IN THE UPPER TRIBUNAL	Case No. CG/4066/2013
ADMINISTRATIVE APPEALS CHAMBER

Before Judge Mark

Decision:  The appeal is allowed.   .I set aside the decision of the tribunal and remit the case for rehearing in accordance with the directions below.

REASONS FOR DECISION

1.	This appeal is brought with the permission of a Judge of the Upper Tribunal.  I held an oral hearing of the appeal on 20 January at which the Secretary of State was represented by Mr Stephen Cooper and the Respondent was represented by Mr. Jack Holborn of counsel on instructions through the Free Representation Unit.  I am grateful to both for their helpful submissions.

2.	The claimant was born on 15 July 1951.  She worked as a teacher.  She took early retirement in about 2007 with the benefit of a pension from the Teachers’ Pension Scheme.  Since the death of her husband in 1992 she had been entitled first to a widowed mother’s allowance and then, after her daughter had become an adult, to a widow’s pension.  She became 60 years old on 15 July 2011, but under the provisions of the Pension Act 1995 (the 1995 Act), she only became entitled to a state pension on 6 November 2012.

3.	The Secretary of State reduced her widow’s pension from 21 July 2011, relying on provisions in the Pension Schemes Act 1993 (the 1993 Act) as amended by the 1995 Act for that pension to be reduced to take account of guaranteed minimum payments to which he found she was entitled under her teacher’s pension scheme.  This had the effect of immediately, from her 60th birthday, reducing her income significantly, by substantially wiping out the additional pension, based on her late husband’s earnings, included in her widow’s pension.  Her position only improved from November 2012 when she started to receive her state pension.

4.	She appealed that decision to the First-tier Tribunal and her appeal succeeded, it being held that under the provisions of the 1993 Act, at least on the facts before the tribunal, the deductions could only be made from the time the Respondent became entitled to receive a state pension.  The Secretary of State has now appealed that decision contending that under the terms of the 1993 Act as amended by the 1995 Act the relevant date from which such deductions were to be made continued to be the person’s 60th birthday even though that had ceased to be the date on which she would become entitled to a state pension.

5.	The 1993 Act introduced a guaranteed minimum pension (GMP) which an occupation pension scheme had to provide for employees who were contracted out of the State Earnings Related Pension Scheme (SERPS).  When it was enacted the age at which all women qualified for state pensions was 60.   All men qualified at 65.  

6.	Guaranteed minimum pension was defined by section 8(2) as any pension which is provided by an occupational pension scheme in accordance with the requirements of sections 13 and 17 to the extent to which its weekly rate is equal to the earner’s or, as the case may be, the earner’s widow’s or widower’s guaranteed minimum as determined for the purposes of those sections respectively.

7.	Section 181(1) provided that “In this Act, unless the context otherwise requires - …”pensionable age” has the same meaning as in section 122 of the Social Security Contributions and Benefits Act 1992”.  Section 122 of the Social Security Contributions and Benefits Act 1992, as then in force, provided that “”pensionable age” means – (a) the age of 65, in the case of a man; and (b) the age of 60, in the case of a woman”. 

8.	This definition in the 1993 Act was amended by the 1995 Act to read, unless the context otherwise required, “(a) so far as any provisions (other than sections 46 to 48) relate to guaranteed minimum pensions, means the age of 65 in the case of a man and the age of 60 in the case of a woman, and (b) in any other case has the meaning given by the rules in paragraph 1 of Schedule 4 to the Pensions Act 1995”.  Paragraph 1 of Schedule 4 to the 1995 Act raised incrementally the age at which a woman born after 5 April 1950 became entitled to a state pension.

9.	The 1993 Act contains provisions which must be satisfied if a pension scheme is to be certified as contracted out.  Section 9 of the 1993 Act provides that subject to certain exceptions, an occupational pension scheme can be contracted-out in relation to an earner’s employment only if it satisfies subsection (2) or subsection (3) of that section.  Bearing in mind the provisions that have been referred to in these proceedings, it would appear that the Teachers Pension Scheme was certified as contracted-out on the basis that it complied with sections 13 to 24 of the 1993 Act. 

10.	Section 13(1)-(4) were in the following terms:

(1) Subject to the provisions of this Part, the scheme must— 
(a) provide for the earner to be entitled to a pension under the scheme if he attains pensionable age; and 
(b) contain a rule to the effect that the weekly rate of the pension will be not less than his guaranteed minimum (if any) under sections 14 to 16. 
(2) In the case of an earner who is a married woman or widow who is liable to pay primary Class 1 contributions at a reduced rate by virtue of section 19(4) of the Social Security Contributions and Benefits Act 1992, subject to the provisions of this Part, the scheme must— 
(a) provide for her to be entitled to a pension under the scheme if she attains pensionable age and does not have a guaranteed minimum under sections 14 to 16; and 
(b )satisfy such other conditions as may be prescribed. 
(3) Subject to subsection (4), the scheme must provide for the pension to commence on the date on which the earner attains pensionable age and to continue for his life. 
(4) Subject to subsection (5), the scheme may provide for the commencement of the earner’s guaranteed minimum pension to be postponed for any period for which he continues in employment after attaining pensionable age. 

11.	It can be seen that the scheme had to provide for the earner to be entitled to the GMP, in the case of a woman, at the age of 60.

12.	Section 46 of the 1993 Act had the heading “Effect of entitlement to guaranteed minimum pensions on payment of social security benefits”.  Section 46(1) provided that 

“Where for any period a person is entitled both – 
(a)	to a Category A or Category B retirement pension, a widowed mother’s allowance, a widow’s pension or a widower’s invalidity pension under the Social Security Contributions and Benefits Act 1992; and
(b)	 to one or more guaranteed minimum pensions,
the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal –
(i)	to its additional pension, or
(ii)  to the weekly rate of the pension mentioned in paragraph (b) … whichever is the less”

The words in section 46 (1)(b)(i) were amended by paragraph 44 of Schedule 4 to the 1995 Act to read  
“(i) to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day”.

That has no significance in the present case, as all the additional pension was attributable to earnings of the Respondent’s late husband before the appointed day (6 April 1997).  In other cases it may limit the amount of the additional pension to be reduced.

13.	Section 48 of the 1993 Act then provided as follows under the heading “Reduced benefits where minimum payment or minimum contributions paid”:

(1)Subject to subsection (3), this subsection applies where for any period— 
(a) minimum payments have been made in respect of an earner to an occupational pension scheme which is a money purchase contracted-out scheme in relation to the earner’s employment, or 
(b) minimum contributions have been paid in respect of an earner under section 43. 
(2) Where subsection (1) applies then, for the purposes of section 46— 
(a) the earner shall be treated, as from the date on which he reaches pensionable age, as entitled to a guaranteed minimum pension at a prescribed weekly rate arising from that period in that employment; 
(b) in prescribed circumstances if the earner dies after reaching pensionable age any widow or widower of the earner shall be treated as entitled to a guaranteed minimum pension at a rate equal to one-half of the rate prescribed under paragraph (a); and 
(c) in prescribed circumstances if the earner dies before reaching pensionable age any widow or widower of the earner shall be treated as entitled to a guaranteed minimum pension at a prescribed weekly rate arising from that period; 
and where subsection (1)(b) applies paragraphs (a) to (c) of this subsection apply also for the purposes of sections 34(4) and 47(2) of the Social Security Contributions and Benefits Act 1992 and paragraph 3(2) of Schedule 7 to that Act, but with the omission from paragraph (a) of the words “in that employment”. 
(3)Where the earner is a married woman or widow, subsection (1) shall not have effect by virtue of paragraph (a) of that subsection in relation to any period during which there is operative an election that her liability in respect of primary Class 1 contributions shall be a liability to contribute at a reduced rate. 
(4)The power to prescribe a rate conferred by subsection (2)(a) includes power to prescribe a nil rate.

14.	However, section 140(3) of the 1995 Act provided that section 48 of the 1993 Act should cease to have effect after the appointed day (6 April 1997).  Insofar as it is relevant in this case, it can only be in respect of any guaranteed pension accrued by the Respondent up to 5 April 1997.
 
15.	Prior to the enactment of the 1995 Act, these provisions made it clear that a person entitled to a guaranteed minimum pension was liable to have a reduction in other benefits for any period or periods during which that person was entitled to a GMP.   

16.	The position so far as the Respondent is concerned is as follows:

(a)	Once she became entitled to her GMP there was to be reduction in the additional element of her widow’s pension under section 46 of the 1993 Act.
(b)	 It is clear that the Teachers’ Pension Scheme is an approved contracted-out scheme.  It must therefore, by virtue of section 13 of the 1993 Act, provide for her to have a GMP if she attains pensionable age.  For this purpose, the amended section 181 of the 1993 Act provides that she attains pensionable age at 60.
(c)	The Respondent accepted in the oral hearing before me that she had had the same pension since she took early retirement, that it was in terms of the amount paid the amount payable by way of GMP and that it did not change when in November 2012 she became entitled to a state pension.
(d)	Paragraph (a) of the amended section 181 definition of pensionable age does not apply to sections 46 to 48 of the 1993 Act.  Instead, paragraph (b) of the definition makes pensionable age for the purposes of those sections the date provided by Schedule 4 to the 1995 Act, in this case 6 November 2012.
(e)	Sections 46 to 48 are concerned with the calculations of deductions to be made from the additional element of the state pension being received.  For the purpose of making those calculations, to the extent provided in those sections, pensionable age has a different meaning.
(f)	The only reference to pensionable age in sections 46 to 48 is in section 48(2).  That section only applies to the limited extent set out in section 48 as amended by the 1995 Act.  If there have been no qualifying payments before 6 April 1997, it does not apply.  For, any payments to have been qualifying payments they must satisfy section 48(1) and the Respondent must not have made an election which falls within section 48(3).
(g)	Insofar as there were any such payments, then in making the calculations required for the purposes of section 46, the Secretary of State is required to treat entitlement to any GMP arising from the period of employment in which they were made as from the date on which the Respondent became entitled to a state pension and not from the earlier date on which she actually became entitled to the GMP.
(h)	It was suggested by Mr. Cooper at the oral hearing that section 48 only applied where a person continued to work after the age of 60 so that under section 13(4) of the 1993 Act entitlement is postponed beyond 60.  That cannot be right as section 47(2)(a) provides that a person is to be treated for the purposes of section 46 as entitled to a GMP if he would have been entitled had entitlement not been postponed as mentioned in section 13(4).
(i)	It follows that, for the purposes of the calculations under section 46 up to 6 November 2012, the Secretary of State ought to have determined how much, if any, of the Respondent’s GMP was attributable to payments before 6 April 1997 which fell within section 48 of the 1993 Act, and to have excluded that part of the pension in calculating how much should be deducted from the additional element of the widow’s pension.

17.	I note that in Secretary of State v MH [2014] UKUT 113 (AAC) Judge Jacobs appears to have come to a different conclusion on the facts before him.  That case also involved a widowed teacher born in the same month as the present Respondent.  There is no indication there whether she had worked as a teacher before 6 April 1997, and bearing in mind that her GMP in that case was less than half that of the present Respondent, it is possible that she had not made any relevant contributions before 6 April 1997.  It is also possible that she could not rely on section 48 because there had been an election covered by section 48(3).  All that Judge Jacobs says of section 48 is that the references there to pensionable age do not affect the case before him.  He does not explain why.  I also note that in paragraph 14 of his decision he states that the definition of pensionable age was left in its original form by the 1995 Act, although he had previously set it out in its amended form.  It is unnecessary for me to consider whether this may have affected his decision.  For the reasons already given, I am satisfied that section 48 is capable of being relevant to the calculation of any deduction from the Respondent’s additional widow’s pension up to 6 November 2012 and there are insufficient facts to enable me to determine in this case whether any, and if so what, part of the Respondent’s occupational pension are to be disregarded during that period.

18.	The tribunal found that section 13 did not have any effect on the operation of section 46 and that a deduction was only to be made where a person was entitled to the GMP in question.  The tribunal also accepted a statement from the Teachers’ Pension Scheme that a GMP would not be applied to the claimant until she reached pensionable age (i.e. 6 November 2012) and found that she was not entitled to a GMP until that age.  As pointed out by Mr. Holborn, if she was not entitled to a GMP until that date the scheme would not comply with section 13.  I am satisfied that the tribunal was in error of law in this respect and did not refer to or consider section 48 and its limited application following the enactment of the 1995 Act.

19.	I would only add that although Judge Jacobs recorded in his decision a concession by the Secretary of State that there had been an oversight in the way in which the 1995 amendments had been formulated in this respect, Mr. Cooper informed me at the hearing that this was a mistake and there was no such concession on the part of the Secretary of State.  If it should be relevant at any time, the question whether there was an oversight must await decision in another case.

20.	The matter must be remitted to the First-tier Tribunal for rehearing, when there should be evidence as to what part of the GMP is attributable to contributions falling within section 48 of the 1993 Act and so should have been disregarded in calculating deductions from the additional element of the widow’s pension.

(signed)

		Michael Mark
		Judge of the Upper Tribunal

		21 January 2015