The Social Security (Graduated Retirement Benefit) Regulations 2005

Explanatory Note

(This note is not part of these Regulations)

These Regulations make provision relating to the deferment of graduated retirement benefit arising from changes in the rules relating to the deferment of retirement pension made by the Pensions Acts 1995 (c. 26) and 2004 (c. 35) (“the 2004 Act”).

Regulations 2 to 4 and Schedule 1 repeal and re-enact the existing rules relating to increments of graduated retirement benefit where entitlement to either retirement pension or to graduated retirement benefit alone is deferred, so that they correspond with the rules for deferment of entitlement to retirement pension enacted in Schedule 5 to the Social Security Contributions and Benefits Act 1992 (c. 4) as amended by Schedule 11 to the 2004 Act.

The two changes introduced by Schedule 1 are an increase in the incremental rate from 1/7th per cent. to ⅕th per cent. and the introduction of a new reward of a lump sum, both for those who have deferred entitlement to their graduated retirement benefit for at least 12 months and for widows and widowers where their deceased spouses deferred entitlement to their graduated retirement benefit for at least 12 months as at the date of death. Those who also had deferred entitlement to retirement pension for at least 12 months can only get the same reward for graduated retirement benefit as they elected to receive for their retirement pension, otherwise, an election can be made. The election is to be made in the manner and within the time specified in regulations made under powers introduced by the 2004 Act. The lump sum is to be calculated on the basis of the amount of graduated retirement benefit foregone in the period of deferment with interest accrued on it at a rate 2% above the Bank of England base rate.

Regulation 1(2) provides that the increase in the incremental rate is to not to take effect in relation to incremental periods beginning before 6th April 2005.

Regulation 5 and Schedule 2 modify Schedule 1 in so far as it applies to cases where a person was deferring his graduated retirement benefit before 6th April 2005 and continued deferring it on or after that date.

A full Regulatory Impact Assessment has not been produced for this Instrument as it has no impact on the costs of business.