Upper Tribunal (Administrative Appeals Chamber)

DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

 

The DECISION of the Upper Tribunal is to allow the appeal by the Secretary of State.

 

The decision of the Newcastle-upon-Tyne First-tier Tribunal dated 27 December 2012 under file reference SC229/12/00277 involves an error on a point of law. The First-tier Tribunal’s decision is set aside. The Upper Tribunal is able to re-make the decision under appeal. The decision that the First-tier Tribunal should have made is as follows:

 

The claimant’s appeal against the Secretary of State’s second decision dated 7 June 2012 is dismissed.

 

It follows that the claimant was entitled to a Category A retirement pension from and including 12 March 2011 at the aggregate weekly rate of £10.63 (including £0.86 a week for deferral).

 

This decision is given under section 12(2)(a) and (b)(ii) of the Tribunals, Courts and Enforcement Act 2007.

 

 

 

 

REASONS FOR DECISION

 

A summary of this decision

1. The appeal by the Secretary of State against the decision of the First-tier Tribunal succeeds. The claimant’s category A state retirement pension had been correctly entitled in the Secretary of State’s second decision of 7 June 2012. The claimant was not eligible for a lump sum for deferring her pension.

 

The key dates

2. The important dates, shorn of unnecessary details, are as follows. The claimant (who I shall call Mrs M) now lives in Canada and was born on 30 April 1950. She reached UK pension age not on her 60^th birthday but on 6 May 2010 (as she was just caught by the pension age equalisation measures).

 

3. Nearly two years later, on 12 March 2012 Mrs M made a telephone claim for state retirement pension. She indicated that she wished to claim her pension from the earliest date possible.

 

4. On 7 June 2012 the Secretary of State’s decision maker decided that Mrs M was entitled to be paid a pension from 15 March 2011 (i.e. 12 months prior to her claim). The weekly award totalled £10.63, being the sum of £9.77 a week (based on Mrs M’s own national insurance contributions) and £0.86 a week (for deferring her pension).

 

The issue on this appeal

5. Mrs M appealed, arguing that she had been told that she would receive a lump sum for any period deferred. The Secretary of State’s response was that she had no entitlement to a lump sum as the period of deferment was less than 12 months (being the period from 6 May 2010 to 11 March 2011).

 

The First-tier Tribunal’s decision

6. The First-tier Tribunal (the FTT), which (understandably) heard the appeal in Mrs M’s absence in Newcastle-upon-Tyne, allowed her appeal and revised the Secretary of State’s decision.

 

7. The FTT set out its reasoning compendiously on the decision notice:

 

“Schedule 5 Social Security Contributions and Benefits Act 1992 enables a lump sum to be paid if a person’s entitlement to a pension is deferred by at least 12 months. On claiming the state retirement pension the person shall elect to decide if they want an increase in pension or a lump sum.

 

Entitlement to a state retirement pension occurred on 6.5.10. The entitlement was not activated until 12.3.12 when a telephone call was made. This was some 22 months later.

 

The peculiarity of pensions legislation automatically backdated entitlement up to 12 months.

 

This peculiarity relates only to backdating state retirement pension it does [not] determine issues relating to the question of deferring entitlement which in this case is based on the date of claim.

 

In this case entitlement was deferred by at least 12 months and as a consequence Mrs M became entitled to a lump sum payment.

 

Backdating and entitlement are separate issues. The rules relating to backdating state retirement pension do not impact on the issues concerning entitlement to lump sum.”

 

8. I should add that I have added the word “not” in the fourth paragraph of this extract, as the sentence does not make sense without that amendment.

 

The relevant legislation on periods of deferment

9. There is no dispute that the maximum period for backdating a claim for state retirement pension is 12 months (Social Security Administration Act (“SSAA”) 1992, section 1(2)(b), Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968), regulation 19(1) and Schedule 4, paragraph 13). Having made her claim on 12 March 2012, Mrs M’s entitlement was backdated a year and paid from 15 March 2011 (and not to 12 March 2011) simply because of the rules on benefit pay days.

 

10. Section 55(1) of the Social Security Contributions and Benefits Act (“SSCBA”) 1992 makes provision for the consequences of deferral of entitlement to state retirement pension. Section 55(3) (as amended by the Pensions Acts 2004 and 2007) defines what is meant by a period of deferment:

 

‘(3) For the purposes of this Act a person’s entitlement to a Category A or Category B retirement pension is deferred if and so long as that person—

(a) does not become entitled to that pension by reason only of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim), or

(b) in consequence of an election under section 54(1), falls to be treated as not having become entitled to that pension,

and, in relation to any such pension, “period of deferment” shall be construed accordingly.’

 

11. In plain English this means that a “period of deferment” is the period starting with the date the claimant reaches pension age and continues so long as pension entitlement is deferred, either because the person concerned does not make a claim or because a claim is cancelled or withdrawn.

 

12. The detailed mechanics of deferral are contained in Schedule 5 to SSCBA 1992. The starting point is paragraph A(1) (as inserted by the Pension Act 2004). This provides as follows:

 

‘A1 (1) Where a person’s entitlement to a Category A or Category B retirement pension is deferred and the period of deferment is at least 12 months, the person shall, on claiming his pension or within a prescribed period after claiming it, elect in the prescribed manner either—

(a) that paragraph 1 (entitlement to increase of pension) is to apply in relation to the period of deferment, or

(b) that paragraph 3A (entitlement to lump sum) is to apply in relation to the period of deferment.’

 

13. In other words, those who defer their pension get a choice between having an increase in their weekly pension or alternatively receiving a lump sum – but this choice is only for those whose “period of deferment is at least 12 months”. If that period is less than 12 months, Hobson’s Choice applies and the pensioner receives an increase to their weekly benefit based on the length of the deferment (see paragraph 1(1)(b) of Schedule 5 to SSCBA 1992).

 

The error of law in the First-tier Tribunal’s decision

14. The short point in this case is that the period of deferment in this case was 10 months, not 22 months. As that period was less than 12 months, Mrs M was unable to choose the lump sum option. In reaching the conclusion that the relevant period was 22 months, the FTT went wrong in law.

 

15. According to the FTT, “Entitlement to a state retirement pension occurred on 6.5.10. The entitlement was not activated until 12.3.12 when a telephone call was made. This was some 22 months later.” However, in doing so the FTT elided the concepts of being eligible to make a claim and being entitled to a benefit. The general rule is that entitlement is dependent on a claim being made (see SSAA 1992, section 1(1)). There are some narrow exceptions to that principle but none applies here.

 

16. Mrs M became eligible to claim a retirement pension in May 2010 but she was not entitled at that date as she had made no claim; she did not make the relevant claim until March 2012. The starting point is that her entitlement would run from that later date – however, it was then immediately backdated 12 months so that her entitlement commenced in March 2011. On that basis, under the definition in section 55(3) of the SSCBA 1992, the period of deferment, from reaching pension age to becoming entitled to her pension, was 10 months.

 

17. The FTT’s further error was to treat the rules on backdating as a completely separate issue from those governing entitlement. On the contrary, the statutory provisions dealing with backdating in effect define when entitlement starts. Section 55(3) provides that entitlement is deferred “if and so long as” the claimant “does not become entitled to that pension by reason only of not satisfying the conditions of section 1 of the Administration Act”. The statutory use of the double negative is unhelpful drafting, but Mrs M plainly became entitled to the pension as from March 2011. Entitlement did not somehow become vested with effect only from March 2012.

 

18. The same point may be put in a slightly different way. Clearly Mrs M did not meet the condition laid down in section 1 of the SSAA 1992 until March 2012. However, section 55(3) of the SSCBA 1992 does not provide that entitlement to benefit is deferred until section 1 is satisfied. Section 1 itself provides for that, subject to the backdating rules. Section 55(3) defines the parameters of the period of deferment. Because of the operation of the backdating provisions, Mrs M was entitled (rather than not entitled) to a pension as from March 2011 – so as from that time it could not be said that she was not entitled “by reason only of not satisfying the conditions of section 1 of the Administration Act”.

 

19. As Mr Michael Page for the Secretary of State, there is a special rule which in certain circumstances allows a claimant to elect to be treated as not having retired from the date of the first award of a pension and so extend the period of deferment (see Social Security (Widow’s Benefit and Retirement Provision) Regulations 1979 (SI 1979/642), regulation 2). However, this rule cannot be operated by those, like Mrs M, who are not ordinarily resident in Great Britain and so cannot assist her.

 

The back story

20. There was considerable contact between Mrs M and the Pension Service before she made her telephone claim in March 2012. There were difficulties associated with Mrs M’s attempt to use an Isle of Man bank account to receive her pension and queries over voluntary payments of national insurance contributions. Mrs M obviously feels that in the course of these dealings she was misadvised by Pension Office staff about her pension options.

 

21. Neither the FTT nor the Upper Tribunal is in a position to adjudicate on those sorts of matters. If they are to be pursued, they would have to be taken forward by way of a complaint to the Parliamentary Commissioner for Administration or Ombudsman. Mrs M has argued that in her circumstances a small weekly increase to her pension made little financial sense and that she sought to make this clear to the Pension Service.

 

22. It is unclear what discussion, if at all, there was in the course of the telephone claim about the implications of the backdating request. The claim form, completed by a member of staff, simply answers “yes” in response to the question “I understand that Payment of State Pension is subject to time limits and wish to claim my State Pension from the earliest possible date”. If Mrs M had been aware of the 12-month rule, she would perhaps have asked for her entitlement to be backdated for less than the full 12 months, so as to ensure she qualified for a lump sum instead of a small weekly increase. However, the fact that there may have been some misunderstanding here does not necessarily mean that the Ombudsman will find that there has been maladministration.

 

23. Matters were also not helped by the Pension Service issuing two decisions by letter on the same date, detailing different pension entitlements for the same period. However, it is clear that the effective decision was the second decision under reference “FR7”, awarding a pension of £10.63 (being £9.77 based on contributions and £0.86 for deferment) a week.

 

 

 

Conclusion

24. The decision of the First-tier Tribunal involves an error of law. I must therefore allow the appeal and set aside the decision of the tribunal (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a)). I also re-make the tribunal’s decision (section 12(2)(b)(ii)) in the terms set out above. In effect I reinstate the Secretary of State’s decision.

 

 

 

 

 

 

Signed on the original Nicholas Wikeley

on 02 September 2013 Judge of the Upper Tribunal