2006 No. 741

PENSIONS

The Pensions Increase (Review) Order 2006

Made

Laid before Parliament

Coming into force

In accordance with section 151(1) of the Social Security Administration Act 19921 the Secretary of State for Work and Pensions has given a direction2 under section 150(2) and section 190(1)(a) of that Act that the sums mentioned in section 150(1)(c) of that Act are to be increased;

The Treasury now make the following Order in exercise of the powers conferred by section 59(1), (2), (5) and (5ZA) of the Social Security Pensions Act 19753 and now vested in them4:

Citation and commencement1

1

This Order may be cited as the Pensions Increase (Review) Order 2006 and comes into force on 10th April 2006.

2

This Order and the existing Orders may be cited together as the Pensions Increase (Review) Orders 1972 to 2006.

Interpretation2

1

In this Order—

  • “the 1971 Act” means the Pensions (Increase) Act 19715;

  • “the 1974 Act” means the Pensions (Increase) Act 19746;

  • “the 1975 Act” means the Social Security Pensions Act 1975;

  • “basic rate” and “derivative pension” have the meanings given by section 17(1) of the 1971 Act7;

  • “the existing Orders” means the Pensions Increase (Annual Review) Order 19728, the Pensions Increase (Annual Review) Order 19739, the Pensions Increase (Annual Review) Order 197410, the Pensions Increase (Annual Review) Order 197511, the Pensions Increase (Annual Review) Order 197612, the Pensions Increase (Annual Review) Order 197713, the Pensions Increase (Annual Review) Order 197814, the Pensions Increase (Review) Order 197915, the Pensions Increase (Review) Order 198016, the Pensions Increase (Review) Order 198117, the Pensions Increase (Review) Order 198218, the Pensions Increase (Review) Order 198319, the Pensions Increase (Review) Order 198420, the Pensions Increase (Review) Order 198521, the Pensions Increase (Review) Order 198622, the Pensions Increase (Review) Order 198723, the Pensions Increase (Review) Order 198824, the Pensions Increase (Review) Order 198925, the Pensions Increase (Review) Order 199026, the Pensions Increase (Review) Order 199127, the Pensions Increase (Review) Order 199228, the Pensions Increase (Review) Order 199329, the Pensions Increase (Review) Order 199430, the Pensions Increase (Review) Order 199531, the Pensions Increase (Review) Order 199632, the Pensions Increase (Review) Order 199733, the Pensions Increase (Review) Order 199834, the Pensions Increase (Review) Order 199935, the Pensions Increase (Review) Order 200036, the Pensions Increase (Review) Order 200137, the Pensions Increase (Review) Order 200238, the Pensions Increase (Review) Order 200339, the Pensions Increase (Review) Order 200440 and the Pensions Increase (Review) Order 200541;

  • “official pension” has the meaning given by section 5(1) of the 1971 Act42;

  • “pension authority” has the meaning given by section 7(1) of the 1971 Act;

  • “qualifying condition” means one of the conditions laid down in section 3 of the 1971 Act43;

  • “relevant injury pension”, “substituted pension” and “widow’s pension” have the meanings given by section 17(1) of the 1971 Act.

2

For the purposes of this Order the time when a pension “begins” is that stated in section 8(2) of the 1971 Act44, and the “beginning date” shall be construed accordingly.

3

Where, for the purposes of this Order, it is necessary to calculate the number of complete months in any period an incomplete month shall be treated as a complete month if it consists of at least 16 days.

Pension increases3

1

The pension authority may, if any of the conditions in subsection (2) are fulfilled, increase the annual rate of an official pension in respect of any period on or after 10th April 2006 as follows—

a

a pension beginning before 11th April 2005 may be increased by 2.7 per cent of the basic rate (as increased by the amount of any increase under section 1 of the 1971 Act or the existing Orders);

b

a pension beginning on or after 11th April 2005 and before 10th April 2006 may be increased by 2.7 per cent multiplied by

ABmath

where

  1. i

    A is the number of complete months in the period between the beginning date of the pension and 10th April 2006; and

  2. ii

    B is 12.

2

Those conditions are—

a

a qualifying condition is satisfied;

b

the official pension is—

i

a derivative pension;

ii

a substituted pension; or

iii

a relevant injury pension.

Increases in certain lump sums4

1

This article applies to any lump sum or instalment of a lump sum which became payable on or after 11th April 2005 but before 10th April 2006.

2

The pension authority may increase a lump sum or instalment of a lump sum to which this article applies by 2.7 per cent of the amount of the lump sum or instalment (as increased by the amount of any increase under section 1 of the 1971 Act or the existing Orders) multiplied by

ABmath

where

  1. a

    A is the number of complete months in the period between the beginning date for the lump sum or, if later, 11th April 2005 and the date on which it became payable; and

  2. b

    B is 12.

Reductions in respect of guaranteed minimum pensions

5

The amount by reference to which any increase in the rate of an official pension provided for by this Order is to be calculated shall, in the case of a person—

a

who is entitled to a guaranteed minimum pension on 10th April 2006; and

b

whose entitlement to that guaranteed minimum pension arises from an employment from which (either directly or by virtue of the payment of a transfer credit) entitlement to the official pension also arises,

be reduced by an amount equal to the rate of the guaranteed minimum pension unless the Treasury45 otherwise direct, in accordance with the provisions of section 59A of the 1975 Act.

6

The amount by reference to which any increase in the rate of a widow’s or widower’s pension provided for by this Order is to be calculated shall, where the pensioner becomes entitled on the death of the deceased spouse to a guaranteed minimum pension, be reduced in accordance with section 59(5ZA) of the 1975 Act.

Signatory text

Dave WattsVernon CoakerTwo of the Lords Commissioners1 Horse Guards Road,London SW1A 2HQ

(This note is not part of the Order)

Under section 59 of the Social Security Pensions Act 1975 as amended, and as modified by section 59A of that Act, the Treasury (in whom the functions conferred by those provisions are now vested) are required to provide by order for the increase in the rates of public service pensions. Under section 59(7) of the 1975 Act, section 59 of that Act has effect as if it were contained in the Pensions (Increase) Act 1971. Section 9(2)(c) of the 1971 Act provides that references to the “rate” of pension shall have effect as references also to the amount of a lump sum benefit. The increase is the percentage (or in some circumstances a fraction of the percentage) by which the Secretary of State for Work and Pensions has, by direction given under the provisions of section 151(1) of the Social Security Administration Act 1992, increased the sums referred to in section 150(1)(c) of that Act. These are the sums which are the additional pensions in long term benefits, namely the additional pension entitlements accruing to employees in respect of earnings after 5th April 1978.

For pensions which began before 11th April 2005 the increase is 2.7 per cent. For pensions which began on or after 11th April 2005 the increases are as follows—

Pensions Beginning

Pensions Increase

11th April 2005 to 25th April 2005

2.70%

26th April 2005 to 25th May 2005

2.48%

26th May 2005 to 25th June 2005

2.25%

26th June 2005 to 25th July 2005

2.03%

26th July 2005 to 25th August 2005

1.80%

26th August 2005 to 25th September 2005

1.58%

26th September 2005 to 25th October 2005

1.35%

26th October 2005 to 25th November 2005

1.13%

26th November 2005 to 25th December 2005

0.90%

26th December 2005 to 25th January 2006

0.68%

26th January 2006 to 25th February 2006

0.45%

26th February 2006 to 25th March 2006

0.23%

Article 4 of the Order provides for increases on certain deferred lump sums which became payable on or after 11th April 2005 and before 10th April 2006.

The Order also makes provision for the amount by reference to which any increase in the rate of an official pension is to be calculated to be reduced by the amount equal to the rate of the guaranteed minimum pension entitlement deriving from the employment which gives rise to the official pension. This is required by section 59(5) of the Social Security Pensions Act 1975. However by virtue of section 59A of that Act and the Transfer of Functions (Minister for the Civil Service and Treasury) Order 1981 the Treasury are empowered to direct that in respect of specified cases or classes of case either no such reduction be made or the reduction shall be less than the rate of the guaranteed minimum pension. Section 59(5ZA) was inserted into section 59 by section 5 of the Pensions (Miscellaneous Provisions) Act 1990. This applies section 59(5) to a widow’s or widower’s pension.