DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	My decision is that the decision of the Lincoln appeal tribunal, held on 2nd January 2001 under reference U/42/040/2000/00934, is not erroneous in point of law.

The appeal to the Commissioner
2.	This is an appeal to a Commissioner against the decision of the appeal tribunal brought by the claimant with leave of a district chairman of tribunals. The appeal did not reach the Commissioners’ office until October 2002. I then gave case management direction. In response, the Secretary of State does not support the appeal. 
The issue
3.	This case concerns regulation 42(2A) of the Income Support (General) Regulations 1987. In simple terms, it deals with a person who has reached pensionable age and who is entitled to draw on a personal pension. For the purposes of calculating entitlement to income support, the person is treated as having the pension that could be obtained immediately even if it has not been drawn. 
4.	The issue is: how does this provision apply to a claimant who has a pension mortgage, which she needs to retain in order to pay off her mortgage?
Facts and analysis
5.	The claimant was born on 14th August 1940. Her pensionable age is 60, which she attained on 14th August 2000.
6.	She borrowed £10,000 on the security of her home. The mortgage was with Barclays and was on an interest only basis. That meant that she paid to Barclays only the interest on the sum secured. She made no payment towards the capital. She made a separate arrangement to repay the capital by way of a pension mortgage. It is now with Scottish Amicable. 
7.	The pension is a personal pension. The claimant now argues that it is not, because she made only a lump sum payment into it and did not make regular contributions. That fact is irrelevant to the proper classification of the pension.
8.	Like any other pension, the claimant has the choice of taking up to 25% of the pension as a lump sum. It was anticipated that that 25% would be sufficient to repay the capital by her 60th birthday. In fact it was not. So, the period of the loan was extended by three years and she deferred drawing her pension by the same period. 
9.	So, for practical purposes the claimant is not in a position to draw her pension unless she is able to find another way of repaying the mortgage debt. However, the legal position is different. 
10.	Is there anything in the terms of the pension to stop her drawing her pension immediately? No, there is not. That was made clear by Scottish Amicable in a letter dated 6th August 2000 (page 6):
	‘I have changed your selected retirement age to 63 for plan 276NW838 as you asked. However, you can take your retirement benefits before then.’ 
11.	Is there anything in the arrangement with Barclays to stop the claimant drawing on the pension and finding the capital owing from another source? The bank has her policy or the certificate of her policy. What is the effect of that?
12.	The bank cannot have taken an assignment of the lump sum element of the claimant’s potential benefits under the person pension, because this is prohibited by section 635(5) of the Income and Corporation Taxes Act 1988:
‘The right to payment of the lump sum must not be capable of assignment or surrender, except for the purpose of giving effect to a pension sharing order or provision.’
13.	I have considered whether the deposit of the policy or certificate might take effect as a charge rather than an assignment, thereby escaping the prohibition in section 635(5) and barring her from being able to draw on the pension for the time being. However, that argument fails for the reason explained by Lord Justice Chitty in Durham Brothers v Robertson [1898] 1 QB 765 at page 769:
‘A mere charge on a fund or debt operates as a partial equitable assignment.’
So, if the deposit of the policy or certificate is a charge on the policy and, more specifically on the lump sum, it takes effect as an equitable assignment and is deprived of effect by section 635(5).
Conclusion 
14.	So, the Secretary of State was correct to treat the claimant as receiving a notional income from her personal pension, although she was not drawing on that pension and in practice was prevented from doing so by the need to pay her mortgage.

Signed on original	Edward Jacobs
Commissioner
20th February 2003