After paragraph 7 insert—

“Entitlement to lump sum where pensioner’s deceased spouse has deferred entitlement

7A

(1)

This paragraph applies where a person to whom paragraph 3C applies (“W”) has made (or is treated as having made) an election under paragraph 3C(2)(b).

(2)

W is entitled to an amount calculated in accordance with paragraph 7B (a “widowed person’s lump sum”).

Calculation of widowed person’s lump sum

7B

(1)

The widowed person’s lump sum is the accrued amount for the last accrual period beginning during the period which—

(a)

began at the beginning of S’s period of deferment, and

(b)

ended on the day before S’s death.

(2)

In this paragraph—

• ‘S’ means the other party to the marriage;

• ‘accrued amount’ means the amount calculated in accordance with sub-paragraph (3);

• ‘accrual period’ means any period of seven days beginning with a prescribed day of the week, where that day falls within S’s period of deferment.

(3)

The accrued amount for an accrual period for W is—

$\left(A+P\right)\times \sqrt[52]{(1+\genfrac{}{}{0.1ex}{}{R}{100})}$

where—

A is the accrued amount for the previous accrual period (or, in the case of the first accrual period beginning during the period mentioned in sub-paragraph (1), zero);

P is—

1. (a)

   the basic pension, and

2. (b)

   half of the additional pension,

to which S would have been entitled for the accrual period if his entitlement had not been deferred during the period mentioned in sub-paragraph (1);

R is—

1. (a)

   a percentage rate two per cent. higher than the Bank of England base rate, or

2. (b)

   if regulations so provide, such higher rate as may be prescribed.

(4)

For the purposes of sub-paragraph (3), any change in the Bank of England base rate is to be treated as taking effect—

(a)

at the beginning of the accrual period immediately following the accrual period during which the change took effect, or

(b)

if regulations so provide, at such other time as may be prescribed.

(5)

For the purposes of the calculation of the widowed person’s lump sum, the amount of Category A or Category B retirement pension to which S would have been entitled for an accrual period—

(a)

includes any increase under section 47(1) and any increase under paragraph 4 of this Schedule, but

(b)

does not include—

(i)

any increase under section 83A or 85 or paragraphs 5 to 6 of this Schedule,

(ii)

any graduated retirement benefit, or

(iii)

in prescribed circumstances, such other amount of Category A or Category B retirement pension as may be prescribed.

(6)

The reference in sub-paragraph (5)(a) to any increase under subsection (1) of section 47 shall be taken as a reference to any increase that would take place under that subsection if subsection (2) of that section and section 46(5) of the Pensions Act were disregarded.

(7)

In any case where—

(a)

there is a period between the death of S and the date on which W becomes entitled to a Category A or Category B retirement pension, and

(b)

one or more orders have come into force under section 150 of the Administration Act during that period,

the amount of the lump sum shall be increased in accordance with that order or those orders.”