Department of Health v Pensions Ombudsman

For the purpose of calculating a pension reduction, a pension payable under the NHS Regulations means the initial pension, excluding statutory index-linked increases. However, once a later reduction changes the pension’s annual rate, future statutory increases are calculated by reference to the reduced basic rate. Past increases are not recalculated or withdrawn. The statutory definition of “basic rate” excludes increases under or by reference to the Pensions (Increase) Act 1971, but does not exclude other lawful variations in the pension rate.

Dr John Wallis Moss received an NHS occupational pension under the National Health Service (Superannuation) Regulations 1980. On reaching state pension age, regulation 56(3)(c) required a reduction based on his pre-1980 contributing service. The dispute concerned whether that reduction was to be made from the pension after statutory increases, or from the initial pension before those increases.

The Pensions Ombudsman upheld Dr Moss’s complaint under section 146 of the Pension Schemes Act 1993. Robert Walker J dismissed the Department’s appeal. The central issue before the Court of Appeal was the interaction between regulation 56(3)(c), the Pensions (Increase) Act 1971 and section 59 of the Social Security Pensions Act 1975.

Appeal allowed unanimously. The order of Robert Walker J was discharged, the Pensions Ombudsman’s determination was set aside, and the Department agreed to pay the Ombudsman’s costs of the appeal.

1. Regulation 56(3)(c) required the reduction to be made from the initial pension. The NHS Regulations distinguished “pension” from “uprated pension”. The latter expressly included increases under the Pensions (Increase) Act 1971, whereas regulation 56(3)(c) referred only to “pension”.

2. Section 7(4) of the 1971 Act confirmed that an increase under that Act was not to be treated as part of the pension for the purposes of a provision made under an enactment. Regulation 56(3)(c) was such a provision.

3. Under section 59(5) of the Social Security Pensions Act 1975, increases were calculated by reference to the “basic rate”, defined by section 17(1) of the 1971 Act as the annual rate apart from increases under or by reference to that Act.

4. That definition did not make the basic rate a fixed figure determined once and for all. It excluded statutory increases, but not other lawful changes in the annual rate. Accordingly, after regulation 56(3)(c) operated, the basic rate became the reduced amount, and future increases were calculated on that reduced rate.

5. The construction did not retrospectively recalculate or divest accrued increases. It affected only the amount payable in the future.

• Court of Appeal: Appeal allowed. Paragraph 1 of Robert Walker J’s order was discharged and the Pensions Ombudsman’s determination was set aside.
• High Court, Chancery Division: Robert Walker J dismissed the Department’s appeal from the Pensions Ombudsman’s determination on 30 July 1997.
• Pensions Ombudsman: On 10 January 1997, the Ombudsman upheld Dr Moss’s complaint and directed recalculation of his pension.