Pensions Bill

House of Commons

Session 2003 - 04
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Pensions Bill

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
261

Schedule 11
Section 255

Deferral of retirement pensions and shared additional pensions
Part 1
Principal amendments of Social Security Contributions and Benefits Act 1992
(c. 4)
5
1
In this Part of this Schedule “the principal Act” means the Social Security
Contributions and Benefits Act 1992.
2
Schedule 5 to the principal Act (increase of pension where entitlement is
deferred) is amended as follows.
3
For the heading, substitute “PENSION INCREASE OR LUMP SUM WHERE
10
ENTITLEMENT TO RETIREMENT PENSION IS DEFERRED”.
4
Before paragraph 1 insert—
“Choice between increase of pension and lump sum where pensioner’s entitlement
is deferred
A1    (1)
Where a person’s entitlement to a Category A or Category B
15
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
20
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.
      (2)
If no election under sub-paragraph (1) is made within the period
prescribed under that sub-paragraph, the person is to be treated as
25
having made an election under sub-paragraph (1)(b).
      (3)
Regulations may enable a person who has made an election under
sub-paragraph (1) (including one that the person is treated by sub-
paragraph (2) as having made) to change the election in prescribed
circumstances and within a prescribed time.
30
      (4)
Where the Category A or Category B retirement pension includes
any increase under paragraphs 5 to 6, no election under sub-
paragraph (1) applies to so much of the pension as consists of that
increase (an entitlement to an increase of pension in respect of
such an increase after a period of deferment being conferred either
35
by paragraphs 1 and 2 or by paragraph 2A).”
5
For paragraph 1 (increase of pension where pensioner’s entitlement is
deferred) substitute—
“1    (1)
This paragraph applies where a person’s entitlement to a
Category A or Category B retirement pension is deferred and one
40
of the following conditions is met—
(a)
the period of deferment is less than 12 months, or
(b)
the person has made an election under paragraph A1(1)(a)
in relation to the period of deferment.

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
262

      (2)
The rate of the person’s Category A or Category B retirement
pension shall be increased by an amount equal to the aggregate of
the increments to which he is entitled under paragraph 2, but only
if that amount is enough to increase the rate of the pension by at
least 1 per cent.”
5
6     (1)
In paragraph 2 (calculation of increment), in sub-paragraph (5)(b), for “83
or” substitute “83A or”.
      (2)
In relation to any incremental period (within the meaning of Schedule 5 to
the principal Act) beginning before 6th April 2010, the reference in
paragraph 2(5)(b) of that Schedule to section 83A of that Act is to be read as
10
a reference to section 83 or 84 of that Act.
7
After paragraph 2 insert—
“2A   (1)
This paragraph applies where—
(a)
a person’s entitlement to a Category A or Category B
retirement pension is deferred,
15
(b)
the pension includes an increase under paragraphs 5 to 6,
and
(c)
the person has made (or is treated as having made) an
election under paragraph A1(1)(b) in relation to the period
of deferment.
20
      (2)
The rate of the person’s Category A or Category B retirement
pension shall be increased by an amount equal to the aggregate of
the increments to which he is entitled under sub-paragraph (3).
      (3)
For each complete incremental period in the person’s period of
deferment, the amount of the increment shall be 1/5th per cent. of
25
the weekly rate of the increase to which the person would have
been entitled under paragraphs 5 to 6 for the period if his
entitlement to the Category A or Category B retirement pension
had not been deferred.”
8     (1)
After paragraph 3 insert—
30
“Lump sum where pensioner’s entitlement is deferred
3A    (1)
This paragraph applies where—
(a)
a person’s entitlement to a Category A or Category B
retirement pension is deferred, and
(b)
the person has made (or is treated as having made) an
35
election under paragraph A1(1)(b) in relation to the period
of deferment.
      (2)
The person is entitled to an amount calculated in accordance with
paragraph 3B (a “lump sum”).
Calculation of lump sum
40
3B    (1)
The lump sum is the accrued amount for the last accrual period
beginning during the period of deferment.
      (2)
In this paragraph—
‘accrued amount’ means the amount calculated in
accordance with sub-paragraph (3);
45

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
263

‘accrual period’ means any period of seven days beginning
with a prescribed day of the week, where that day falls
within the period of deferment.
      (3)
The accrued amount for an accrual period for a person is—

where—
5
A is the accrued amount for the previous accrual period (or,
in the case of the first accrual period beginning during the
period of deferment, zero);
P is the amount of the Category A or Category B retirement
pension to which the person would have been entitled for
10
the accrual period if his entitlement had not been
deferred;
R is the percentage rate prescribed for the purposes of this
sub-paragraph.
      (4)
For the purposes of the calculation of the lump sum, the amount
15
of Category A or Category B retirement pension to which the
person would have been entitled for an accrual period—
(a)
includes any increase under section 47(1) and any increase
under paragraph 4 of this Schedule, but
(b)
does not include—
20
(i)
any increase under section 83A or 85 or paragraphs
5 to 6 of this Schedule,
(ii)
any graduated retirement benefit, or
(iii)
in prescribed circumstances, such other amount of
Category A or Category B retirement pension as
25
may be prescribed.
      (5)
The reference in sub-paragraph (4)(a) to any increase under
subsection (1) of section 47 shall be taken as a reference to any
increase that would take place under that subsection if subsection
(2) of that section and section 46(5) of the Pensions Act were
30
disregarded.”
      (2)
In relation to any accrual period (within the meaning of Schedule 5 to the
principal Act as amended by this paragraph) ending before 6th April 2010
the reference in paragraph 3B(4)(b) of that Schedule to section 83A of that
Act is to be read as a reference to section 83 or 84 of that Act.
35
9
After paragraph 3B (inserted by paragraph 8 of this Schedule) insert—
“Choice between increase of pension and lump sum where pensioner’s deceased
spouse has deferred entitlement
3C    (1)
Subject to paragraph 8, this paragraph applies where—
(a)
a widow or widower (“W”) is entitled to a Category A or
40
Category B retirement pension,
(b)
W was married to the other party to the marriage (“S”)
when S died,
(c)
S’s entitlement to a Category A or Category B retirement
pension was deferred when S died, and
45

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
264

(d)
S’s entitlement had been deferred throughout the period of
12 months ending with the day before S’s death.
(2)
W shall within the prescribed period elect in the prescribed
manner either—
(a)
that paragraph 4 (entitlement to increase of pension) is to
5
apply in relation to S’s period of deferment, or
(b)
that paragraph 7A (entitlement to lump sum) is to apply in
relation to S’s period of deferment.
(3)
If no election under sub-paragraph (2) is made within the period
prescribed under that sub-paragraph, W is to be treated as having
10
made an election under sub-paragraph (2)(b).
(4)
Regulations may enable a person who has made an election under
sub-paragraph (2) (including one that the person is treated by sub-
paragraph (3) as having made) to change the election in prescribed
circumstances and within a prescribed time.
15
(5)
The making of an election under sub-paragraph (2)(b) does not
affect the application of paragraphs 5 to 6 (which relate to an
increase in pension where the pensioner’s deceased spouse had
deferred an entitlement to a guaranteed minimum pension).”
10    (1)
Paragraph 4 (increase of pension where pensioner’s deceased spouse has
20
deferred entitlement) is amended as follows.
      (2)
For sub-paragraph (1) substitute—
“(1)
Subject to paragraph 8, this paragraph applies where a widow or
widower (“W”) is entitled to a Category A or Category B retirement
pension and was married to the other party to the marriage (“S”)
25
when S died and one of the following conditions is met—
(a)
S was entitled to a Category A or Category B retirement
pension with an increase under this Schedule,
(b)
W is a widow or widower to whom paragraph 3C applies and
has made an election under paragraph 3C(2)(a), or
30
(c)
paragraph 3C would apply to W but for the fact that the
condition in sub-paragraph (1)(d) of that paragraph is not
met.
(1A)
Subject to sub-paragraph (3), the rate of W’s pension shall be
increased—
35
(a)
in a case falling within sub-paragraph (1)(a), by an amount
equal to the increase to which S was entitled under this
Schedule, apart from paragraphs 5 to 6,
(b)
in a case falling within sub-paragraph (1)(b), by an amount
equal to the increase to which S would have been entitled
40
under this Schedule, apart from paragraphs 5 to 6, if the
period of deferment had ended immediately before S’s death
and S had then made an election under paragraph A1(1)(a),
or
(c)
in a case falling within sub-paragraph (1)(c), by an amount
45
equal to the increase to which S would have been entitled
under this Schedule, apart from paragraphs 5 to 6, if the
period of deferment had ended immediately before S’s
death.”

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
265

11    (1)
After paragraph 7 insert—
“Entitlement to lump sum where pensioner’s deceased spouse has deferred
entitlement
7A    (1)
This paragraph applies where a person to whom paragraph 3C
applies (“W”) has made (or is treated as having made) an election
5
under paragraph 3C(2)(b).
      (2)
W is entitled to an amount calculated in accordance with
paragraph 7B (a “widowed person’s lump sum”).
Calculation of widowed person’s lump sum
7B    (1)
The widowed person’s lump sum is the accrued amount for the
10
last accrual period beginning during the period which—
(a)
began at the beginning of S’s period of deferment, and
(b)
ended on the day before S’s death.
      (2)
In this paragraph—
‘S’ means the other party to the marriage;
15
‘accrued amount’ means the amount calculated in
accordance with sub-paragraph (3);
‘accrual period’ means any period of seven days beginning
with a prescribed day of the week, where that day falls
within S’s period of deferment.
20
      (3)
The accrued amount for an accrual period for W is—

where—
A is the accrued amount for the previous accrual period (or,
in the case of the first accrual period beginning during the
period mentioned in sub-paragraph (1), zero);
25
P is—
(a)
the basic pension, and
(b)
half of the additional pension,
to which S would have been entitled for the accrual
period if his entitlement had not been deferred during the
30
period mentioned in sub-paragraph (1);
R is the percentage rate prescribed for the purposes of this
sub-paragraph.
      (4)
For the purposes of the calculation of the widowed person’s lump
sum, the amount of Category A or Category B retirement pension
35
to which S would have been entitled for an accrual period—
(a)
includes any increase under section 47(1) and any increase
under paragraph 4 of this Schedule, but
(b)
does not include—
(i)
any increase under section 83A or 85 or paragraphs
40
5 to 6 of this Schedule,
(ii)
any graduated retirement benefit, or

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
266

(iii)
in prescribed circumstances, such other amount of
Category A or Category B retirement pension as
may be prescribed.
      (5)
The reference in sub-paragraph (4)(a) to any increase under
subsection (1) of section 47 shall be taken as a reference to any
5
increase that would take place under that subsection if subsection
(2) of that section and section 46(5) of the Pensions Act were
disregarded.
      (6)
In any case where—
(a)
there is a period between the death of S and the date on
10
which W becomes entitled to a Category A or Category B
retirement pension, and
(b)
one or more orders have come into force under section 150
of the Administration Act during that period,

the amount of the lump sum shall be increased in accordance with
15
that order or those orders.”
      (2)
In relation to any accrual period (within the meaning of Schedule 5 to the
principal Act) ending before 6th April 2010 the reference in paragraph
7B(4)(b) of that Schedule to section 83A of that Act is to be read as a reference
to section 83 or 84 of that Act.
20
12
After paragraph 7B (inserted by paragraph 11 of this Schedule) insert—
“Supplementary
7C    (1)
Any lump sum calculated under paragraph 3B or 7B must be
rounded to the nearest penny, taking any 1/2p as nearest to the
next whole penny above.
25
      (2)
In prescribing a percentage rate for the purposes of paragraphs 3B
and 7B, the Secretary of State must have regard to—
(a)
the national economic situation, and
(b)
any other matters which he considers relevant.”
13
For the heading immediately preceding paragraph 8 substitute “Married
30
couples”.
14
In paragraph 8 (married couples)—
(a)
in sub-paragraph (3) for “the reference in paragraph 2(3) above”
substitute “the references in paragraphs 2(3) and 3B(3) and (4)”,
(b)
for sub-paragraph (4) substitute—
35
“(4)
The conditions in paragraph 3C(1)(c) and 4(1)(a) are not
satisfied by a Category B retirement pension to which S
was or would have been entitled by virtue of W’s
contributions.
(5)
Where the Category A retirement pension to which S was
40
or would have been entitled includes an increase under
section 51A(2) attributable to W’s contributions, the
increase or lump sum to which W is entitled under
paragraph 4(1A) or 7A(2) is to be calculated as if there had
been no increase under that section.
45
(6)
In sub-paragraphs (4) and (5), “W” and “S” have the same
meaning as in paragraph 3C, 4 or 7A, as the case requires.”

Pensions Bill
Schedule 11 — Deferral of retirement pensions and shared additional pensions
Part 1 — Principal amendments of Social Security Contributions and Benefits Act 1992 (c. 4)
267

15
After Schedule 5 to the principal Act insert—
“Schedule 5A
Pension increase or lump sum where entitlement to shared
additional pension is deferred
Choice between pension increase and lump sum where entitlement to shared
5
additional pension is deferred
1     (1)
Where a person’s entitlement to a shared additional 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—
10
(a)
that paragraph 2 (entitlement to increase of pension) is to
apply in relation to the period of deferment, or
(b)
that paragraph 4 (entitlement to lump sum) is to apply in
relation to the period of deferment.
      (2)
If no election under sub-paragraph (1) is made within the period
15
prescribed under that sub-paragraph, the person is to be treated as
having made an election under sub-paragraph (1)(b).
      (3)
Regulations may enable a person who has made an election under
sub-paragraph (1) (including one that the person is treated by sub-
paragraph (2) as having made) to change the election in prescribed
20
circumstances and within a prescribed time.
Increase of pension where entitlement deferred
2     (1)
This paragraph applies where a person’s entitlement to a shared
additional pension is deferred and either—
(a)
the period of deferment is less than 12 months, or
25
(b)
the person has made an election under paragraph 1(1)(a) in
relation to the period of deferment.
      (2)
The rate of the person’s shared additional pension shall be
increased by an amount equal to the aggregate of the increments
to which he is entitled under paragraph 3, but only if that amount
30
is enough to increase the rate of the pension by at least 1 per cent.
Calculation of increment
3     (1)
A person is entitled to an increment under this paragraph for each
complete incremental period in his period of deferment.
      (2)
The amount of the increment for an incremental period shall be 1/
35
5th per cent. of the weekly rate of the shared additional pension to
which the person would have been entitled for the period if his
entitlement had not been deferred.
      (3)
Amounts under sub-paragraph (2) shall be rounded to the nearest
penny, taking any 1/2p as nearest to the next whole penny.
40
      (4)
Where an amount under sub-paragraph (2) would, apart from this
sub-paragraph, be a sum less than 1/2p, the amount shall be taken
to be zero, notwithstanding any other provision of this Act, the
Pensions Act 1995 or the Administration Act.