Schedule 1: Part 4: Category A and C retirement pensions: abolition of adult dependency increases 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.