The Secretary of State for Work And Pensions v Goulding

For state pension credit, “income” and “income withdrawal” in the rules governing notional retirement pension income are technical statutory concepts. They must be construed in the context of the pension and tax legislation governing personal pension schemes. The maximum amount of income withdrawal is therefore determined by that statutory regime and by reference to the annuity purchasable with the fund. It is not measured by whether the fund has increased above the contributions paid. A permissible withdrawal is not transformed into a return of capital merely because the fund’s value is below those contributions. The absence from the State Pension Credit Regulations 2002 of words appearing in equivalent provisions for other benefits does not justify a different construction.

The Secretary of State appealed from the Upper Tribunal (Administrative Appeals Chamber), where Upper Tribunal Judge Humphrey had set aside the First-tier Tribunal’s reasons but reached the same conclusion. The First-tier Tribunal had allowed Ian Goulding’s appeal against a decision of the Department for Work and Pensions concerning his entitlement to state pension credit.

Mr Goulding held a personal pension plan with an income-drawdown facility. The fund was worth less than the contributions paid into it. The central issue was whether the maximum amount which could be withdrawn under regulation 18 of the State Pension Credit Regulations 2002 was “income” for the purpose of calculating notional income, or instead a return of capital.

Appeal allowed. The Court of Appeal dismissed Mr Goulding’s appeal against the Department for Work and Pensions’ decision rather than remitting the matter.

1. Regulation 18 applies only where a claimant is entitled to purchase an annuity with pension funds and has not done so. It does not deem a claimant to have retirement pension income where no income is available. The conditions were nevertheless satisfied because the personal pension plan permitted income withdrawal.
2. The relevant principles of statutory construction require legislation to be read in its legal, social and historical context, with an informed rather than purely literal meaning. Technical terms must be given their technical or generally understood meaning, and legislation in pari materia must be read together.
3. “Personal pension scheme”, “income”, “income withdrawal” and “income foregone” in regulation 18 are technical concepts governed by the pension and tax legislation applicable to such schemes. The statutory history, beginning with the introduction of income withdrawal by Schedule 11 to the Finance Act 1995 and continuing under the Finance Act 2004, confirmed that income withdrawal was calculated by reference to the annuity purchasable with the fund. It was unrelated to whether the fund had appreciated above the contributions.
4. Regulation 7(6) of the Social Security (Claims and Payments) Regulations 1987, requiring the pension fund holder to provide the maximum withdrawal figure, reinforced that construction. Treating withdrawals as capital whenever the fund was below the contributions would produce volatility and unequal treatment compared with annuity income.
5. The Upper Tribunal therefore erred in treating the absence of additional words found in equivalent regulations for other benefits as excluding the pension and tax legislation. Those words merely made explicit the true meaning of regulation 18. The maximum permitted withdrawal was notional income under regulation 18(3), despite the fund being worth less than the original investment.

• Court of Appeal (Civil Division) — [2019] EWCA Civ 839: allowed the Secretary of State’s appeal and dismissed Mr Goulding’s appeal against the DWP decision.
• Upper Tribunal (Administrative Appeals Chamber) — in CPC/3/2016, set aside the First-tier Tribunal’s decision on the reasons given but reached the same substantive conclusion, excluding the notional pension income.
• First-tier Tribunal — allowed Mr Goulding’s appeal against the DWP’s decision of 13 February 2014.