[2025] UKUT 353 (AAC)

The facts are not in dispute. The appellant was born on 29^th November 1948 and so attained what was then state pension age on 29^th November 2013. He deferred claiming his pension until 4^th April 2018 and was then awarded a Category A retirement pension with effect from 12^th April 2018.

The appellant then “de-retired” with effect from 28^th May 2021 and ceased to be entitled his pension. He made a further claim to retirement pension on 20^th June 2022 and was awarded a pension with effect from that date.

The appellant does not dispute the amounts of pension he was paid up until his de-retirement. What he says is that the DWP used the wrong methodology to calculate his pension when he made his second claim. The essence of his argument is that in June 2022 his pension was calculated as if he had deferred it for a single period running from 29^th November 2013 to 20^th June 2022, whereas it should have been calculated as if he had deferred his pension for two distinct periods, the first being the period from 29^th November 2013 to 12^th April 2018 and the second being the period from 28^th May 2021 to 20^th June 2022.

To understand the practical consequences of the two approaches, it is helpful first to look at the component parts of the appellant’s pension as identified by the DWP. They are set out in the Secretary of State’s submission to the tribunal as follows:

As can be seen, this comes to £184.05 a week if the increments and the state pension top up are excluded, or £212.11 a week if the increments alone are excluded. The pension amounts other than the state pension top up amount are the amounts to which the appellant would have been entitled if he had claimed his pension with effect from 29^th November 2013 but it had been payable at the rate which would have been applicable if any annual up-rating Orders made under the Social Security Administration Act 1992 up to the date of the appellant’s second claim had been in force at 29^th November 2013. Thus, the basic Category A retirement pension was £110.15 on 29^th November 2013 but had been increased to £141.85 by June 2022: see s.44(4) of the Social Security Contributions Act 1992 and the Social Security Benefits Up-rating Order 2022, S.I. 2022 No. 292, art. 4. A similar approach was taken to the various tranches of the appellant’s additional pension. The increments are the increases in pension to which the appellant is entitled because his pension was deferred. They have been applied to those various pension amounts following a calculation made on the footing that the appellant is entitled to increments for the number of 6 day increment periods which occurred during the period 29^th November 2013 to 20^th June 2022. The definition of “increment period”, as explained below, is such that no increment periods occurred while the appellant was in receipt of state pension from 12^th April 2018 to 12^th May 2021.

The position as respects the state pension top up is different because the appellant was not entitled to such a component in November 2013. His entitlement accrued on 30^th November 2016, when he paid additional national insurance contributions and became entitled to an additional £25 of state pension. He did so under a facility introduced into the Social Security Contributions and Benefits Act 1992 by the Pensions Act 2014 to enable, among others, any person with a deferred entitlement to a Category A pension to pay Class 3A contributions in order to acquire units of additional pension. A cut-off date which was in general 5^th April 2017 applied. Such units of additional pension are additional pension for the purposes of s.45 of the 1992 Act and are therefore up-rated in the same way as other elements of additional pension, but no increment period occurred between 29^th November 2013 and 29^th November 2016.

The appellant has done his own calculations of his entitlement, taking as a starting point his entitlement from 6^th April 2021 as notified to him by the annual increase letter he received dated 30^th January 2021 (i.e., the letter setting out the benefits he would receive from 6^th April 2021) and applying the annual up-rating increase used to calculate benefits from 6^th April 2022. The increase letter set out the appellant’s entitlement as follows:

The appellant’s contention is that he was permanently entitled to the amount of £297.36, which of course incorporates all the increments to which the Secretary of State had calculated he was entitled for the period of deferment between 29^th November 2013 and 12^th April 2018, and that he is therefore entitled to a pension of that amount from 20^th June 2022 together with the increments appropriate to the further period of deferment from 28^th May 2021 to 20^th June 2022. Applying the formula for calculating increments in Schedule 5 to the 1992 Act, the appellant calculates that he is entitled to 60p for each increment period and that there were 55 increment periods during the second period of deferment. That produces a total amount of increments of £33.00, which would give the appellant a total weekly entitlement from the date of his second claim of £330.36 (i.e., £297.36 + £33.00). There was thus a shortfall of £7.01 in the weekly amount he was awarded in response to that claim. It follows that the shortfall increased slightly in subsequent financial years as the annual up-rating figure was applied to the wrong amount.

The question before the First-tier Tribunal was in substance which method of calculation is correct. The answer depends on the true construction of the various statutory provisions governing the calculation of a retirement pension in circumstances of this kind.

For completeness, I should add that the history of the appellant’s second claim and of his appeal to the First-tier Tribunal has been unfortunate. He was originally notified that he was entitled to a state pension of £184.05 (i.e., the figure mentioned in paragraph 9 above, excluding increments and state pension top up) and, as statutorily required, was given a choice between receiving extra pension or a lump sum in respect of the increments. He chose the extra pension. It then emerged that:

This led to a string of communications from the DWP to the appellant notifying him separately of the points mentioned in paragraph 14(a) and (b) above, sending him a further choices letter (reflecting the revised entitlement) and notifying him that since he had chosen to receive extra pension he was entitled to arrears of state pension. All of this reached the appellant in early October 2022 and left him, at that stage, uncertain of how his entitlement had been calculated. He requested mandatory reconsideration so that he could understand the calculation, but no mandatory reconsideration notice was provided then or when he queried the 2023 annual increase letter.

In those circumstances, the appellant appealed to the First-tier Tribunal on 29^th April 2023 referring to the communications as “confusing”, stating that he had decided to ask for mandatory reconsideration because of the lack of clarity and setting out his understanding of the correct calculation as explained above. Following directions given by the tribunal, a mandatory reconsideration notice dated 26^th July 2023 was produced which did not change the decision but did draw attention to the statutory provisions which the Secretary of State considered governed the position. It did not directly address the appellant’s grounds of appeal. On 10^th August 2023 the appellant confirmed that he wished to proceed with the appeal and the Secretary of State duly provided a response to the tribunal, but again did not directly address the grounds of appeal. It was the appellant himself who drew attention to the difference in methodology in a counter-response dated 20^th October 2023 which contained a detailed discussion of the statutory provisions. The matter proceeded towards a hearing on the papers and the appellant produced a written submission dated 11^th December 2023. By February 2024 the appellant was awaiting a new hearing date and had also received a further annual increase letter which he challenged for the same reasons as he relied on in relation to his previous challenges.

A new hearing date was eventually given and on 8^th July 2024, in preparation, the appellant uploaded a further submission setting out what he proposed to say. The hearing was then adjourned for a face to face hearing and the Secretary of State was directed to put in a submission responding to the appellant’s submission. The notice of the adjournment, itself dated 8^th July 2024, correctly identifies the two different approaches to the relevant calculations. The Secretary of State made a further submission, dated 9^th August 2024, and the appellant responded with a submission dated 2^nd September 2024 in which he commented that the Secretary of State was relying on a line of argument not previously actively advanced. The appeal was eventually heard on 7^th November 2024 and was dismissed.