted out deductions" were £83.97, and that his additional retirement pension payable was therefore 26p. His notice of appeal against this decision challenged the periods taken into account and the calculation of SERPS.

The tribunal decision

7. The appellant made a written submission stating that he had been in contracted-out employment until the end of 1992, but had then contracted back into SERPS from the beginning of 1993 on advice which seemed now to be wrong. He had been given two official pension forecasts of his additional pension entitlement, which were both significantly higher than the figure in the decision. The submission from the Secretary of State to the tribunal stated that, on the contrary, the appellant had been awarded too much additional pension. The correct calculation of additional pension entitlement was £83.78. This was 19p less than the appellant's guaranteed minimum pension, and accordingly the submission was that the tribunal should decide the lower rate of additional pension and then refer the decision to "the relevant area" for the award of retirement pension to be revised downwards, but without creating a recoverable overpayment. The tribunal accepted the Secretary of State's submission in full and gave the decision requested, adopting as correct the revised calculation of additional pension. Given the complexities of this case, the deficiencies in the submission to the tribunal, and the absence of the texts of or comments on the relevant law in the usual reference sources available to tribunals, it is not surprising that the tribunal took this course of action. But, for the reasons below, the Secretary of State's submission was wrong in law and so the tribunal decision was also wrong in law.

What is under appeal?

8. It was not clear on the papers what aspects of the appellant's pension entitlement were being challenged by the appellant in his appeal. At the oral hearing, Mrs Ferneyhough stated that her client was not challenging the basic pension entitlement or the graduated retirement benefit, but she was challenging all aspects of the original calculation of the additional pension, including the "relevant periods" for the calculation. This included the calculation of the appellant's guaranteed minimum pension. She also challenged the tribunal decision to take the "excess" guaranteed minimum pension from the basic pension.
9. Notwithstanding the many thousands of pensioners directly affected by the law relating to additional pension in the way that the claimant was affected, there has apparently been no previous appeal to a Commissioner on these points. Nor, so far as informal enquiries show, have there been previous appeals to appeal tribunals about the calculation of additional pension and guaranteed minimum pensions and the operation of section 46. I was also unable to gain assistance in deciding this case in the standard social security literature or the standard pensions literature. For that reason I set out the relevant law and an explanation of it in more than usual detail in this decision.

Entitlement to basic and additional pension

10. Section 44(3) of the Social Security Contributions and Benefits Act 1992 ("the Benefits Act") provides that:

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.

Section 44(4) states the weekly amount of basic pension. Section 44(5) and (6) explain what section 44(4) means, and section 44(7) explains what "relevant years" means. Section 45 of the Benefits Act states how the amount of additional pension is to be calculated by references to the surpluses and then turned into a weekly equivalent figure, and sections 46 to 48 of that Act provide for special cases.

SERPS

11. Read together, these sections set out the conditions for entitlement to retirement pension, including additional pension, and the amount to which an individual is entitled. The impression given by standard social security legislative collections is that everyone is entitled to an additional pension depending on his or her level of contributions. That is not so. Additional pension is also known by an entirely different name, the State Earnings Related Pension Scheme, or SERPS. It is provided in Part II of the Benefits Act that employees and their employers can pay two levels of contribution on the earnings of the employees, depending on whether the earnings relate to contracted-in or contracted-out employment. Individuals (or more usually their employers) can choose between being in the SERPS scheme ("contracted-in") or not ("contracted-out"). An individual is contracted-out if he or she is a member of an approved occupational pension scheme or has an approved personal pension. Employment subject to an approved occupational pension scheme is "contracted-out employment", and this also covers those with approved personal pensions. An individual who is in contracted-out employment pays a lower rate of national insurance contribution than a contracted-in employee does, and the employer's contribution is also lower, but in return the employee does not receive entitlement to SERPS or additional pension. This is because entitlement to SERPS is replaced by entitlement to the occupational or personal pension. Figures show that most employees are contracted-out at some stage in their careers. Increasingly, there are many like the appellant who are contracted-in for parts of their working lives and contracted-out for other parts.

GMPs and the Pension Schemes Act 1993

12. Under the Pension Schemes Act 1993 ('the Pension Schemes Act"), there is a safety net behind the contracted-out occupational or personal pension entitlement of all individuals. They are entitled to receive at least a guaranteed minimum pension (GMP) from their schemes. Each individual is entitled to not less that a weekly amount of pension ( the guaranteed minimum) based on the total contributions paid.
13. The Pensions Schemes Act is a consolidation Act , now substantially amended by the Pensions Act 1995. Until the 1995 Act, many powers and duties under the Pension Schemes act were administered by the Occupational Pensions Board ("OPB"), the others being exercised by the Department (in the name of the Secretary of State). With effect from 1997, the OPB was abolished and its duties and powers transferred to the Department. At that stage, the Department was responsible for all aspects of the Pension Schemes Act. There were further major changes to the Act in 1999, when many of the duties and powers under the Pension Schemes Act were transferred a second time, this time to the Board, by the Social Security Contributions (Transfer of Functions, etc.) Act 1999 ("the Transfer of Functions Act") . Those transfers are important because one of the issues in this case is about what was, and what was not, transferred from the Department to the Board by the Transfer of Functions Act. The duties and powers transferred from the OPB were not the same duties and powers as those transferred to the Board. The relevant parts of the 1993 Act were also amended by the Social Security Act 1998 and by the Welfare Reform and Pensions Act 1999. One of the critical sections in this decision, section 170 of the Pension Schemes Act (decisions and appeals), was significantly amended by the Pensions Act 1995, the Social Security Act 1998, and both 1999 Acts (and by subordinate legislation as well, but thankfully I do not need to deal with that). Indeed, it must be a strong candidate for some sort of award as "the most amended appeals section in primary legislation".
14. Until April 1997 (when changes under the Pensions Act 1995 not relevant to this appeal took effect), the Pension Schemes Act provided that an occupational pension scheme could not be certified as contracted-out unless it complied with the statutory provisions on GMPs (Pension Schemes Act, sections 7, 8, 9(2)(b)). A GMP is one provided in accordance with sections 13 and 17 of the Pension Schemes Act (section 8(2)). Section 13(1) of the Act provides that a scheme must provide a pension to an earner who attains pensionable age of a weekly rate not less than the guaranteed minimum. Sections 14 to 16 provide the rules for calculating that guaranteed minimum. As the appellant in this case was in contracted-out employment for part of his working life, he was entitled to a GMP from his pension scheme once he was 65.

Interaction of GMP and SERPS

15. The Benefits Act is silent on the position of someone entitled both to a SERPS pension and an occupational pension with a GMP. Overlap is avoided by section 46(1) of the Pension Schemes Act. As relevant to this case, it provides:

(1) Where for any period a person is entitled both -

(a) to a Category A ... retirement pension ... 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) ...

whichever is the less.

Other provisions in section 46 make similar provision for other cases of overlap.

The payable amount of additional pension

16. It follows that a full calculation of the appellant's retirement pension entitlement in this case involves:

•    establishing entitlement to additional pension (SERPS) as if the claimant were contracted-in to the state scheme for all relevant periods (referred to as the "hypothetical" SERPS entitlement), then

•    establishing entitlement to Category A retirement pension as a whole,

•    establishing entitlement to any GMP under any contracted-out scheme of which the claimant was a member during that period, and

•     calculating the net difference between the entitlement to Category A pension and the entitlement to GMP.

This analysis, which follows the language of section 46(1), is not in fact what has happened in this case. Rather, the Department (and the Revenue) calculated the difference not between the Category A pension as a whole and the GMP entitlement, but between the SERPS entitlement and the GMP entitlement. While the end result is the same, the failure to follow the express terms of section 46 in the way in which the appeal was presented to the tribunal in the submission meant that the decision it took was in error of law because it failed properly to decide how section 46 applied to the appeal.

Can excess GMP be set off against the basic retirement pension?

17. Mrs Ferneyhough questioned this, and she was right to do so if she based her approach on the way in which the law was presented in the submission to the tribunal. But that is not what section 46 says. Under section 46, the amount of GMP is to be set off against not just the additional pension but against the Category A pension entitlement as a whole. What the tribunal should have been asked to do was to determine the Category A pension as a whole, then deduct the GMP, then decide the weekly rate of pension payable. It should not have been asked to refer any part of that decision to "the relevant area". As there was no dispute in this case about the basic weekly retirement pension entitlement of the appellant, this should have caused no problem. I must therefore reject that part of Mrs Ferneyhough's submissions on behalf of her client while accepting that it highlights an error by the tribunal.

Who makes the section 46 decisions

18. In my view it is:

•    for the Secretary of State to decide on entitlement to pension, including any SERPS entitlement, under section 46(1) (a) of the Pension Schemes Act and to the weekly rate of that entitlement,

•    for an officer of the Board to decide on entitlement to any GMP entitlement under section 46(1)(b), and to decide the weekly rate of that entitlement (or those entitlements), and

•    for the Secretary of State to decide on the amount of reduction to Category A pension under section 46(1) .

That conclusion is not obvious in the legislation, and I have given my reasons for this conclusion in Appendix 2.

Rights of appeal

19. Following from the above analysis:

•    any decision of the Secretary of State under section 46 of the Pension Schemes Act is a decision "made on" a claim for retirement pension, and is appealable to an appeal tribunal under section 12(1)(a) of the Social Security Act 1998 as part of any decision on retirement pension entitlement;

•    any decision of an officer of the Board under Part III of the Pension Schemes Act about entitlement to the guaranteed minimum pension that is made for the purposes of the application of section 46 by the Secretary of State is appealable to an appeal tribunal under section 12(1)(b) of the Social Security Act 1998.

It follows that the two elements of decision making involved in this case are separate issues giving rise to separate appeal rights and the Department and the Board must separately give claimants notice of their decisions under section 46 together with statements of the separate rights to appeal the separate aspects of the decisions if section 46 applies. Whether or not they do that in one document or two is for them. My analysis of the legislative provisions that lead to this conclusion is in Appendix 3.

Applying the conclusions to this case

20. It follows that the submissions to the tribunal are wrong in law on a number of counts, and so therefore is the tribunal decision. In particular, there should be a separate appeal about the decision by the officer of the Board. At the same time, I accept fully the submissions for the appellant in this case that he was appealing the only decision of which he was notified. My conclusion must be that the Board never gave the appellant the notification to which he was entitled about his GMP, and the tribunal were asked the wrong questions, and dissuaded from asking the right questions, by the submissions from the Department. I deal with the consequences of these errors in the order in which they occurred.

The decision of an officer of the Board

21. I accept that the appellant was not notified about the Board decision. This is accepted, it seems, in the submission for the Inland Revenue to the Commissioner. The relevant part of the submission is that "[the appellant] has never requested a formal review or a formal decision on the amount of his GMP". This suggests not only that the appellant did not receive a notification of the decision in this case, but also that such notifications are not generally issued. Indeed, the Revenue submission suggests that officer have not actually taken decisions under Part III in cases such as this. As the Revenue were not represented at the hearing I was unable to establish this.
22. The relevant procedure for decision-making under Part III of the Pension Schemes Act by an officer of the Board is laid out in detail in the Social Security and Child Support (Decisions and Appeals) Regulations 1999 (which, as noted elsewhere in this decision, have been amended so that they apply to section 170 decisions) ("the Decisions and Appeals Regulations"). Section 170 of the Pension Schemes Act expressly applies the provisions made under the Social Security Act 1998, including these Regulations, to decisions by an officer of the Board under section 170, and therefore section 46. There is no category of non-formal decision in those Regulations, nor is there any procedure whereby a claimant has to ask for a formal decision. In all cases where a decision is made that has operative effect, regulation 28 of the Decisions and Appeals Regulations applies and the claimant must be given written notice of the decision and of the appeal rights. If the submission of the Inland Revenue is a statement that officer of the Board have not made decisions in cases such as the present one, the consequence is that the Secretary of State has been unable properly to make decision under section 46, and the issues still remain in abeyance. I do not think that is what the Revenue are suggesting.
23. The alternative is that an officer of the Board has made a decision, but has failed to comply with the requirements of regulation 28. If that is so, (and I assume that it is so), then it is for the Revenue to issue that notice. This is not a mere technicality, because a claimant's appeal rights start running only on notification of a decision of an officer (regulation 31(1) of the Decisions and Appeals Regulations, as amended to take account of decisions under section 170). Failure to issue proper notification of a decision prevents that decision giving rise to rights of appeal, and prevents the decision becoming final. I note the suggestion in Social Security Legislation 2000, Volume III , paragraph 4.297 (Sweet and Maxwell, 2000) that a failure to give notice at all may have the effect that there is no decision. I have not heard argument on this matter, but I can see that it would have profound effects if it were applied to the Revenue decisions in cases such as the present case, because of its effect on all subsequent section 46 decision and on any related overpayment decisions. Without argument, I do not go that far. I find that in this case an officer of the Board failed to notify the GMP decision to the appellant. The appeal papers are to be referred to the Revenue for that notification to be issued. This does not require any application from the appellant as it should have been done in ordinary course of making the decision. It will be for the appellant to decide if he wishes to appeal. If he does, it goes to an appeal tribunal.

What should the tribunal have decided?

24. On the grounds of appeal put before me, there seems to me only one decision that the tribunal could have taken on the full decision put before it. That is to adjourn the proceedings, or at least part of them, until the GMP has been determined. The tribunal could have, and did, decide the amount of additional pension. But it could not decide on the application of section 46 until the Revenue had decided the GMP and notified that decision, and any appeal was considered.

The appellant's additional pension rights

25. This leaves one substantive issue undetermined, namely whether the tribunal erred in law in accepting the second calculation of the additional pension, but not the first. The tribunal accepted the calculation of additional pension on document 4 of the appeal papers. The statement of the tribunal reasoned that:

"The decision maker has explained in detail in his submission to the tribunal the law as it relates to the appellant's pension entitlement and how that entitlement has been calculated under the relevant provisions. The tribunal examined this submission and agreed with it. The appellant's query about his contributions during the 17-month period is fully addressed. The Decision Maker also pointed out that the calculation used in the award of the appellant's additional pension was incorrect because a figure of £6,491, which should have been used, had inadvertently been transposed as £6,941. A recalculation using the correct figure showed that the appellant's additional pension should be £83.78 instead of the £84.23 awarded ... "

26. The submission which the tribunal was accepting states that :

"The amount of the Additional Pension and the Guaranteed Minimum Pension are calculated from the contributions paid by the appellant in accordance with the Law. These figures were calculated by an Officer of the Inland Revenue and the calculations are attached to this submission. "

The implication is that the Officer of the Revenue calculated the additional pension, not the Department. This is important because the submission also states:

"I submit that the law says that any issues that fall to be decided by an Officer of the Inland Revenue are outside the jurisdiction of the Benefits Agency Decision Maker ... It also follows that any question relating to the accuracy of the figure supplied by the Inland Revenue is outside the jurisdiction of a Social Security Appeal Tribunal ."

27. Aside from the fact that the social security appeal tribunals had been abolished for all purposes several months before this submission was prepared, it contains several other errors of law, as this decision identifies. Decisions about "the accuracy of figures" are only outside the jurisdiction of an appeal tribunal if they relate directly to questions within the jurisdiction of the Board under section 8 of the Transfer of Functions Act (and therefore within the jurisdiction of the tax appeal tribunals). That is not in dispute in this case, but the submission to the tribunal goes far wider than that. The decisions of the Officer under section 170, including the calculations, are within jurisdiction on a correctly made appeal. More important, it is for the Department to make its own decision about additional pension under section 45 of the Social Security Contributions and Benefits Act 1992. There is nothing wrong with it using figures generated elsewhere to do that, as long as the Department accepts that the decision is the Department's decision for appeal purposes, that any errors are the Department's errors, and that it is for the Department to explain and notify the decision. It cannot avoid those consequences , as it has tried to do here, by blaming the Board for the figures and the errors.
28. Further, no mention is made at any point in the submission to the tribunal of section 45 of the Social Security Contributions and Benefits Act 1992. That is the section under which the Department makes additional pension decisions. It follows that the submission to the tribunal totally failed to mention, let alone explain, the law under which it was made, and the tribunal was under a complete (if understandable) when it concluded that the submission "explained in detail … the law". The only relevant information given is the sets of figures and associated abbreviations in documents 3 and 4. They include a series of abbreviations that I do not understand and that no one has attempted to explain. Nor has anyone attempted to explain the significance of the figures.
29. This is far from an adequate submission. As a result, I cannot decide this aspect of the appellant's appeal nor properly refer it to another tribunal. I therefore direct a full submission from the Secretary of State stating how the figures are derived from section 45 of the Social Security Contributions and Benefits Act 1992 and any relevant regulations. In so directing, I accept that I have no jurisdiction over contributions questions that are within section 8 of the Transfer of Functions Act. The submission is to include any necessary information within the scope of section 8, but the Secretary of State is directed only to identify those issues not to explain them.

Use of computers

30. I suspect that the effective decision-making in this case was not done by officer of the Department or Board but by their computers. Computers were blamed for delay in the original decision. The tribunal was presented with a series of computer printouts as the explanation for the decisions of both the Department and the Board. This is expressly authorised for the Department by section 2 of the Social Security Act 1998, and expressly extended to the Board by section 170 of the Pension Schemes Act. What is wrong is reliance on something like document 4 without any explanation. That is not in my view notification of a decision, let alone an explanation of a kind sufficient to meet regulation 28. That is why I direct a full explanation of that document from the Secretary of State responsible for the decision made by it.

Summary

31. My decision has unfortunately been lengthy and yet also inconclusive. In large part this is, as I think the appellant was somewhat surprised to learn, because he has sought to appeal against decisions taken by two government departments acting not entirely in tandem with each other under complex and frequently changed legislation not so far tested by the courts, the appeal tribunals or the Commissioners. That may explain some hesitancy and confusion on the part of those making submissions about this case, but it is nonetheless unfortunate that I have to record a catalogue of errors in the approaches taken to these decisions. It is also why I make three separate operative decisions to take this appeal forward. They are set out at the head of the decision. While I conclude that, in the formal sense, the appellant has won his appeal (in that I agree that the appeal tribunal erred in law), I cannot yet say whether that is to his individual advantage.

David Williams

Commissioner


17 September 2001

APPENDIX 1 TO CP 4479 2000

Section 170 of the Pension Schemes Act 1993 in its present form:

[^[1] 170 Decisions and appeals

(1) Section 2 (use of computers) of the Social Security Act 1998 ("the 1998 Act") applies as if, for the purposes of subsection (1) of that section, this Act were a relevant enactment.

[^[2] (2) It shall be for an officer of the Inland Revenue -

(a) to make any decision that falls to be made under or by virtue of Part III of this Act, other than a decision which under or by virtue of that Part falls to be made by the Secretary of State;

(b) to decide any issue arising in connection with payments under section 7 of the Social Security Act 1986 (occupational pension schemes becoming contracted-out between 1986 and 1993); and

(c) to decide any issue arising by virtue of regulations made under paragraph 15 of Schedule 3 to the Social Security (Consequential Provisions) Act 1992 (continuing in force of certain enactments repealed by the Social Security Act 1973). ^{[3] [4]}

(3) In the following provisions of this section a "relevant decision" means any decision which under subsection (2) falls to be made by an officer of the Inland Revenue, other than a decision under section 53 or section 54.

(4) Sections 9 and 10 of the 1998 Act (revisions of decisions and decisions superseding earlier decisions) apply as if -

(a) any reference in those sections to a decision of the Secretary of State

under section 8 of that Act included a reference to a relevant decision; and

(b) any other reference in those sections to the Secretary of State were, in relation to a relevant decision, a reference to an officer of the Inland Revenue.

(5) Regulations may make provision -

[^[5](a) generally with respect to the making of relevant decisions;

(b) with respect to the procedure to b e adopted on any application made under section 9 or 10 of the 1998 Act by virtue of subsection (4); and

(c) generally with respect to such applications, revisions under section 9 and decisions under section 10;]

but may not prevent such a revision or decision being made without such an application.

(6) Section 12 of the 1998 Act (appeal to appeal tribunal) applies as if, for the purposes of subsection (1)(b) of that section, a relevant decision were a decision of the Secretary of state falling within Schedule 3 to the 1998 Act.

(7) The following provisions of the 1998 Act (which relate to decisions and appeals) -

sections 13 to 18,

sections 25 and 26,

section 28, and

Schedules 4 and 5,

shall apply in relation to any appeal under section 12 of the 1998 Act by virtue of subsection (6) above as if any reference to the Secretary of state were a reference to an officer of the Inland Revenue. ]]

Section 170 of the Pension Schemes Act 1993 as amended up to and including the amendments made by the Social Security Act 1998:

(1) [ as present version]

(2) Sections 8, 9, and 20 of the 1998 Act (decisions by the Secretary of State, revision of decisions and decisions superseding earlier decisions) apply as if, for the purposes of section 8(1)(c) of that Act, this Act were a relevant enactment.

(3) Regulations may make provision –

(a) with respect to the procedure to be adopted on any application made under sections 9 or 10 of the 1998 Act by virtue of subsection (2); and

(b) generally with respect to such applications, and revisions under section 9 and decisions under section 10,

but may not prevent such a revision or decision being made without such an application.

(4) Section 12 of the 1998 Act (appeal to appeal tribunal) applies as if, for the purposes of subsection (1)(b) of that section, any decision of the Secretary of State falling to be made under this Act were a decision falling within Schedule 3 to that Act.

Section 170 of the Pension Schemes Act 1993 as originally enacted:

(1) The questions to which section 17(1) of the Social Security Administration Act 1992 (questions for determination by the Secretary of State) applies include –

(a) any question as to the amount of a person's guaranteed minimum for the purposes of section 13 or 17;

(b) any questions –

(i) whether any state scheme premium is payable or has been paid in any case or as to the amount of any such premium; or

(ii) otherwise arising in connection with any state scheme premium;

(c) any question whether for the purposes of this Act a cash sum paid or an alternative arrangement made under the Policyholders Protection Act 1975 provides the whole or any part of the guaranteed minimum pension to which an earner or an earner's widow or widower was entitled under a contracted-out scheme; and

(d) any question arising in connection with minimum contributions or payments under section 7 of the Social Security Act 1986,

other than a question such as is mentioned in paragraph (b)(ii) or (d) which is required by virtue of this act to be determined by the Board.

(2) The Secretary of State may make any determination required by subsection (1)( c) on such basis as he considers appropriate.

(3) Any question arising under this Act as to whether the employment of an earner in employed earner's employment at any time is or was contracted-out employment in relation to him shall be referred by the Secretary of State to the Board and determined by them.

(4) Neither section 17(1) nor section 20(1) of the Social Security Administration Act 1992 (questions for determination by adjudication officers) shall apply to any such question as is mentioned in subsection (3).

(5) and (6) [ applied to equal access requirements appeals only and repealed on enactment: Schedule 7 paragraph 3.]

APPENDIX 2 to CP 4479 2000

Who decides section 46?

A2.1 The appellant has challenged each aspect of the calculations required to establish what, if any, pension he was entitled to receive, including whether there should be any deduction against his basic pension. The Revenue challenged the appellant's right to query the decisions it had made because he had appealed only against the Department's decisions. For the appellant Mrs Ferneyhough stated on advice, and I accept, that her client was not told that any part of it involved a Board decision - he had appealed the decisions he was told about by the Department. By contrast, the tribunal was told that most of the decisions were made by the Board, including the calculations deciding additional pension. My conclusion in this decision is that there must have been a Revenue decision about GMP for his retirement pension to have been paid. I must also decide which of the Department and Board was responsible for which aspect of the decision-making that put section 46 into effect in an individual case.

A2.2 Until the Transfer of Functions Act, all aspects of section 46 were handled by the Department, and no difficulties arose. Had anyone appealed against a decision about additional pension and GMP, the Department would have been required to deal with all aspects of the decision-making in that section (though not all of it was appealable to an appeal tribunal). That Act transferred key functions to the Board, including calculating a GMP. Section 16 of the Transfer of Functions Act is the relevant transferring section. This provides:

(1) The function of determining the questions referred to in subsection (1) of section 170 of the Pension Schemes Act 1993, as that section has effect before the commencement of paragraph 131 of Schedule 7 to the Social Security Act 1998, is hereby transferred to an officer of the Board.

Paragraph 131 came into effect on 4 March 1999, when the text of section 170 was completely replaced by a new text under the 1998 Act. This clumsy drafting means that the scope of section 170 after amendment depends on the scope of section 170 before amendment! (It is additionally clumsy as that text refers to the now-repealed Social Security Administration Act 1992 to further determine its scope).

A2.3 The full version of section 170 as at that date is set out in Appendix 1. Subsection (1) provided, so far as relevant:

(1) The questions to which section 17(1) of the Social Security Administration Act 1992 (questions for determination by the Secretary of State) applies include -

(a) any question as to the amount of a person's guaranteed minimum pension for the purposes of section 13 or 17 ...

A2.4 Section 17(1) of the Social Security Administration Act 1992 (repealed by the Social Security Act 1998) listed questions to be determined by the Secretary of State. Those questions could not be considered by appeal tribunals and Commissioners, but were subject to separate appeal procedures. It is well established that section 17 should be interpreted narrowly: R(G) 1/82. The text of section 17 itself is irrelevant to this case, but the old form of section 170(1)(a) makes it clear that determination of a GMP under section 13 was a question transferred to the Board by the 1999 Act.

A2.5 The new version of section 170 brought in by the Transfer of Functions Act is also set out in full in Appendix 1. The operative subsection is subsection (2), which provides (so far as relevant):

(2) It shall be for an officer of the Inland Revenue -

(a) to make any decision that falls to be made by or by virtue of Part III of this Act, other than a decision which under or by virtue of that Part falls to be made by the Secretary of State ....

A2.6 If I have wound my way through this legislative maze correctly, the conclusion is :

•    that before the Transfer of Functions Act took effect in 1999 all decisions under Part III were taken by the Department,

•    that any decision under the Pension Schemes Act that fell to be made under the old version of section 170(1) of that Act by the Department is now a decision to be made by the Board under the new version of section 170(2)(a) of that Act by virtue of section 16 of the Transfer of Functions Act,

•    that all other decisions under Part III of the Pension Schemes Act are to be taken by the Board unless they "fall to be made" by the Department "under or by virtue of" that Part.

How does that apply to decisions under section 46 of the Pension Schemes Act (which is in Part III of the Pension Schemes Act)?

Submissions of the Departments

A2.7 On behalf of the Secretary of State, the following submission was made. The submission relied on the terminology of the submission made to the tribunal, which listed the decision in question in this appeal as containing five elements:

A) The weekly amount of basic retirement pension

B) The additional pension (SERPS)

less

C) Contracted out deductions (GMP)

D) (B - C)

E) Graduated retirement pension

Figures B, C and D are all in issue in section 46. Using that language, the submission was that figure B was to be determined by the Department , and figure C by the Board. On figure D the submission to the Commissioner was:

"Section 46 is part of Part III of the Pension Schemes Act. Therefore on the face of it, figure D may be a decision which falls to be determined by an officer of the Inland Revenue under section 170 of the Pension Schemes Act. However, this calculation is carried out by the Secretary of State. It is a straightforward arithmetical function which I submit is analogous with the pensions calculations carried out at sections 44 et seq of the Contributions and Benefits Act where the Secretary of State makes decisions about retirement pension based on contribution information supplied by the Inland Revenue.

In the light of its arithmetical nature, I would submit that any dispute on the additional amount payable is likely to concern calculations at figures B and C, rather than figure D which could be easily identified and amended.

Nevertheless I also submit that it is possible that the claimant is complaining about the methodology of the calculation itself. The claimant may be arguing that there should be separate calculations for the SERPS payable in respect of those periods when he was contracted out of SERPS and in respect of periods when he was contracted into SERPS. This is not the approach adopted by the Secretary of State. The amount of SERPS payable is calculated with reference to the entire period of a claimant's working life and deducts the amount of GMP accrued as a result of any contracted-out employment during that period."

The submission from the Solicitor's Office of the Inland Revenue "does not disagree with the views expressed by the Department of Social Security" in this submission.

A2.8 This submission is wrong in law because it is based on a misreading of section 46 of the Pension Schemes Act, as I have explained in the main text of my decision. Using the Department's labelling, the calculation should involve the following stages:

A) The weekly amount of basic retirement pension

B) The additional pension (SERPS)

P) The Category A pension entitlement (A + B)

C) Contracted out deductions (GMP)

D) (P - C)

E) Graduated retirement pension

I have emphasised the inclusion of a new line P and the error in line D by italics. The importance of this is that D cannot be decided until P and C are all decided, not merely B and C. But that error does not alter the identity of the government department deciding each stage of the decision.

A2.9 The submission of the Secretary of State to the Commissioner contradicts the submission made by the Department to the tribunal (section 5.3 on document 1e) which expressly says that "these figures were calculated by an Officer of the Inland Revenue and the calculations are attached to this submission". I have indicated elsewhere in this decision that I consider that the submission to the tribunal erred in law not least because it sought to shift responsibility for all the figures to the Revenue and outside the jurisdiction of the tribunal. That is clearly wrong because it attempts to shift responsibility for matters that are unequivocally within the Department's duty to decide issues.

Conclusion

A2.10 I find it established that the Revenue decides B) (GMP) and the Department decides C) (hypothetical SERPS). The Department must also decide A) (the basic retirement pension) and P), but there is no clear legislative answer about who decides D). I agree with the submission that this is of limited importance provided that there can be an appeal against any error or challenge to the approach to the calculation. As I am satisfied for the reasons set out in Appendix 3 that the matter can be appealed whether either the Revenue or the Department decides it, I accept what is in effect the joint submission to me by the two government departments that it is the Department that decides D). In other words, it is for the Board to decide the GMP, and for the Department to decide the rest. This, of course, means that the submission to the tribunal and the decision of the tribunal are both wrong in law.

APPENDIX 3 to CP 447 2000

Rights of appeal and notification

A3.1 The decision notified to the appellant was a combination of decisions taken by the Department and the Board under section 46, although it was not notified as such. How should the appellant challenge these decisions? As regard the additional pension element of the decision, that answer should be straightforward. As the submission from the Secretary of State pointed out, the figure used in section 46 is in fact a hypothetical figure based on the provisions in section 45 of the Social Security Contributions and Benefits Act 1992. A decision under section 45 of the 1992 Act is covered by the provisions on decisions and appeals within the scope of the provisions now in the Social Security Act 1998 and the Decisions and Appeals Regulations. As a claimant is entitled to an additional pension under section 45 of the 1992 Act save in so far as that entitlement is reduced or removed under section 46 of the Pensions Schemes Act, my view is that the determination of the additional pension in this case is a matter covered directly by the 1998 Act and regulations.

A3.2 The determination of the GMP is for an officer of the Inland Revenue. The current form of section 170 makes it clear that this is within the scope of Social Security Act 1998. In particular, the key provisions of Chapter II of the 1998 Act (social security decisions and appeals) are expressly applied to these decisions. These include the powers to revise and supersede, the appeals provisions, and the powers to prescribe procedures both for decision making and for appeals. Section 170 grants rights of appeal against a decision of the Revenue on a GMP in the same way as if it were a decision of the Secretary of State within Schedule 3 to the Social Security Act 1998. Schedule 3 is entitled "Decisions against which an appeal lies". Section 12(1) of the Social Security Act 1998 provides that the section applies to any decision made otherwise than on a claim or award and falls within Schedule 3. Section 12(2) then gives a right of appeal to an appeal tribunal against that decision, and on to a Commissioner and the courts.

A3.3 Had this case concerned only the GMP entitlement of the claimant, again the situation would have been straightforward. The Revenue would have made, or be asked to make, a GMP decision, and this would then be appealable to the appeal tribunal via a National Insurance Contributions Office (Decisions and Appeals Regulations, regulation 3(11)(d)). But this is not, in that sense, a straightforward section 170 decision. The Board was asked for the figures by the Department. The appellant did not ask the Revenue for a decision (nor had he any reason to do so), and the Revenue did not make it and then formally notify it to the appellant. In the submission to me from the Solicitor to the Inland Revenue, it is stated:

"The DSS has confirmed that the Inland Revenue sent the GMP calculation to the local office who decide total pension entitlement which will include the GMP calculation...".

Mrs Ferneyhough, for the appellant, told me that he had received no individual notice from the Revenue, and neither the Revenue nor the Department has suggested otherwise. The appellant received notification only of the Department's decision.

A3.4 It is axiomatic as part of the decision-making process that however the decision is presented it must be properly notified. The appeal rights should also be set out. That did not happen here. At the oral hearing Mr Chang (not, of course, representing the Board but the Department) presented me with a copy of what I was told was a standard Revenue letter issued about GMP decisions in such cases. The letter nowhere mentions on it the appeal rights to an appeal tribunal under section 170, nor does the leaflet Inland Revenue 120 mentioned in that letter and of which I was also given a copy. This does not, however, remove the fact that there must have been a decision by an officer of the Board, in whatever form, and that there are appeal rights against that decision once it has been notified properly.

A3.5 The final element of section 46 is the decision to deduct the GMP from the retirement pension. I was told in the submissions that was in practice a Department decision, and I accept that provided that there is a clear right of appeal. Trying to identify precisely how decisions by the Secretary of State under the Pension Schemes Act fit within sections 8 and 12 of the Social Security Act 1998 is not as easy as it should be. I start from the position that under section 170 as it applied before the amendments in 1999 (the Transfer of Functions Act) but after the amendments in 1998 (the Social Security Act 1998), it was clear that all decisions under Part III of the Pension Schemes Act were appealable to the appeal tribunals as if a decision were a decision falling under Schedule 3 to the 1998 Act. (See Appendix 1 for each of the relevant forms of section 170). The post-1999 version of section 170 applies that approach to Revenue decisions under Part III (subsection (2). But it seems that the repeal and replacement of section 170(4) (in the post-1998 version) by section 170 (2), (3) and (6) (in the post-1999 version) removed appeal rights under section 12 against any decisions of the Secretary of State under Part III of the Pension Schemes Act. I cannot believe that this was the intention of Parliament, given that there was no reason to remove those rights and there is no specific provision expressly doing so. If that were the unavoidable interpretation of the relevant legislation, then I would have been inclined to decide that it is for the Revenue to make all section 46 decisions save in so far as I could be shown express statutory authority (and I have seen none) stating that the decision were to be made by the Secretary of State, in order to protect appeal rights.

A3.6 In my view this second legislative maze can be avoided in a more direct way if a broader view is taken of the central appeals section. Section 12(1) of the Social Security Act 1998 provides that:

This section applies to any decision of the Secretary of State under section 8 or 10 above (whether as originally made or as revised under section 9 above) which -

(a) is made on a claim for, or on an award of, a relevant benefit, and does not fall within Schedule 2 to this Act; or

(b) is made otherwise than on such a claim or award, and falls within Schedule 3 to this Act ...

Section 8(1) provides that:

Subject to the provisions of this chapter, it shall be for the Secretary of State -

(a) to decide any claim for a relevant benefit ...

Retirement pension is a relevant benefit. If a claimant claims it, then the Secretary of State must decide the claim. The Secretary of State cannot decide the claim without applying section 46 of the Pension Schemes Act, in so far as it falls to the Secretary of State to make the relevant decision. Any decision applying section 46 to entitlement to retirement pension is in my view a decision "made on" the claim. Therefore any decision made or to be made by the Secretary of State in connection with the appellant's claim for retirement pension, including both the decision on the hypothetical additional pension or SERPS and on the difference between the GMP and the Category A pension, is within section 12(1)(a) and appealable.

A3.7 Finally, are the decisions by the Board and those by the Department appealable as part of the same appeal, or as different appeals? Returning to the analysis based on section 12, section 170(6) in the post-1999 version provides that:

Section 12 of the 1998 Act (appeals to appeal tribunal) applies as if, for the purposes of subsection (1)(b) of that section, a relevant decision were a decision of the Secretary of State falling within Schedule 3 to the 1998 Act.

Section 170(3) includes Revenue decisions about GMP within this provision. This cannot therefore be regarded as part of the Secretary of State's decision "made on" the additional pension claim in the same way as the other aspects of decisions under section 46. Decisions of the Secretary of State are appealable under section 12(1)(a), but decisions of an officer of the Board are appealable under section 12(1)(b). It follows that appeal rights under section 12 apply to the calculation of the GMP as part of the application of section 46 separately from other aspects of decision under section 46, and that therefore there must be a separate appeal against the decision of an officer of the Board, and a separate notification of that right of appeal.

Note 1   Section (as amended in 1995) replaced in entirety with effect from 4. 3. 99 by Social Security Act 1998 Schedule 7, paragraph 131    [Back]

Note 2   Subsections (2) - (7) substituted for the previous text by section 16 of the Social Security Contributions (Transfer of Functions) Act 1999 with effect from 1. 4. 99. For transitional provisions see SI 1999 No 527    [Back]

Note 3   Decisions under this subsection are subject to the power in section 23 of the Social Security Contributions (etc) Act 1999, section 23, transferring functions between the Secretary of State and the Inland Revenue.    [Back]

Note 4   A decision under this subsection may be revised at any time by an officer of the Board where it contains an error: SI 1999 No 991, regulation 3(4), as amended by SI 1999 No 1662, art 3(3).    [Back]

Note 5   Amended by Welfare Reform and Pensions Act 1999, Schedule 11, paragraph 22.    [Back]