1.	This appeal, brought with my leave, succeeds, in that the Appeal Tribunal on 24 9 01 erred in not deferring its decision until a formal decision on the guaranteed minimum pension calculation had been obtained from the Inland Revenue.  However, under s14(8)(a)(i) of the Social Security Act 1998 I substitute my own decision to the same effect as the tribunal’s.  This is that the appellant was entitled to retirement pension of £72.56 per week from  4 12 99, payable from 6 12 99.

2.	I held an oral hearing at which the appellant, who attended with his wife, represented himself and the Secretary of State for Work and Pensions (formerly the Secretary of State for Social Security) was represented by Mr Vaughan Lewis.  I am grateful for the help I received from both parties.

The SERPS scheme and the legislative provisions

3.	This appeal concerns the State earnings-related pension scheme (SERPS) introduced from April 1978 by s6 of the Social Security Pensions Act 1975. This scheme provided an earnings-related supplement to the basic retirement pension.  People not in occupational pension schemes paid higher NI contributions, to fund the State earnings-related supplement (Additional Pension: AP) as well as the basic retirement pension.  People who were in occupational pension schemes paid contributions to these schemes, and so paid lower, “contracted out”, NI contributions.  The schemes were required to pay a Guaranteed Minimum Pension (GMP).  But the State guaranteed that people in occupational schemes would not lose out, and it did this by maintaining for them a notional AP which would, if necessary, top up the GMP.  The AP also took account of higher rate NI contributions paid (surplus earnings factors) for periods when people (like the appellant from time to time) were not in occupational schemes.  (From 6 4 97 the notional AP ceased for people in contracted out employment.  But this had no effect on the appellant, because he took early retirement on 31 3 97.)  On making a pension forecast, or on calculating actual retirement pension, actual GMP is calculated, and then the notional AP as if the claimant had not been in a contracted out scheme.  If the GMP exceeds the notional AP, the State will not have to pay a top-up. But if there is a GMP shortfall at the relevant date, then a proportion of the AP will kick in and will be paid on top of GMP.  It is really the AP, rather than the GMP, that is the “safety net”.  The figures involved are updated every year under what is now s148 of the Social Security Administration Act 1992 to take account of the general level of earnings (inflation-proofing).  It is possible for the pension scheme under which a claimant gets his GMP to provide better inflation-proofing than the AP, so that the appellant’s AP earned from any non-contracted out employment is still extinguished by his GMP.    
        	
4.	Under s44(3) of the Social Security Contributions and Benefits Act 1992

A Category A retirement pension shall consist of –
(a)	a basic pension payable at a weekly rate; and
(b) an additional pension payable where there are one or more surpluses in the pensioner’s earnings factors for the relevant years 	

For the tax years 1987/8 and onwards, the earnings factor is derived from  the earnings on which Class 1 (employed earners) NI contributions were paid or treated as paid.  For earlier tax years, the earnings factor is derived from the Class 1 contributions actually paid (s44(6)). 

5.	Under s45(2) of the 1992 Act
 
The weekly rate of the additional pension...in any case where the pensioner attained pensionable age in a tax year after 5th April 1999 shall be -
(a)  in relation to any surpluses in the pensioner’s earnings factors for the tax years in the period beginning with 1978-9 and ending with 1987-8, the weekly equivalent of 25/N per cent of the amount of those surpluses; and
(b)  in relation to any surpluses in the pensioner’s earnings factors in a tax year after 1987-8, the weekly equivalent of the relevant percentage of the amount of those surpluses.

“Relevant percentage” means (20+X)/N per cent for a pensioner attaining pensionable age in a tax year falling between 1999-2000 and 2008-9.  X=0.5 for each tax year by which the tax year in which the pensioner attained pensionable age precedes 2009-10, and N=the number of tax years in the pensioner’s working life which fall after 5th April 1978.		
6.	Under s46 of the now-governing Pension Schemes Act 1993

(1)  Where for any period a person is entitled both -
(a) to a Category A retirement pension [ie including both basic and AP]..; and
(b) to one or more guaranteed minimum pensions,
the weekly rate of [the Category A pension] shall for that period be reduced by an amount equal -
(i) to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day [6 4 97, under amendments introduced by the Pensions Act 1995], or
(ii) to the weekly rate of the pension mentioned in paragraph (b) [ie the GMP] (or, if there is more than one such pension, their aggregate weekly rates),
whichever is the less.

So if the AP is greater than the GMP it is the GMP that is deducted, but if the GMP is greater than the AP, it is the AP that is deducted. 

The events in this case

7.	The appellant, who was born on 4 12 34, made 5 months’ SERPS contributions from April to September 1978, while waiting for his  employer to join the scheme,  and further contributions in 1989/90 while he waited to join his then employer’s occupational pension scheme.  For the rest of the time, he paid into the occupational schemes and therefore paid no SERPS.

8.	Shortly after he took early retirement on 31 3 97, the appellant asked for a pension forecast (at page 9A).  Because he was still a few years short of retirement age, this could only be estimated on the information held at that date, and it further expressly warned that credit might not yet have been given for the NI contributions paid in the 1996/7 tax year (and, quite possibly, for occupational scheme contributions in the same year – this was, after all, a forecast made very soon after the end of the previous tax year).  The forecast was as follows:

Basic pension up to 5 April 1996			£62.45
Payable additional pension to 5 April 1996		£ 3.34
Gaduated pension					£ 5.43
Total weekly pension earned to 5 April 1996     	£71.22

The additional pension was worked out as follows:

Total additional pension				£70.95
Less contracted-out deduction of			£67.61
							_____
							£ 3.34

At this date, therefore, the GMP seems not to have matched the full AP, so there would have been a top up, and it would have been the GMP instead of the AP that would have been deducted from the Category A (combined basic and AP) pension.  But the forecast was only an estimate.

9.	The appellant reached retirement age on 4 12 99, and the pension awarded on the claim made slightly in advance of his retirement date was

Basic retirement pension 				£66.75
Additional retirement pension (SERPS)		£81.10
Minus
Contracted-out deductions 				£84.96
Additional retirement pension payable		£NIL
Graduated pension					£ 5.81
Total 							£72.56

It can be seen that all the figures, including the AP, have been increased, and that the appellant is actually getting overall more than the forecast.  But what bothers him is that whereas according to the forecast he would have received a small amount of additional pension, under the actual award he receives none, because it is overtopped by the (considerably increased since 8 5 97) contracted-out deductions (GMP). 

10.	We need pay no further attention to the Graduated Pension element, as this is a hangover from a scheme which was terminated years ago, and it is not disputed by the appellant.  And he disputes neither the basic pension figure nor the GMP figure, although I insisted, as mentioned below, on the obtaining of a proper decision setting this out.    

11.	The appellant argued at length with the DWP about the final calculations.  His suspicion is that some fiddle has been perpetrated in the calculation of his AP.  He had the misfortune to have three tribunal hearings, the first two of which were adjourned so that the tribunal, as well as the appellant, might be better informed about the law involved.  The appellant was further unlucky enough to be appealing his retirement pension at a time when the law had been changed so as to give rights of appeal against “contributions” questions which until recently were not appealable at all.  The legislation is complicated, and confusion has sadly occurred in many cases (see CP/4479/00).  But for the reasons explained by the Secretary of State’s officer in his submission at pages 62-3, the law (not the Secretary of State) obliged me to ensure that a proper decision was issued by the Inland Revenue on the GMP calculation, which the appellant could appeal if he wished.  He did not wish.  But the decision makes clear that GMP is calculated in different ways for the tax years up to 1986/7 and from 1987/8: in the earlier years, contributions were converted to earnings factors, but thereafter it was actual contracted out earnings that were used, as in s44(6) above and the AP calculations made under it.  This stems from changes made by s18(3) of the Social Security Act 1986 in relation to people (like the appellant) reaching pensionable age between 6 4 99 and 5 4 2009.  The AP based on surpluses for the years up to 1987/8 would be 25% of those surpluses divided by the total number of relevant years since 1978/9, and for those people retiring between 6 4 99 and 5 4 09 it would be a diminishing percentage – though for the appellant, reaching pensionable age in 1999/2000, it would be unchanged.  This explains the split periods used in the making of the calculations.    

12.	The third tribunal upheld the original decision, but did not refer the GMP calculation to the Inland Revenue.  The appellant appealed to me, maintaining his argument that his AP had been subverted.  As well as obtaining an Inland Revenue decision and explanation of the GMP calculation, I issued a direction asking what the appellant actually hoped to achieve by this appeal, since he was better off under the actual calculation than under the forecast, and it is not my function to decide points which are without practical significance to the claimant involved.  He told me in a further written submission and orally that he believed something in the nature of retrospective legislation had occurred in 1997 (after he received the forecast) which removed the small amount of AP the forecast had shown, he complained that official advice in 1978 and afterwards had never warned about the offset of GMP against AP (but he has made it clear in earlier correspondence, at page 15, that he did understand this), and he reiterated his suspicions of the Secretary of State.   He objects to what he sees as employers subsidising the state scheme. 

13.	There was no legislation in April 1997 which affected the appellant. What actually occurred in April 1997 was (as explained at page 10A) that a person in contracted-out employment could no longer earn any additional pension (as a result of changes made by the Pensions Act 1995).  But the appellant had already retired by then so was not in any employment, contracted-out or otherwise.  He was not affected by this change, and his 8 5 97 pension forecast was likewise unaffected by it.

14.	After the hearing, the appellant sent me a copy of a 1984 document containing advice from Age Concern (which I did not forward to the Secretary of State for comment as I do not understand it to have been disputed).  This said (page 203) that “your employers are responsible for paying your guaranteed minimum pension (additional pension), instead of the State”.  It added “You may get more but you should not get less”. 

15.	This is precisely what did happen: the appellant got more GMP than the additional pension earned by his non-SERPS contributions, not less.  The literature says nothing about getting more additional pension than GMP, only of getting more GMP than additional pension.  The appellant has never disputed the GMP calculation, and was somewhat annoyed that I insisted on having a formal decision confirming it. The non-SERPS contributions were taken into account in calculating the additional pension, but the GMP now overtops them.  If this now results in more of the appellant’s pension being borne by his former employers, so be it.   The forecast of 8 5 97 was an estimate, given three-and-a-half years before his actual retirement date, his 65th birthday on 4 12 99.  It was not set in stone, and took no account of the inflation and regular up-ratings in the meantime.  I hardly imagine he would be happy to accept the 1997 figures, which would make him worse off overall, simply because they show that at that time he would have had £3.34 additional pension but £17.35 less GMP.  The AP calculation itself had increased, not decreased (as in CP/4479/00), but the GMP increase exceeded it.  It is clear that this is authorised under s46 of the Pensions Schemes Act 1993, and further that the calculations set out at page 1b of the submissions have been done correctly. 

16.	At the hearing we went carefully through the AP calculation at page 23.  The appellant was not able to point to any particular in which he quarrelled with it.  There was substantial revaluation of his earnings, and the calculations show the same pre- and post-1988 split which he expressly approves in the GMP calculation, which is required by s45(2) of the 1992 Contributions and Benefits Act, and which I have briefly explained above.  I can detect no finagling.

17.	Retirement pension and its appendages are contributory benefits and thus within article 1 of protocol 1 to the European Convention on Human Rights (incorporated into UK law by the Human Rights Act 1998).  But I can see no deprivation of a possession, for the reasons explained above.  
	
18.	The appeal therefore fails.

				(signed on original)	Christine Fellner
								Commissioner

								28 October 2002