Upper Tribunal (Administrative Appeals Chamber)

CP/3493/2013

NOTICE OF DETERMINATION OF

APPLICATION FOR PERMISSION TO APPEAL

I refuse permission to appeal.

This determination is made under section 11 of the Tribunals, Courts and Enforcement Act 2007 and rules 21 & 22 of the Tribunal Procedure (Upper Tribunal) Rules 2008.

REASONS

Introduction

1. I held an oral hearing of this application for permission to appeal at Field House on 14 March 2014. The Appellant attended, representing himself. He put his points clearly and courteously. However, I am not persuaded it is arguable that the First-tier Tribunal (from now on, “the tribunal”) made any material error of law in reaching its decision.

The background

2. The Appellant reached the age of 65 in December 2006. He decided to defer claiming his state retirement pension in order to increase the amount of his weekly pension. He studied the DWP booklet Your guide to State Pension Deferral (SPD1) with care. According to p.1 of the 2006 version of that booklet:

“If you put off claiming your State Pension for a year, for example, when you do finally claim it you could get an extra 10.4% added to your weekly State Pension for life”.

3. That statement was an attempt to explain in plain English the effect of paragraph 2(3) of Schedule 5 to the Social Security Contributions and Benefits Act (SSCBA) 1992 (as amended by paragraph 6(3) of Schedule 4 to the Pensions Act 1995). Paragraph 2(3) provides as follows:

"the amount of the increment for any such incremental period shall be 1/5th per cent. of the weekly rate of the Category A ... retirement pension to which that person would have been entitled for the period if his entitlement had not been deferred".

4. The Appellant deferred his pension retirement for exactly 50 weeks until 10 December 2007, and so qualified for an increment of precisely 10%, being 0.2% for each of the 50 weeks of deferment. As a result in December 2007 he qualified for (i) a basic pension of £87.30 together with (ii) a graduated pension of £5.07 and (iii) an additional pension of £5.43, totalling £97.80 a week. For convenience, I describe the combined total of these three elements as his “aggregated ordinary pension”. As a result of the calculation set out in the previous paragraph, his aggregated ordinary pension was then supplemented by his 10% deferred increment of £9.78, giving a grand total of a retirement pension of £107.58 a week for the remainder of the 2007/08 tax year.

5. When the social security benefit rates were increased in April 2008, the value of the deferred element of the Appellant’s overall pension slipped to 9.75% of the aggregated ordinary pension. That pattern has continued in each of the following years, with the deferred increment hitting a low of 8.6% of the aggregated ordinary pension in 2013/14.

6. The Appellant’s argument, in short, is that in each and every year his deferred increment should amount to exactly 10% of his aggregated ordinary pension. After all, the DWP booklet had promised him that he would get “an extra 10.4% [or, in his case, 10%] added to your weekly State Pension for life”.

7. The Appellant has pursued his contention through all possible channels. He has had lengthy correspondence with the DWP Pension Service. He has complained to the Independent Case Examiner, who did not uphold the complaint, concluding that the SPD1 booklet did not contain misleading information. He also appealed to the First-tier Tribunal.

The issue in dispute in this case and the Appellant’s arguments

8. The issue in dispute and the rival constructions can be expressed simply enough. The Appellant’s position is that in each financial year the deferred increment should amount to an additional 10% on top of the aggregated ordinary pension for that year. The Department’s view, as put by the presenting officer at the tribunal hearing, was that the deferred increment was a sum fixed as a weekly amount at the date that the pension was first awarded, which was then uprated annually in accordance with decisions taken by the Chancellor of the Exchequer.

9. The Appellant had two main arguments which he advanced at the Upper Tribunal permission hearing. The first is that the terms of the SPD1 booklet were crystal clear. The computer programme operated by the Department produced results which did not reflect the booklet. It followed, the Appellant argued, that either the programme was faulty or the booklet was misleading. This argument will not work for one simple reason. The amount of the Appellant’s total retirement pension (and in particular the deferred increment) is governed by statute, and not by the Department’s booklet, which is no more than a (non-binding) guide to the law. The “letter of the law” is statute, not the booklet.

10. The Appellant’s second main argument was that, given the difference of opinion between him and the Department, one should go back to first principles. The SPD1 booklet was clear enough; presumably the Parliamentary debates or expert reports could be consulted to confirm that this was the intention of those responsible for designing the deferral scheme. I decline to take up that invitation. The starting point has to be the legislative scheme itself. It is only if the statutory language is ambiguous that other official sources may come into play.

The statutory basis for the Appellant’s retirement pension and the deferred increment

11. The Appellant’s entitlement to his aggregated ordinary pension was governed by SSCBA 1992, sections 44 (Category A retirement pension), 45 (additional pension) and 62 (graduated retirement benefit). His entitlement to the increase for deferral arose under section 55 of SSCBA 1992, which in turn refers to Schedule 5 for the mechanics of the calculation. Paragraph A1(1) of Schedule 5 provides that a claimant who defers entitlement to a Category A pension can elect for a weekly increase in that pension “in relation to the period of deferment”. Thus the increment is calculated by reference to the period of deferral; it is not calculated by reference to the other constituent elements of the aggregated ordinary pension as increased each year during the lifetime of the pension. The Schedule also includes the arithmetical provision in paragraph 2(3) (as amended), as cited above (at paragraph 3).

12. The fundamental flaw in the Appellant’s argument is his unspoken assumption that these provisions require the Pension Service decision maker (or in practice the Department’s computer programme) to revisit, review and recalculate the amount of his pension every year, applying paragraph 2(3) of Schedule 5 at every annual uprating so that his deferred increment always represents 10% of his aggregated ordinary pension.

13. However, this is simply not the way the retirement pension decision making system works. The Appellant made a (deferred) claim for state retirement pension in December 2007. His entitlement to a pension was dependent upon him making that claim (Social Security Administration Act 1992, section 1). The Secretary of State then made a decision on that claim (under section 8 of the Social Security Act 1998), awarding a total weekly retirement pension of £107.58 a week for that part year (see paragraph 4 above). 

14. In principle the legislation makes no provision for that individual calculation to be looked at ever again. Thus a person’s entitlement to state retirement pension is decided (and the rate of that pension calculated) once and once only, at the point that the original claim is made. That decision is then final, subject always to the possibility of a revision, supersession or appeal under the Social Security Act 1998. However, assuming the decision on the original claim was correct when made – and the Appellant here insists that it was, of course, as it awarded him an increment of precisely 10% for deferment – then that is the end of the matter.

15. All this, of course, is subject to the question of uprating. However, the underlying position is demonstrated by the fact that had the Appellant moved to Australia or Canada (or any other country outside the EU with which we do not have reciprocal arrangements), as soon as he received his pension award in 2007, then his weekly pension would have been frozen at £107.58 a week for ever more (see R (on the application of Carson) v Secretary of State for Work and Pensions [2005] UKHL 37; [2006] 1 AC 173).

16. As it was, the Appellant has lived either in Spain or in the United Kingdom throughout the period since December 2007. He has therefore benefited from annual benefit upratings. The legal framework for uprating is governed by sections 150 and 150A of the Social Security Administration Act 1992. Section 150A requires the Secretary of State to uprate the amount of the basic state pension (i.e. the standard Category A retirement pension) at least in line with the increase in the general level of earnings over the review period. The present Coalition Government has undertaken to increase the basic state pension by the highest of earnings, prices or 2.5% - the so-called “triple lock” or “triple guarantee” – but this is a political commitment, not a legal requirement. Section 150, on the other hand, requires various other specified elements (including the additional pension and deferred increments) to be increased at least in line with the increase in the general level of prices over the review period (see section 150(1)(c) and (da), as amended). To complicate matters further, the actual reference measures used (which are not specified in the legislation) have changed over time. For example, changes in prices used to be determined by reference to the Retail Price Index (RPI), but since 2011 the calculation has been governed by the Consumer Price Index (CPI). The actual weekly benefit rates that emerge from this process are then included in a statutory instrument each year (see e.g. the Social Security Benefits Up-rating Order 2014 (SI 2014/516)).

17. The effect of sections 150 and 150A is to provide a floor, defining for each such element of the pension the minimum level of the uprating increase. The increase must be “a percentage not less than the percentage by which the general level of prices [or earnings] is greater at the end of the period than it was at the beginning” (emphasis added; see sections 150(2) and 150A(2)).  Beyond that floor, the actual percentage rate increase specified in the Uprating Order for any particular year is a matter of political judgement. As the presenting officer is said to have put it in a rather unedifying way at the hearing before the tribunal, “basically we [i.e. the Department] make it up as we go along”. Furthermore, the underlying statutory framework makes it plain that the annual increase for each constituent element of the retirement pension is considered individually. The Appellant’s argument is that the rates of all the other elements are calculated and then 10% is added on top by way of the deferral increment. However, this approach is completely inconsistent with the statutory mechanism for uprating as embodied in sections 150 and 150A.

The actual decision in this case

18. The Secretary of State’s decision maker made a decision on the Appellant’s claim for state retirement pension on 29 August 2007, awarding benefit with effect from 10 December 2007 at the rates explained in paragraph 4 above. That decision was in accordance with the provisions referred to in paragraph 11 above. The tribunal’s decision was to confirm that decision of 29 August 2007. That was the correct outcome because of the legal principles set out above.

19. The Appellant, in any event, has made it plain that he did not wish to challenge that original decision which, in his view, was calculated correctly. In effect, however, his argument was that the Secretary of State’s original decision was wrong to the extent that it did not include a clause stating that e.g. “the claimant is awarded a deferral increment to be calculated as 10% of the total amount of the other elements of his pension as that aggregate figure may be at any time”. However, for the reasons explained at paragraphs 16 and 17 above, that is not how uprating operates.

20. I therefore must dismiss this application for permission to appeal.

Two possible problems with the First-tier Tribunal’s decision

21. The overall outcome of the tribunal was correct in terms of the issue which the Appellant was challenging. There are, however, two problems with the tribunal’s decision.

22. The first problem is that the Secretary of State’s original decision was taken on 29 August 2007 and the Appellant’s appeal was lodged on 3 February 2010. It was therefore way out of time (there being an absolute time limit of 12 months from the date that the initial one month time limit expired). A District Tribunal Judge somehow managed to find that the Appellant’s earlier letter of 26 August 2007 was an in-time appeal. However, that was a challenge on another point to the previous decision of 16 August 2007, which was itself revised by the 29 August 2007 decision. The annual uprating decisions, of course, which were what the Appellant was really complaining about, were non-appealable decisions (see paragraph 25 of Schedule 2 to the Social Security and Child Support (Decisions and Appeals) Regulations 1999 (SI 1999/991)). It was, therefore, at the very least highly arguable that the tribunal was acting without jurisdiction to hear the Appellant’s appeal. At various stages the Pension Service raised these issues rather ineffectually with the tribunal below. The Secretary of State’s decision maker could, of course, have appealed to the Upper Tribunal against the tribunal’s decision that the appeal was within jurisdiction but either chose not to or did not realise that he could. However, there is absolutely no point in giving permission to explore these jurisdictional difficulties. The reason for that is it is quite clear that the tribunal’s outcome decision – to confirm the Secretary of State’s decision of 29 August 2007 – was correct.

23. The second problem is that the tribunal appears to have misunderstood the Appellant’s case in part. The Appellant was clearly not arguing that the fact that he had deferred receiving his retirement pension meant that he should receive an extra 10% each and every year. In doing so, the tribunal appears to have taken its cue from the Independent Case Examiner, who also thought (wrongly) that the Appellant was arguing for compound interest of 10% each year. Where a tribunal fundamentally misunderstands one party’s case, I accept that may amount to an error of law – it may, for example, mean that the tribunal has failed to give adequate reasons. However, any such misunderstanding in this case was not material, as the tribunal came to the right conclusion and (for by far the most part) explained that decision adequately and correctly.

24. As neither of those errors have any real bearing on the substance of the dispute between the Appellant and the Department, I can ignore them for present purposes.

Where does this leave the statement in the SPD1 booklet?

25. The Upper Tribunal decides appeals on the basis of the law. It does not adjudicate on disputes over the wording of departmental leaflets (that is one function of the Independent Case Examiner). That said, I think the tribunal summed it up very well by explaining that the passage from the SPD1 booklet cited at paragraph 2 above “including the words ‘for life’ simply means that once the percentage increase is added to the weekly state retirement pension at the end of the first year, it will not be removed in the future but will stay added on for life.” The tribunal might simply have added “and will be subject to whatever annual uprating takes place thereafter”.

Conclusion

26. Overall, therefore, I am satisfied that the tribunal in this case arrived at the only decision that it could do. It made appropriate findings of fact and gave adequate reasons for its decision. Any errors that it made were not material to the outcome. The grounds of appeal are not arguable. It follows that I must refuse this application for permission to appeal to the Upper Tribunal. 

(Signed on the original)

Nicholas Wikeley

Judge of the Upper Tribunal

(Dated) 24 March 2014