Pearce v Secretary of State for Work & Ors

Where a person is entitled to both a Category A retirement pension and a guaranteed minimum pension, section 46(1) of the Pension Schemes Act 1993 requires the retirement pension to be reduced by the lesser of the pre-1997 additional pension and the current, revalued guaranteed minimum pension.

The provision does not limit the deduction to additional pension earned during contracted-out employment. Nor does it permit use of the guaranteed minimum pension’s original, unrevalued amount. References to the period of entitlement concern the period during which the retirement pension is payable, rather than the earlier period in which pension rights accrued.

The applicant claimed that her State retirement pension had been understated by approximately £40 per week. She had accrued a guaranteed minimum pension during contracted-out employment between 1978 and 1984 and additional State pension rights during later contracted-in employment. The guaranteed minimum pension had increased from £15.56 to £57.40 per week by the time she reached State pension age.

The Appeal Tribunal dismissed her challenges to the pension calculation and the determination of her guaranteed minimum pension. The Social Security Commissioner, in joined cases CP/1023/2004 and CP/1025/2004, rejected her further appeals and refused permission to appeal.

The applicant sought permission from the Court of Appeal. The central issues were whether section 46(1) of the Pension Schemes Act 1993 permitted the revalued guaranteed minimum pension to be deducted from all pre-1997 additional pension and whether the deduction should instead be confined to contracted-out service or the guaranteed minimum pension’s original value.

1. Disposition. The application was dismissed and permission to appeal was refused. The Appeal Tribunal and Deputy Social Security Commissioner had been correct in law, and the proposed appeal had no prospect of success.

2. Section 46(1) of the Pension Schemes Act 1993 applied because the applicant was entitled to both a Category A retirement pension and a guaranteed minimum pension. It required the weekly Category A pension to be reduced by the lesser of the pre-6 April 1997 additional pension and the weekly guaranteed minimum pension. Since the guaranteed minimum pension was the lesser amount, it constituted the deduction.

3. The expressions “any period” and “that period” in section 46(1) referred to a period during which the Category A retirement pension was payable. They did not refer to the earlier employment or contribution period during which the pension rights accrued. The subsection concerned a weekly rate, and entitlement to a Category A retirement pension arose only upon reaching State pension age.

4. Section 46(1) contained no basis for separating additional pension attributable to contracted-out employment from additional pension attributable to contracted-in employment. Additional pension arose from earnings in any qualifying year. Where a person also had one or more guaranteed minimum pensions, section 46 prevented duplication by applying the statutory deduction to the whole pre-1997 additional pension. That conclusion followed from the clear statutory language, notwithstanding its potentially illogical effect and its inconsistency with departmental guidance.

5. A guaranteed minimum pension was not a separate Government pension. It was the amount below which benefits under a contracted-out occupational pension scheme could not fall. Contracting out carried reduced National Insurance contributions, while the guaranteed minimum pension sought to secure a basic level equivalent to the benefit which SERPS would otherwise have provided.

6. The guaranteed minimum pension had to be taken at its current amount for all purposes, including statutory revaluation. There was no statutory basis for deducting its original value rather than the revalued value. Section 16 of the Pension Schemes Act 1993 required revaluation after contracted-out employment ended. Schemes could choose between revaluation methods, but could not choose whether to revalue.

1. Court of Appeal (Civil Division): By [2005] EWCA Civ 453, dismissed the application and refused permission to appeal because the proposed appeal had no prospect of success.

2. Social Security Commissioner: Deputy Commissioner White decided the joined cases CP/1023/2004 and CP/1025/2004 on 27 October 2004 and refused permission to appeal on 3 February 2005.

3. Appeal Tribunal for Social Security, Child Support and Vaccine Damage: Heard the two appeals together on 22 October 2003 and dismissed them.