Office of Public Sector Information
79.Currently, trustees or managers of occupational pension schemes are required to have in place formal arrangements for the resolution of disagreements relating to the scheme. The existing dispute resolution procedure requires a two stage process, with someone nominated by trustees giving a decision at the first stage, and then the matter being referred to the trustees if the applicant is still not satisfied.
80.The measure in the Act will make it possible to replace the two-stage internal dispute resolution procedure with a single-stage arrangement where all decisions would be taken by trustees or managers. This would not be compulsory, however, and schemes will be able to retain the present two-stage arrangements if they wish.
81.This amendment would give effect to the proposal announced in the 2002 Green Paper Simplicity, security and choice: Working and saving for retirement.
82.In order for actuaries to calculate pension schemes’ liabilities consistently, all are required to use an agreed set of guidelines. These guidelines are contained in documents referred to either as ‘Guidance Notes’ or as a ‘Technical Memorandum’. There are seven Guidance Notes and one Technical Memorandum referred to in pensions legislation. The Secretary of State is required by primary legislation to approve three of these Guidance Notes and the Technical Memorandum.
83.Historically, the Actuarial Profession has produced these documents. The professional bodies for actuaries – the Institute of Actuaries in England and Wales and the Faculty of Actuaries in Scotland – have combined the role of regulator with that of professional body.
84.The Morris Review of the Actuarial Profession recommended that the Financial Reporting Council should establish a new regime to set actuarial standards and to oversee the regulation of the Profession. The Financial Reporting Council is the UK’s independent regulator for corporate reporting and governance. The Government accepted this recommendation and the Financial Reporting Council has now set up the Board for Actuarial Standards to promote confidence in corporate reporting and governance by setting high quality actuarial standards. The Institute of Actuaries in England and Wales and the Faculty of Actuaries in Scotland continue to exist as the professional bodies for the profession in their respective jurisdictions.
85.On 6 April 2007, the Board for Actuarial Standards adopted and took responsibility for the existing versions of the pensions Guidance Notes and the Technical Memorandum.
86.In order to maintain the independence of the Financial Reporting Council, and through it the Board for Actuarial Standards, as the UK’s independent regulator for corporate reporting and governance, the Act contains provisions removing from primary legislation the requirement for the Secretary of State to approve the three Guidance Notes and the Technical Memorandum.
87.Section 286 of the PA2004 requires the Secretary of State to make regulations setting up the financial assistance scheme (“FAS”). The FAS was announced on 14 May 2004 to assist those who had lost or who stood to lose significant amounts as a result of their pension scheme winding up underfunded with an insolvent employer. Regulations setting out the details of the FAS were made in July 2005 and the majority of those regulations came into force on 1 September 2005. Under those regulations and subsequent amendments, schemes must have started to wind-up between 1 January 1997 and 5 April 2005 and must meet certain other qualifying criteria in order for their members to qualify for assistance.
88.At present, members of qualifying schemes who were within 15 years of their normal retirement age on or before 14 May 2004 may qualify for assistance payments, which are tapered depending on proximity of the member to normal retirement age. Qualifying members are generally entitled to payments at age 65 (though early access to payments is possible for the terminally ill). Eligible survivors of qualifying members who have died may also qualify for payments (at a lower level) regardless of their age. FAS payments top up any pensions being paid by the scheme during its winding-up or at the end of the winding up (taking account of the amount of assets allocated to members) to a specified proportion of members' “expected pensions”, as that term is defined in the July 2005 regulations (commonly referred to as members’ “expected core pensions”). Payments are subject to a cap (currently £12,000 a year) and are currently subject to a de minimis amount (of £520 a year). In general, payments made whilst pension schemes are winding-up (“initial payments”) are paid at a lower rate than final payments (“annual payments”), at up to 60% of expected core pensions.
89.An extension of the financial assistance scheme was announced by the Chancellor of the Exchequer in his budget speech of 21 March 2007. The Act makes provision, including by way of amendment to section 286 of the PA2004, to provide for part of that extension (the rest of the extension will be brought forward in regulations). The amendments to section 286 are designed to require regulations made under that section to provide for the removal of tapered assistance by requiring that the level of annual payments is set at no less than 80% of members' expected core pensions subject to any cap provided for in the regulations (and taking account of any assets allocated to members by their scheme). The amendments also ensure that the regulations must provide that that level of assistance will be received by all qualifying members, regardless of age. The Act also makes provision setting initial payments - paid whilst pension schemes are winding up - at a level of 80% and further provides that the level of those payments can be amended by regulations (which will be subject to the affirmative procedure). Regulations will be required to specify the precise level at which annual payments will be paid. However, the new provision to raise the level of initial payments to 80% takes effect from the date of Royal Assent.
90.The Act also requires the Secretary of State to make regulations imposing a temporary restriction on the purchase of annuities by trustees of qualifying schemes that are still winding up, unless they have entered into a binding commitment to do so or have obtained the permission of the FAS scheme manager. The regulations must be made as soon as is reasonably practicable and will apply for nine months from the date on which they come into force.
91.As outlined in the White Paper, the Government intends to give effect to some form of personal accounts scheme from 2012. The Government intends to legislate for the personal accounts scheme in a planned future Bill.
92.However, to ensure delivery of a personal accounts scheme from 2012, much preliminary work must be done in advance of Royal Assent of the planned future Bill. The Government’s intention is that the delivery and eventual governance of the personal accounts scheme should be independent of Government, utilising the knowledge and skills of individuals with experience of private occupational pensions administration. No existing organisations were identified that currently have the necessary remit, skills and capacity for the work needed to deliver a system of personal accounts or the capacity to expand and adapt their operations to commence the work within the required timeframe.
93.The Act establishes a body corporate called the Personal Accounts Delivery Authority (referred to as the ‘Authority’) to undertake the preliminary work necessary for the establishment of a personal accounts scheme.
94.The Authority is being established with a remit limited to:
Providing advice and recommendations to Government, helping it to think through the operational and commercial implications of its policy options.
Preparing for the implementation of a personal accounts scheme, such as formulating a commercial strategy for the personal accounts scheme by preparing specific products which comprise a financial, technical and commercial strategy.
95.The Authority will be at a distance from Government and will be able to manage its own affairs. Schedule 6 gives details on the membership and structure of the Authority.
96.The Act also gives the Secretary the State the power to wind up the Authority if he considers that, owing to the abandonment or modification of relevant proposals on the personal accounts scheme, it is no longer necessary to have an Authority.
97.The Act gives the Authority limited powers, as detailed in paragraph 94. The Government will consider options to extend this remit in legislation planned for a later date, subject to the agreement of Parliament.
98.The Act is formed of 4 Parts:
Part 1 – State Pension
Entitlement to Category A and B retirement pensions
Credits for basic state pension
Abolition of adult dependency increases
Up-rating of basic state pension and other benefits
Additional pension: deemed earnings factors
Additional pension: simplification of accrual rates
Increase in state pension age
Part 2 – Occupational and personal pension schemes
Conversion of guaranteed minimum pensions
Abolition of contracting-out for defined contribution pension schemes
Dispute resolution arrangements
Removal of Secretary of State’s role in approving actuarial guidance
Financial assistance scheme: increased levels of payments
Temporary restriction on purchase of annuities
Part 3 – Personal Accounts Delivery Authority
Part 4 – General
99.The following measures extend to the whole of the UK:
Section 18, regarding increased levels of payments under the financial assistance scheme;
Section 19, regarding a temporary restriction on the purchase of annuities under the financial assistance scheme; and
Part 3 of the Act. This relates to the establishment of the Personal Accounts Delivery Authority.
Part 4 of the Act. This contains general provisions. (But section 24 only extends to Northern Ireland so far as it relates to provisons that extend there.)
100.The following measures extend only to Northern Ireland:
Section 8 on the basis that it deals with National Insurance contributions, which are a reserved matter. This section amends the Social Security Contributions and Benefits (Northern Ireland) Act 1992 to remove the link between the lower earnings limit and basic pension in Northern Ireland (the same function as section 7 performs for Great Britain); and
Part 4 of Schedule 7, insofar as that applies to the Act of 1992 mentioned above.
101.The amendments made by Schedule 5, which relate to the removal of the Secretary of State’s role in approving actuarial guidance, have the same extent as the Acts that they amend.
102.All other measures extend to England and Wales and Scotland but not to Northern Ireland. Pensions legislation is a transferred matter under the Northern Ireland Act 1998 and Northern Ireland has its own body of pensions law, but there is a long-standing policy of parity in this area.
103.The Act does not contain any measures which affect the powers of the National Assembly for Wales.
104.As regards matters extending to Scotland, it was not necessary to invoke the Sewel Convention.
105.At present, the contribution conditions for basic state pension and bereavement benefits are set out in paragraph 5 of Schedule 3 to the SSCBA1992. Section 1inserts a new paragraph 5A setting out the new single contribution condition that will apply in certain cases from 6 April 2010.
106.In order to achieve this:
Subsection (3) introduces the new paragraph 5A (the single contribution condition for those reaching state pension age on or after 6 April 2010).
Subsection (2) makes a consequential amendment to paragraph 5.
Subsection (4) introduces Part 1 of Schedule 1 which will effect the required consequential amendments in respect of the changes made by this section.
107.Sub-paragraph (1) sets out the cases in which the new single contribution condition will apply, as determined by when the contributor concerned reaches state pension age:
A person reaching state pension age on or after 6 April 2010 will be entitled to a Category A pension on satisfying that condition; and
A spouse or civil partner of a person reaching state pension age on or after 6 April 2010 (or of a person who dies on or after that date without having reached that age) may substitute or inherit a Category B pension based on that person’s Category A pension where the contributor concerned satisfied that condition.
108.Sub-paragraph (2) sets out the new condition. It requires that, in order to qualify for a full basic state pension, the contributor concerned must have paid or been credited with Class 1, 2 or 3 National Insurance contributions for at least 30 “qualifying years” in their working life. In the case of 1987-88 or a later year, it is also sufficient if the person has been credited with earnings. In addition, for each of those 30 years, the person’s earnings factor must be not less than the qualifying earnings factor for that year.
109.Sub-paragraph (3) defines how earnings factors are to be calculated for these purposes. The earnings factor will be calculated with regard to Class 1 contributions paid or treated as paid, or earnings credited, up to the upper earnings limit, together with any Class 2 or 3 contributions for the year.
110.Sub-paragraph (4) enables regulations to be made which modify paragraph 5A(2) and (3) so they will not prevent people insured under the 1946 and 1965 National Insurance Acts who reach state pension age from 6 April 2010 qualifying for basic state pension (Category A and/or Category B) under the new single contribution condition.
111.Paragraphs 1 to 3 amend sections 44 (Category A pension), 48A (Category B pension for a married person or civil partner) and 48B (Category B pension for a surviving spouse or civil partner) of the SSCBA1992 to ensure that:
people reaching state pension age before 6 April 2010 would continue to be entitled to the benefits identified in paragraph 5 of Schedule 3 to the SSCBA1992 on satisfaction by the contributor concerned of the two contribution conditions set out in that paragraph; and
people who reach state pension age on or after 6 April 2010 would be entitled to a Category A pension on satisfaction of the single contribution condition in the new paragraph 5A of Schedule 3 to the SSCBA1992; and
in the case of Category B pensions, entitlement would be calculated by reference to the new paragraph 5A of Schedule 3 to the SSCBA1992 for people who are:
married to or in a civil partnership with someone who reaches pensionable age on or after 6 April 2010; or
the surviving spouse or civil partner of someone who died on or after 6 April 2010 and did not reach state pension age before that date.
112.Paragraph 4 amends section 60 of the SSCBA1992. This section allows provision to be made for those who do not satisfy the contribution conditions for certain benefits. As similar provision is made by new section 60A (see below) where only the new single contribution condition needs to be satisfied, it is necessary to exclude the cases where the single condition applies from the scope of section 60.
113.Paragraph 5 introduces new section 60A. This applies to those cases where only the single contribution condition needs to be satisfied as set out in the new paragraph 5A of Schedule 3.
114.Subsection (1) of this section provides that the section applies where a person does not satisfy the single contribution condition in order to be entitled to a Category A or Category B pension.
115.Subsection (2) of this section provides a regulation-making power to allow a person who would have been entitled to benefit by virtue of paragraph 5A, Schedule 3 to the SSCBA1992 but for the fact that the contributor (defined in subsection (4)) has not acquired the full 30 qualifying years nevertheless to be entitled to a prescribed proportion of a full basic state pension for each qualifying year the contributor has built up (defined in subsection (3)). The calculation for determining the pro-rated amount of basic state pension entitlement in these cases will be set out in regulations. This means that the 25% de minimis rule (see regulation 6(1) of the Social Security (Widow’s Benefit and Retirement Pensions) Regulations 1979 (S.I.1979/642)), which applies to benefits calculated under paragraph 5, Schedule 3 to the SSCBA1992, will not apply to the benefits to which this section applies.
116.Subsection (5) of this section would allow the widow, widower or surviving civil partner of an employed earner who dies on or after 6 April 2010 as a result of an industrial injury benefit (section 94(1) of the SSCBA1992) or a prescribed disease or injury (section 108(1)) to inherit a Category B pension (section 48B), even if the contribution condition set out at paragraph 5A of Schedule 3 to the SSCBA1992 is not satisfied by the deceased employed earner. This makes equivalent provision to that made by section 60.
117.Subsection (6) of this section provides that the reference to the single contribution condition in subsections (1) and (3) includes a reference to that condition as modified by regulations under paragraph 5A(4) of Schedule 3 (i.e. regulations modifying the condition for the purposes of persons who were insured under the National Insurance Act of 1946 or 1965 - see paragraph 110 above).
118.Subsection (2) of this section amends subsections (2)(a) and (2B)(a) of section 48A of the SSCBA1992 to remove the restriction which currently prevents a person from becoming entitled to a Category B pension derived from their spouse’s or civil partner’s contributions where their spouse or civil partner has not made a claim for their Category A pension.
119.The effect of the amendment is to enable, subject to the relevant contribution condition being met, a married person or a person in a civil partnership to become entitled to a Category B pension from the point at which both they and their spouse or civil partner have reached state pension age, regardless of whether the spouse or civil partner has made a claim for their Category A pension.
120.Subsection (3) omits section 48(5) which restricts payability of a Category B pension to periods after the spouse or civil partner’s first payday for his or her Category A pension.
121.Subsection (4) introduces the consequential amendments in Part 2 of Schedule 1.
122.Subsection (5) makes provision for section 2 and Part 2 ofSchedule 1 to have effect from 6 April 2010. By subsection (6), the amendments to section 48A apply to a person who attains state pension age before that date as well as to a person who attains state pension age on or after that date.
123.Part 2 of this Schedule makes amendments to Part 2 of the SSCBA1992 consequential on section 2.
124.Paragraph 6 amends section 54 of that Act by omitting subsection (3), which currently prevents a spouse or civil partner from electing to cancel his or her Category A pension where this is already in payment without the consent of the other party to the marriage or civil partnership. The provision becomes redundant by virtue of the amendments made to section 48A by section 2.
125.Paragraph 7 amends subsection (3) of section 55 of that Act so that a person’s entitlement to their Category B pension is no longer deemed to be deferred where the person’s spouse or civil partner has not made a claim for his or her Category A pension.
126.Paragraph 8 amends paragraph 8 of Schedule 5 to the Act by omitting sub-paragraph (3), which also becomes redundant as a result of the amendments made to section 48A by section 2.
127.Section 3 amends the SSCBA1992 to replace the existing home responsibilities protection with new crediting arrangements for parents, approved foster parents and carers reaching state pension age on or after 6 April 2010.
128.In order to achieve this subsection (1) inserts new section 23A into the SSCBA1992.
129.Subsection (1) provides that the new crediting arrangements for parents and carers apply to the following benefits:
a Category A pension for a pensioner who reaches state pension age on or after 6 April 2010;
a Category B pension for the spouse or civil partner of a person reaching state pension age on or after 6 April 2010 (or who dies on or after that date without reaching that age); and
widowed parent’s allowance or bereavement allowance payable to the surviving spouse of a person who dies on or after 6 April 2010 who has not yet reached state pension age. Entitlement to both benefits would be based on the deceased’s contribution record.
130.Subsection (2) would allow the contributor concerned in relation to the benefits referred to in paragraph 129 above to be credited with a Class 3 National Insurance credit for each week after 6 April 2010 in which they are a relevant carer as defined in subsection (3).
131.Subsection (3) defines a person as a relevant carer in respect of a week if, they are:
a parent or guardian awarded child benefit for a child aged under 12 for any part of that week;
a foster parent for any part of that week; or
“engaged in caring” in that week. This is intended to be defined in regulations to cover someone who provides care for one or more severely disabled persons for at least 20 hours a week. The regulations are also intended to allow a person caring for a child under 12 to be treated as engaged in caring in circumstances where there is another carer for that child who is entitled to credits by virtue of subsection (3)(a) but who does not need them, because the tax year in question is already a qualifying year for that person.
132.Subsection (4) provides a regulation-making power to make entitlement to the credits for foster parents and those engaged in caring to be conditional on the application process being complied with, and on the prescribed information being provided. The information that will be required is information that would confirm that a person is undertaking qualifying care.
133.Subsections (5) to (7) allow contributors reaching state pension age, or dying on or after 6 April 2010 to have any complete years of home responsibilities protection, acquired before 6 April 2010, converted to an equivalent number of fully credited years for the purposes of entitlement to basic state pension and bereavement benefits. The number of home responsibilities protection years which may be converted to qualifying years will be subject to upper limits broadly along the lines of the existing rules. In the case of a Category A or B pension that limit is 22 years. In the case of widowed parent’s allowance or bereavement allowance it is half the requisite number of years in the contributor’s working life.
134.Subsection (8) provides that in circumstances where a week straddles two tax years, a credit for that week would be attributed to the tax year in which the week begins.
135.Subsection (9) enacts both definitions and regulation-making powers for the purposes of new section 23A. In particular, it enables “foster parent” to be defined in regulations. The intention is to mirror the definition in regulation 1(2)(a) of the Social Security Pensions (Home Responsibilities) Regulations 1994 (SI 1994/ 704).
136.Paragraph 9 inserts new section 22(5A) in the SSCBA1992 to make reference to the new arrangements in section 23A which provide for the crediting of Class 3 contributions.
137.Paragraph 10 amends section 176 of the SSCBA1992 to provide that the regulations made using the power in section 23A(3)(c) will be subject to the affirmative procedure on first use.
138.Paragraph 11 makes a consequential amendment to Part 1 of Schedule 1 to the Welfare Reform Act 2007 so that the definition of "benefit" extends to contributions credits for relevant carers under section 23A of the SSCBA1992.
139.Subsections (1) and (2) provide that sections 83, 84 and 85 of the SSCBA1992 are to cease to apply from 6 April 2010. The SSCBA1992 allows for the weekly rate of Category A or Category C pension to be increased in respect of a pensioner’s wife (section 83), civil partner (section 83A), husband (section 84) or person having care of his or her child/children (section 85). Section 83A was intended, by virtue of paragraph 2 of Schedule 4 to the PA1995, to provide for increases in respect of spouses and civil partners on an equal footing from 6 April 2010.
140.Subsections (3) and (4) provide for the consequential amendments in Part 4 ofSchedule 1 (see below) to have effect from 6 April 2010.
141.Subsections (5), (6) and (7) provide that the repeal of sections 83, 84 and 85 under subsection (1) and the consequential amendments referred to in subsection (3) are not to apply in certain cases before 5 April 2020. This saving will apply in relation to a person who has claimed an increase of pension under those provisions before 6 April 2010 and who immediately before that date is either:
entitled to the increase; or
has underlying entitlement to it by virtue of section 92 where the dependant’s earnings fluctuate;
unless the person otherwise ceases to be entitled to the increase (other than as a result of a fluctuation in the dependant’s earnings) or, in the case of an increase paid in respect of a wife, the wife reaches state pension age and becomes eligible for a Category B pension.
142.Paragraphs 12 and 13 of this Schedule remove references to adult dependency increases in the following sections of the SSCBA1992, which are redundant following the abolition of those increases:
Section 30B(3)(b) which deals with the rate of short-term incapacity benefit payable to a person who has attained state pension age; and
Section 78(4)(d) which deals with non-contributory Category C and D pensions.
143.Paragraphs 14, 15 and 16 remove redundant references to adult dependency increases in the following sections of the SSCBA1992:
Section 88, which provides that a person cannot be entitled to an adult dependency increase in respect of more than one person for the same period;
Section 89, which provides for occupational and personal pensions to be treated as earnings for the purposes of the conditions of entitlement to adult dependency increases; and
Section 114, which provides for regulations to prescribe the circumstances in which one person can be taken to be maintaining another for the purposes of establishing entitlement to an adult dependency increase.
144.Paragraph 17 removes the redundant references to section 83(2) and (3) in section 149(3) of the SSCBA1992 which deals with circumstances in which a person is treated as being entitled to an adult dependency increase for the purposes of establishing entitlement to a Christmas bonus.
145.Paragraph 18 amends paragraphs 5 and 6 of Part 4 of Schedule 4 to the SSCBA1992 to remove redundant references to the rates at which adult dependency increases of Category A and C pensions are payable.
146.Section 5 inserts a new section 150A into the SSAA1992. Subsection (1) of new section 150A requires the Secretary of State to review the amount of the basic state pension in a Category A, Category B, Category C or Category D pension, the amount of the standard minimum guarantee in State Pension Credit, and widow’s pension and widower’s pension in Industrial Death Benefit, to determine whether they have kept their value in relation to the general level of earnings.
147.Under subsection (2), where the Secretary of State considers the level of earnings has increased during the review period, he will be required to lay a draft of an up-rating order before Parliament increasing the amounts referred to in paragraph 146 above by a percentage which is not less than the relevant increase in earnings over the review period.
148.Subsection (3) will allow the Secretary of State not to increase the amounts of these benefits where it appears to him that the amount of the increase would be inconsiderable.
149.Subsection (4) will allow for the rounding up or down of any increase. In practice, this would normally mean rounding to the nearest five pence.
150.Subsection (5) will require a draft order to be accompanied by a copy of a report by the Government Actuary or the Deputy Government Actuary giving their opinion on the likely effect of the order on the National Insurance Fund, so far as the order relates to sums payable out of that Fund.
151.Subsection (6) will require the up-rating order to be made in the form of the draft once it is approved by Parliament.
152.Subsection (7) provides for the date when the increases made by the up-rating order are to come into force.
153.Subsection (8) gives the Secretary of State discretion as to how to estimate the general level of earnings. In practice this means the Secretary of State will be able to decide which measure or index of earnings growth shall be used for the purposes of earnings uprating.
154.Where a draft up-rating order under new section 150A of the SSAA1992 is combined with a draft up-rating order under section 150 of that Act, subsection (9) allows for a combined report by the Government Actuary or the Deputy Government Actuary.
155.Subsection (2) of section 5 introduces the consequential and related amendments in Part 5 of Schedule 1.
156.Subsection (3) of section 5 makes provision for the tax years in relation to which the up-rating of the basic state pension and widow’s and widower’s pension in Industrial Death Benefit is to have effect. It provides that the first review carried out under section 150A(1) is to be carried out in ‘the designated tax year’. Subsection (4) of section 5 requires the Secretary of State to designate ‘the designated tax year’ by way of an order made before 1st April 2011.Subsection (5) provides that in setting ‘the designated tax year’ the Secretary of State must ensure that the tax year following the designated tax year is a tax year that begins before the ‘relevant dissolution date’. Subsection (6) defines ‘the relevant dissolution date’ by reference to the maximum period for which a Parliament may exist. This is five years.
157.For the standard minimum guarantee in State Pension Credit, subsection (7) ensures that the new section 150A has effect in relation to the tax year in which the Act is enacted and subsequent tax years. Accordingly, as the Act received Royal Assent in the tax year 2007-08, the first review in respect of the standard minimum guarantee will take place in that year, with the first order up-rating the guarantee by earnings having effect for the tax year 2008-09.
158.This section amends section 150 of the SSAA1992 and sections 39 and 39C of the SSCBA1992.
159.Subsections (2), (3) and (4) amend sections 150(1), (3) and (7) respectively of the SSAA1992 to remove the basic state pension, standard minimum guarantee and widow’s and widower’s pensions in industrial death benefit from that section, which provides for up-rating by reference to prices. Subsections (2) and (3) also amend section 150(1) and (3) so that the rate of widowed mother’s allowance, widow’s pension, widowed parent’s allowance and bereavement allowance can continue to be up-rated in line with prices under that section.
160.Subsections (5) and (6) amend sections 39 and 39C respectively of the SSCBA1992. The effect of the amendments is to empower the Secretary of State to prescribe by regulations the rate of widowed mother’s allowance, widow’s pension and widowed parent’s allowance. The weekly amount of bereavement allowance will equal the prescribed rate of widowed parent’s allowance.
161.Subsection (9) will ensure that those regulation-making powers are used to provide that the rate of widowed mother’s allowance, widow’s pension, widowed parent’s allowance and bereavement allowance will equal the amount of the basic state pension up to the point at which the basic state pension is uprated in line with earnings.
162.Under subsection (7) the amendments relating to the basic state pension, widowed mother’s allowance, widow’s pension, widowed parent’s allowance, bereavement allowance and widow’s/widower’s pensions in industrial death benefit will have effect in relation to the designated tax year specified under subsection (4) of section 5 and subsequent tax years. Under subsection (8) the amendments relating to the standard minimum guarantee will have effect in relation to the tax year in which the Act was passed (ie 2007-08) and subsequent tax years.
163.This section amends sections 5 and 176(1) of the SSCBA1992. The effect of the amendments made by subsections (2) and (3) of the section is to remove the link between the amount of the lower earnings limit and the weekly rate of the basic state pension in a Category A pension, thereby ensuring that the amount of the lower earnings limit will not be required to automatically increase in line with earnings. Instead, any future increase in the lower earnings limit will be at the discretion of the Treasury.
164.Subsection (4) provides that these amendments have effect in the tax year following the designated tax year (i.e. as from the first year in which the basic pension is uprated by earnings) and subsequent tax years.
165.Subsection (5) provides that regulations setting the rate of the lower earnings limit in relation to years following the designated tax year will be subject to the affirmative procedure.
166.This section makes the same changes to sections 5 and 172 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 as section 7 makes to sections 5 and 176(1) of the SSCBA1992.
167.Part 5 of this Schedule amends the SSCBA1992, the SSAA1992 and the Welfare Reform Act 2007. The amendments are consequential on the introduction of new section 150A of the latter Act and their general effect is to ensure that certain provisions that currently apply in relation to the existing up-rating machinery in section 150 will also apply in relation to the new up-rating machinery in section 150A.
168.Subsection (1) amends the SSCBA1992 by introducing new sections 44B and 44C. Subsection (2) introduces Part 6 of Schedule 1 which contains consequential amendments relating to the deemed earnings factors.
169.Subsection (1) ensures that deemed earnings factors can only be accrued under the new provisions for tax years from 2010-11 onwards. This means that the new provisions only apply to those who have not yet reached state pension age at that time (a person cannot continue to build up entitlement to state second pension once they have reached state pension age).
170.Subsection (2) provides that an individual who satisfies any of the new conditions A, B or C set out at subsections (3), (4) and (5) would be deemed to be earning at the low earnings threshold.
171.Subsection (3) introduces Condition A which is satisfied if an individual has earnings at or above the qualifying earnings factor (52 times the lower earnings limit) but less than the low earnings threshold.
172.Subsection (4) introduces Condition B which is satisfied if an individual has earnings at less than the qualifying earnings factor but has some of the new earnings factor credits (see section 44C – paragraphs 177-183 refer) which may be added to their earnings to bring them up to the qualifying earnings factor.
173.Subsection (5) introduces Condition C which is satisfied if an individual has 52 earnings factor credits by virtue of section 44C. This would equate to the qualifying earnings factor – see paragraph 178 below.
174.Subsection (6) ensures that from the first year in which the flat rate of accrual is introduced for the additional pension (“flat rate introduction year”), the effect of the new section 44B will simply be to provide deemed earnings factors above the qualifying earnings factor but below the low earnings threshold, as that will be sufficient to enable them to accrue state second pension at the new weekly flat rate (£1.40, subject to up-rating). Condition A will not operate at that stage, since the persons to whom it applies will already have actual earnings over the qualifying earnings factor.
Pensions Act 2007