Schedule 1: Part 4: Category A and C retirement pensions: abolition of adult dependency increases
142.Paragraphs 12 and 13 of this Schedule remove references to adult dependency increases in the following sections of the SSCBA1992, which are redundant following the abolition of those increases:
Section 30B(3)(b) which deals with the rate of short-term incapacity benefit payable to a person who has attained state pension age; and
Section 78(4)(d) which deals with non-contributory Category C and D pensions.
143.Paragraphs 14, 15 and 16 remove redundant references to adult dependency increases in the following sections of the SSCBA1992:
Section 88, which provides that a person cannot be entitled to an adult dependency increase in respect of more than one person for the same period;
Section 89, which provides for occupational and personal pensions to be treated as earnings for the purposes of the conditions of entitlement to adult dependency increases; and
Section 114, which provides for regulations to prescribe the circumstances in which one person can be taken to be maintaining another for the purposes of establishing entitlement to an adult dependency increase.
144.Paragraph 17 removes the redundant references to section 83(2) and (3) in section 149(3) of the SSCBA1992 which deals with circumstances in which a person is treated as being entitled to an adult dependency increase for the purposes of establishing entitlement to a Christmas bonus.
145.Paragraph 18 amends paragraphs 5 and 6 of Part 4 of Schedule 4 to the SSCBA1992 to remove redundant references to the rates at which adult dependency increases of Category A and C pensions are payable.
Section 5: Up-rating of basic pension etc. and standard minimum guarantee by reference to earnings
146.Section 5 inserts a new section 150A into the SSAA1992. Subsection (1) of new section 150A requires the Secretary of State to review the amount of the basic state pension in a Category A, Category B, Category C or Category D pension, the amount of the standard minimum guarantee in State Pension Credit, and widow’s pension and widower’s pension in Industrial Death Benefit, to determine whether they have kept their value in relation to the general level of earnings.
147.Under subsection (2), where the Secretary of State considers the level of earnings has increased during the review period, he will be required to lay a draft of an up-rating order before Parliament increasing the amounts referred to in paragraph 146 above by a percentage which is not less than the relevant increase in earnings over the review period.
148.Subsection (3) will allow the Secretary of State not to increase the amounts of these benefits where it appears to him that the amount of the increase would be inconsiderable.
149.Subsection (4) will allow for the rounding up or down of any increase. In practice, this would normally mean rounding to the nearest five pence.
150.Subsection (5) will require a draft order to be accompanied by a copy of a report by the Government Actuary or the Deputy Government Actuary giving their opinion on the likely effect of the order on the National Insurance Fund, so far as the order relates to sums payable out of that Fund.
151.Subsection (6) will require the up-rating order to be made in the form of the draft once it is approved by Parliament.
152.Subsection (7) provides for the date when the increases made by the up-rating order are to come into force.
153.Subsection (8) gives the Secretary of State discretion as to how to estimate the general level of earnings. In practice this means the Secretary of State will be able to decide which measure or index of earnings growth shall be used for the purposes of earnings uprating.
154.Where a draft up-rating order under new section 150A of the SSAA1992 is combined with a draft up-rating order under section 150 of that Act, subsection (9) allows for a combined report by the Government Actuary or the Deputy Government Actuary.
155.Subsection (2) of section 5 introduces the consequential and related amendments in Part 5 of Schedule 1.
156.Subsection (3) of section 5 makes provision for the tax years in relation to which the up-rating of the basic state pension and widow’s and widower’s pension in Industrial Death Benefit is to have effect. It provides that the first review carried out under section 150A(1) is to be carried out in ‘the designated tax year’. Subsection (4) of section 5 requires the Secretary of State to designate ‘the designated tax year’ by way of an order made before 1st April 2011.Subsection (5) provides that in setting ‘the designated tax year’ the Secretary of State must ensure that the tax year following the designated tax year is a tax year that begins before the ‘relevant dissolution date’. Subsection (6) defines ‘the relevant dissolution date’ by reference to the maximum period for which a Parliament may exist. This is five years.
157.For the standard minimum guarantee in State Pension Credit, subsection (7) ensures that the new section 150A has effect in relation to the tax year in which the Act is enacted and subsequent tax years. Accordingly, as the Act received Royal Assent in the tax year 2007-08, the first review in respect of the standard minimum guarantee will take place in that year, with the first order up-rating the guarantee by earnings having effect for the tax year 2008-09.
Section 6: Preservation of link with prices in case of other benefits
158.This section amends section 150 of the SSAA1992 and sections 39 and 39C of the SSCBA1992.
159.Subsections (2), (3) and (4) amend sections 150(1), (3) and (7) respectively of the SSAA1992 to remove the basic state pension, standard minimum guarantee and widow’s and widower’s pensions in industrial death benefit from that section, which provides for up-rating by reference to prices. Subsections (2) and (3) also amend section 150(1) and (3) so that the rate of widowed mother’s allowance, widow’s pension, widowed parent’s allowance and bereavement allowance can continue to be up-rated in line with prices under that section.
160.Subsections (5) and (6) amend sections 39 and 39C respectively of the SSCBA1992. The effect of the amendments is to empower the Secretary of State to prescribe by regulations the rate of widowed mother’s allowance, widow’s pension and widowed parent’s allowance. The weekly amount of bereavement allowance will equal the prescribed rate of widowed parent’s allowance.
161.Subsection (9) will ensure that those regulation-making powers are used to provide that the rate of widowed mother’s allowance, widow’s pension, widowed parent’s allowance and bereavement allowance will equal the amount of the basic state pension up to the point at which the basic state pension is uprated in line with earnings.
162.Under subsection (7) the amendments relating to the basic state pension, widowed mother’s allowance, widow’s pension, widowed parent’s allowance, bereavement allowance and widow’s/widower’s pensions in industrial death benefit will have effect in relation to the designated tax year specified under subsection (4) of section 5 and subsequent tax years. Under subsection (8) the amendments relating to the standard minimum guarantee will have effect in relation to the tax year in which the Act was passed (ie 2007-08) and subsequent tax years.
Section 7: Removal of link between lower earnings limit and basic pension
163.This section amends sections 5 and 176(1) of the SSCBA1992. The effect of the amendments made by subsections (2) and (3) of the section is to remove the link between the amount of the lower earnings limit and the weekly rate of the basic state pension in a Category A pension, thereby ensuring that the amount of the lower earnings limit will not be required to automatically increase in line with earnings. Instead, any future increase in the lower earnings limit will be at the discretion of the Treasury.
164.Subsection (4) provides that these amendments have effect in the tax year following the designated tax year (i.e. as from the first year in which the basic pension is uprated by earnings) and subsequent tax years.
165.Subsection (5) provides that regulations setting the rate of the lower earnings limit in relation to years following the designated tax year will be subject to the affirmative procedure.
Section 8: Removal of link between lower earnings limit and basic pension: Northern Ireland
166.This section makes the same changes to sections 5 and 172 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 as section 7 makes to sections 5 and 176(1) of the SSCBA1992.
