Section 3: Abolition of certain additions to the state pension
Section 3 amends section 132 of the Social Security Administration (Northern Ireland) Act 1992 and Schedule 5 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992. This section removes the provision for new awards of small “top-up” amounts to a person’s State Pension from the specified date where that person is a member of a salary-related contracted-out scheme who has delayed taking his or her private pension and earned “increments” on their Guaranteed Minimum Pension (GMP), or is the survivor of such a member. The GMP is the minimum pension a scheme is required by law to pay to a person who was in contracted-out employment between 1978 and 1997.
The small “top-up” amounts, referred to as “Payable Uprated Contracted-out Deduction Increments” (PUCODIs), are paid by the State to take account of the fact that the occupational pension scheme is only responsible for providing limited indexation on the extra amounts gained by the individual for postponing their private pension – the GMP increments. For example, schemes are not required to provide any indexation on GMP increments accrued between 1978 and 1988, but must provide indexation at the rate of the rise in the general level of prices in Great Britain capped at three per cent for accruals between 1988 and 1997. Hence the State will index any GMP increments in line with the general rise in the level of prices for any 1978 to 1988 accruals, and by anything over three per cent for accruals between 1988 and 1997.
PUCODIs do not apply to any periods of contracted-out employment after April 1997 as the requirement to provide a GMP was replaced with the requirement to provide benefits which are broadly equivalent to those provided under the Reference Scheme Test.
Awards which have been made and are in payment before the specified date will not be affected.
Subsection (6) gives effect to Schedule 2 (Abolition of certain additions to the state pension: consequential amendments etc.).
