Schedule 1: Part 6: Deemed earnings factors for purposes of additional pension Section 10: Additional pension: removal of accrual bands from 2010 – 11
187.This section amends Schedule 4A to the SSCBA1992, which contains the rules for the calculation of additional state pension. As the first step towards introducing a flat rate additional pension, the section removes the ‘Band 3’ accrual rate (which is 20%) on earnings factors between the upper earnings threshold and the upper earnings limit currently used in calculating state second pension, starting from the 2010–11 tax year.
188.Subsection (2)(a) restricts the existing 3-band structure to accruals for tax years up to and including 2009-10. Subsection (2)(b) introduces the new two accrual band formulation for the calculation of an individual’s annual surplus earnings factor from 2010-11. A surplus earnings factor for earnings between the lower earnings limit and the low earnings threshold will continue to be based on 40% of relevant earnings. However, surplus earnings factors for any subsequent earnings between the low earnings threshold and the “annual upper earnings limit” will be based on 10% of relevant earnings. Subsection (2)(c) defines the annual upper earnings limit for additional pension purposes.
189.Subsection (3) replicates the provisions of subsection (2) in respect of the calculation of ‘contracted-out’ state second pension entitlement.
190.Subsection (4) replicates the provisions of subsection (2) in respect of the calculation of the amount available by way of top-up for members of an appropriate personal pension scheme (i.e. a contracted-out personal scheme).
191.Subsection (5) defines “AUEL” for the purpose of the amendments in subsections (2) to (4).
192.Subsection (6) amends the heading of Schedule 4A.