Pensions Bill (HL Bill 91)

Part 1 State pension

Introduction

1 State pension

(1) 5This Part creates a benefit called state pension.

(2) A person who reaches pensionable age before 6 April 2016 is not entitled to
benefits under this Part (but may be entitled to similar benefits under Part 2 of
the Contributions and Benefits Act).

State pension at the full or reduced rate

2 10Entitlement to state pension at full or reduced rate

(1) A person is entitled to a state pension payable at the full rate if—

(a) the person has reached pensionable age, and

(b) the person has 35 or more qualifying years.

(2) A person is entitled to a state pension payable at the reduced rate if—

(a) 15the person has reached pensionable age, and

(b) the person has at least the minimum number of qualifying years but
fewer than 35 qualifying years.

(3) The minimum number of qualifying years for a state pension payable at the
reduced rate is to be specified in regulations and may not be more than 10.

(4) 5In this Part “qualifying year” means a tax year, during a person’s working life,
in which the person’s earnings factor (or the sum of the person’s earnings
factors) is equal to or greater than the qualifying earnings factor for the year.

(5) Regulations may provide for circumstances in which a person may opt to have
a year treated as a qualifying year if by aggregating income from two or more
10jobs, that person’s earnings are equal to or greater than the lower earnings level
for that year.

(6) For earnings factors, see sections 22 and 23 of the Contributions and Benefits
Act.

(7) For transitional cases in which a person may be entitled to a different state
15pension (instead of a state pension under this section), see sections 4 and 12.

(8) There are provisions elsewhere that affect a person’s entitlement to a state
pension under this section or the rate at which it is payable.

3 Full and reduced rates of state pension

(1) The full rate of the state pension is the weekly rate for the time being specified
20in regulations.

(2) The reduced rate of the state pension for a person is the following proportion
of the full rate—

(3) Once the full rate has been specified, the power to make regulations under
25subsection (1) may not be re-exercised so as to reduce the rate.

State pension at the transitional rate

4 Entitlement to state pension at transitional rate

(1) A person is entitled to a state pension payable at the transitional rate if—

(a) the person has reached pensionable age,

(b) 30the person has at least the minimum number of qualifying years, and

(c) the person has at least one pre-commencement qualifying year.

(2) The minimum number of qualifying years for a state pension payable at the
transitional rate is to be specified in regulations and may not be more than 10.

(3) A person entitled to a state pension payable at the transitional rate is not
35entitled to a state pension under section 2.

(4) In this Part—

• “post-commencement qualifying year” means a qualifying year
  beginning on or after 6 April 2016;

• “pre-commencement qualifying year” means—

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  (a)

  a qualifying year beginning on or after 6 April 1978 and ending
  before 6 April 2016, or

  (b)

  a reckonable year that would have been treated under
  regulation 13(1) of the Social Security (Widow’s Benefit,
  5Retirement Pensions and Other Benefits) (Transitional)
  Regulations 1979 (S.I. 1979/643S.I. 1979/643) as a qualifying year for the
  purposes of determining the person’s entitlement to an old state
  pension that is a Category A retirement pension.

(5) A reckonable year mentioned in paragraph (b) of the definition of “pre-
10commencement qualifying year” counts towards the minimum number of
qualifying years required by subsection (1)(b) (even though it does not come
within the definition of “qualifying year” for the purposes of this Part).

(6) For earnings factors, see sections 22 and 23 of the Contributions and Benefits
Act.

(7) 15There are provisions elsewhere that affect a person’s entitlement to a state
pension under this section or the rate at which it is payable.

5 Transitional rate of state pension

(1) The transitional rate of the state pension for a person is a weekly rate equal to—

(a) the sum of the amounts calculated under Schedule 1 for the person’s
20pre-commencement and post-commencement qualifying years capped
at the full rate of the state pension on the day on which the person
reaches pensionable age, or

(b) if higher, the amount for the person’s pre-commencement qualifying
years alone.

(2) 25The transitional rate of the state pension for a person is to be increased from
time to time in accordance with the applicable paragraph of Schedule 2.

(3) Section 6 requires the transitional rate of the state pension for a person to be
recalculated in certain circumstances.

(4) There are special rules about the transitional rate for certain women: see
30section 11 (reduced rate elections).

6 Recalculation and backdating of transitional rate in special cases

(1) This section modifies the transitional rate of the state pension for a person if,
after the person has reached pensionable age, a determination is made under
section 48A(2) of the Pension Schemes Act 1993 (contracting-out: reinstatement
35in state scheme following payment of contributions equivalent premium).

(2) The person’s transitional rate is to be recalculated (taking the determination
into account under paragraph 3(8) of Schedule 1).

(3) The recalculated rate has effect as from the day on which the person reached
pensionable age (and the other provisions of this Part apply accordingly).

Transitional entitlement based on contributions of others

7 Survivor’s pension based on inheritance of additional old state pension

(1) A person is entitled to a state pension under this section if—

(a) the person has reached pensionable age,

(b) 5the person’s spouse died while they were married or the person’s civil
partner died while they were civil partners of each other, and

(c) the person is entitled to an inherited amount under Schedule 3.

(2) A state pension under this section is payable at a weekly rate equal to the
inherited amount.

(3) 10The rate of the state pension for a person under this section is to be increased
from time to time in accordance with the applicable paragraph of Schedule 4.

(4) Regulations may provide that if at any time the sum of the relevant state
pensions for a person exceeds an amount provided for by regulations, the rate
of any state pension payable to the person under this section is to be reduced
15by the amount of the excess.

(5) The “sum of the relevant state pensions” for a person is the sum of—

(a) the rate of any state pension payable to the person under this section
(ignoring any reduction under subsection (4)), and

(b) the rate of any state pension payable to the person under section 2, 4
20or 12.

(6) In subsections (4) and (5) a reference to the rate of a person’s state pension is to
the rate—

(a) taking into account any reduction under section 14 (in the case of a state
pension under section 4), but

(b) 25ignoring any increase under section 17.

(7) There are provisions elsewhere that affect a person’s entitlement to a state
pension under this section or the rate at which it is payable.

8 Choice of lump sum or survivor’s pension under section 9 in certain cases

(1) A person is entitled to a choice under this section if—

(a) 30the person has reached pensionable age,

(b) the person’s spouse died while they were married or the person’s civil
partner died while they were civil partners of each other,

(c) the spouse or civil partner’s entitlement to an old state pension was
deferred at the time of death and throughout the period of 12 months
35ending with the day before the death,

(d) either: (i) the person was under pensionable age when the spouse or
civil partner died and did not marry or form a civil partnership after the
death and before reaching pensionable age, or (ii) the person was over
pensionable age when the spouse or civil partner died, and

(e) 40the person would, on reaching pensionable age or on the death of the
spouse or civil partner, have been entitled to an old state pension if in
the relevant provisions of the Contributions and Benefits Act: (i) the
words “before 6 April 2016” were omitted, and (ii) any reference to a
bereavement allowance included a reference to bereavement support
45payment under section 30 of this Act.

(2) The person may choose—

(a) to be paid a lump sum under this section, or

(b) to be paid a state pension under section 9.

(3) Regulations are to set out the manner in which, and the period within which,
5that choice is to be made.

(4) A person who chooses to be paid a lump sum under this section, or who fails
to choose within that period, is entitled to a “widowed person’s or surviving
civil partner’s lump sum” calculated under paragraph 7B of Schedule 5 to the
Contributions and Benefits Act.

(5) 10In that paragraph as it applies for the purposes of this section—

(a) read the references to “W” as references to the person,

(b) read sub-paragraph (5) as if it required increases under paragraph 4 of
the Schedule to be excluded, and

(c) read the reference in sub-paragraph (7)(a) to the date on which W
15becomes entitled to a Category A or Category B retirement pension as
a reference to the date on which the person becomes entitled to make a
choice under this section.

(6) There are provisions elsewhere that affect a person’s entitlement to a lump
sum under this section.

(7) 20Regulations may allow a person, in specified circumstances—

(a) to alter his or her choice under this section;

(b) to make a late choice.

(8) Regulations under subsection (7) may, for the purpose of avoiding the
duplication of payment—

(a) 25enable recovery of an amount paid to the person, or

(b) reduce the amount of a lump sum to be paid to the person.

(9) For the purposes of this section—

(a) “deferred” has the meaning given by section 55(3) of the Contributions
and Benefits Act,

(b) 30“the relevant provisions” of the Contributions and Benefits Act are—

• section 44(1)(a);

• section 48(1);

• section 48A(1) and (3);

• section 48B(1), (1A), (4) and (4A);

• 35section 48BB(1) and (3), and

(c) in determining whether a person would have been entitled to an old
state pension as mentioned in subsection (1)(e) ignore any requirement
to make a claim.

9 Survivor’s pension based on inheritance of deferred old state pension

(1) 40A person is entitled to a state pension under this section if—

(a) the person has reached pensionable age,

(b) the person’s spouse died while they were married or the person’s civil
partner died while they were civil partners of each other,

(c) either: (i) the person was under pensionable age when the spouse or
45civil partner died and did not marry or form a civil partnership after the

death and before reaching pensionable age, or (ii) the person was over
pensionable age when the spouse or civil partner died,

(d) the person is entitled to an inherited deferral amount under Schedule 5,
and

(e) 5in the case of a person entitled to a choice under section 8, the person
has chosen to be paid a state pension under this section.

(2) A state pension under this section is payable at a weekly rate equal to the
inherited deferral amount.

(3) But if at any time an order under section 151A of the Administration Act comes
10into force, the rate of the person’s state pension under this section is increased
(at that time) by the percentage specified in the order.

(4) A person may be entitled to more than one state pension under this section.

(5) There are provisions elsewhere that affect a person’s entitlement to a state
pension under this section or the rate at which it is payable.

10 15Inheritance of graduated retirement benefit

(1) Regulations may make provision corresponding or similar to any provision of
sections 7 to 9 and Schedules 3 to 5 for the purpose of conferring benefits on a
person whose dead spouse or civil partner paid graduated contributions as an
insured person.

(2) 20The regulations may—

(a) include provision corresponding or similar to any provision that may
be made by regulations under section 7 or 8;

(b) amend or otherwise modify this Act or any other enactment (whenever
passed or made).

(3) 25In this section “graduated contributions” and “insured person” have the
meanings given by section 36(8) of the National Insurance Act 1965.

Transition: women who have had a reduced rate election

11 Reduced rate elections: effect on section 4 pensions

(1) Section 4(1)(b) (minimum number of qualifying years for state pension at the
30transitional rate) does not apply to a woman if a reduced rate election was in
force in respect of her at the beginning of the relevant 35-year period.

(2) Schedule 6 modifies the rules about the transitional rate of the state pension for
a woman if a reduced rate election was in force in respect of her at the
beginning of the relevant 35-year period.

(3) 35In this section—

• “reduced rate election” means an election made, or treated as having been
  made, under regulations under section 19(4) of the Contributions and
  Benefits Act;

• “relevant 35-year period” means the 35-year period ending with the tax
  40year before the one in which the woman reached pensionable age.

12 Reduced rate elections: pension for women with no section 4 pension

(1) A woman is entitled to a state pension under this section if—

(a) she has reached pensionable age,

(b) a reduced rate election was in force in respect of her at the beginning of
5the relevant 35-year period,

(c) she does not have any pre-commencement qualifying years, and

(d) she is entitled to a basic amount under Schedule 7.

(2) A state pension under this section is payable at a weekly rate equal to the basic
amount.

(3) 10But if at any time the full rate of the state pension is increased, the rate of the
woman’s state pension under this section is increased (at that time) by the same
percentage as the increase in the full rate.

(4) In subsection (3) the reference to the rate of the woman’s state pension is to the
rate ignoring any increase under section 17.

(5) 15A woman is not entitled to a state pension under this section and section 2 at
the same time: she is only entitled to the one with the higher rate.

(6) There are provisions elsewhere that affect a woman’s entitlement to a state
pension under this section or the rate at which it is payable.

(7) In this section—

• 20“reduced rate election” means an election made, or treated as having been
  made, under regulations under section 19(4) of the Contributions and
  Benefits Act;

• “relevant 35-year period” means the 35-year period ending with the tax
  year before the one in which the woman reached pensionable age.

25Transition: pension sharing on divorce etc

13 Shared state pension on divorce etc

(1) A person is entitled to a state pension under this section if—

(a) the person has reached pensionable age, and

(b) the person is entitled to a state scheme pension credit.

(2) 30A state pension under this section is payable at the appropriate weekly rate set
out in Schedule 8.

(3) The rate of the state pension for a person under this section is to be increased
from time to time in accordance with the applicable paragraph of Schedule 9.

(4) A person may be entitled to more than one state pension under this section.

(5) 35There are provisions elsewhere that affect a person’s entitlement to a state
pension under this section or the rate at which it is payable.

(6) In this Part—

• “state scheme pension credit” means—

  (a)

  a new state scheme pension credit, or

  (b)

  40an old state scheme pension credit;

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• “new state scheme pension credit” means a credit under section 49A(2)(b)
  of the Welfare Reform and Pensions Act 1999;

• “old state scheme pension credit” means a credit under section 49(1)(b) of
  that Act.

14 5Pension sharing: reduction in the sharer’s section 4 pension

(1) The rate of a person’s state pension under section 4 is reduced under this
section if the person is subject to a state scheme pension debit.

(2) The amount by which the rate is reduced is the amount of the appropriate
weekly reduction set out in Schedule 10.

(3) 10A person’s state pension may be reduced more than once under this section.

(4) In this Part—

• “state scheme pension debit” means—

  (a)

  a new state scheme pension debit, or

  (b)

  an old state scheme pension debit;

• 15“new state scheme pension debit” means a debit under section 49A(2)(a)
  of the Welfare Reform and Pensions Act 1999;

• “old state scheme pension debit” means a debit under section 49(1)(a) of
  that Act.

15 Pension sharing: amendments

20Schedule 11 contains amendments to do with pension sharing.

Postponing or suspending state pension

16 Pensioner’s option to suspend state pension

(1) A person who has become entitled to a state pension under this Part may opt
to suspend his or her entitlement in accordance with regulations.

(2) 25A person is not entitled to any state pension under this Part for the period for
which the person has opted to suspend his or her entitlement.

(3) For other effects of a person exercising the option, see section 17.

(4) A person may not opt to suspend his or her entitlement to a state pension
under this Part on more than one occasion.

(5) 30Regulations may specify other circumstances in which a person may not opt to
suspend his or her entitlement to a state pension under this Part.

(6) Regulations may allow a person who has opted to suspend his or her
entitlement to a state pension under this Part to cancel the exercise of that
option (in whole or in part) in relation to a past period.

17 35Effect of pensioner postponing or suspending state pension

(1) If a person’s entitlement to a state pension under this Part has been deferred
for a period, the weekly rate of the person’s state pension is increased by an
amount equal to the sum of the increments to which the person is entitled.

(2) But the weekly rate is not to be increased under subsection (1) if the increase
would be less than 1% of the person’s weekly rate ignoring that subsection.

(3) A person is entitled to one increment for each whole week in the period during
which the person’s entitlement to a state pension was deferred.

(4) 5The amount of an increment is equal to a specified percentage of the weekly
rate of the state pension to which the person would have been entitled
immediately before the end of that period if the person’s entitlement had not
been deferred.

(5) In subsection (4) “specified” means specified in regulations.

(6) 10The amount of an increase under this section is itself to be increased from time
to time in accordance with any order made under section 150 of the
Administration Act (annual up-rating of benefits).

(7) For the purposes of this section and section 18 a person’s entitlement to a state
pension under this Part is deferred for a period if the person has opted under
15section 16 to suspend his or her entitlement for that period.

(8) For the purposes of this section and section 18 a person’s entitlement to a state
pension under this Part is also deferred for a period if the person is not entitled
to it for that period by reason only of—

(a) not satisfying the conditions in section 1 of the Administration Act
20(entitlement dependent on claim etc), or

(b) subsection (9) below.

(9) A person is not entitled to a state pension under this Part for any period during
which his or her entitlement to any other state pension under this Part is
deferred.

18 25Section 17 supplementary: calculating weeks, overseas residents, etc

(1) Regulations may—

(a) provide for circumstances in which a part of a week is to be treated for
the purposes of section 17(3) as a whole week, and

(b) provide for circumstances in which a day does not count in
30determining a number of whole weeks for the purposes of section 17(3)
(for example if the person is receiving other benefits).

(2) Regulations may modify section 17(4) in cases where, at any time in the period
during which a person’s entitlement to a state pension is deferred, the rate for
the person would have changed otherwise than because of an up-rating
35increase.

(3) Regulations may modify section 17(4) in relation to a person who has been an
overseas resident during any part of the period for which the person’s
entitlement to a state pension has been deferred.

(4) In subsection (3) “overseas resident” means a person who is not ordinarily
40resident in Great Britain or any other territory specified in the regulations.

(5) Regulations may amend the percentage specified in section 17(2).