Wilkinson v Secretary of State for Work and Pensions [2009] EWCA Civ 1111

[2009] EWCA Civ 1111Case No C3 2009/0581
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
Judge Rowland
CP/2611/2007
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 23 rd October 2009
Before
LORD JUSTICE LONGMORELADY JUSTICE SMITHLORD JUSTICE PATTEN
Between
GEORGE WILKINSONAppellantSECRETARY OF STATE FOR WORK AND PENSIONSRespondent
Mr George Wilkinson appeared in person for in personMr Andrew Henshaw (instructed by DWP Litigation Division) for RespondentHearing Hearing date : 15 th September 2009
JudgmentLord Justice Patten :Introduction
[1]This is an appeal by Mr Wilkinson against a decision of the Upper Tribunal (Judge Rowland) [2008] UKUT 33 (AAC) dated 8th December 2008. The Tribunal dismissed Mr Wilkinson’s appeal against a revised decision of the Secretary of State for Work and Pensions that he was entitled to a state retirement pension of £122.62 per week from 13th May 2002. This was calculated on the basis of a deduction of £40.66 from what would otherwise have been his Category A pension entitlement in order to take account of the guaranteed minimum pension attributable to his membership of an occupational pension scheme that was contracted out from the State Earnings-Related Pension Scheme (“SERPS”).[2]The principal legislation governing the composition of state-funded retirement pensions is now contained in the Social Security Contributions and Benefits Act 1992 (“SSCBA 1992”). Section 44 provides that: “44Category A retirement pension(1) A person shall be entitled to a Category A retirement pension if— (a) he is over pensionable age; and (b) he satisfies the contribution conditions for a Category A retirement pension specified in Schedule 3, Part I, paragraph 5; and, subject to the provisions of this Act, he shall become so entitled on the day on which he attains pensionable age and his entitlement shall continue throughout his life.(2) …(3) A Category A retirement pension shall consist of— (a) a basic pension payable at a weekly rate; and (b) an additional pension payable where there are one or more surpluses in the pensioner’s earnings factors for the relevant years….”.[3]The basic state pension was introduced in 1946 but the reference to an additional pension in subsection 44(3)(b) is to the additional element of earnings related pension under the SERPS scheme. This was introduced with effect from 6th April 1978 under the Social Security Pensions Act 1975 (“SSPA 1975”). The additional pension was intended to amount to 1.25% of earnings above the lower earnings limit in relevant years adjusted for subsequent increases in average earnings. These would therefore be earnings on which full National Insurance contributions were payable. If more than 20 such surpluses existed then the additional pension was calculated on the basis of the pensioner’s earnings in the best 20 such years.[4]It was possible for an employee to contract out of SERPS by being a member of a salary-related occupational pension scheme which satisfied certain conditions. Until 5th April 1997 these included the requirement that the scheme should provide its members with a guaranteed minimum pension (“GMP”). Although the basis of calculation was similar to that of the additional pension under the SERPS scheme, a GMP was calculated by reference only to earnings in contracted-out employment adjusted over the pensioner’s whole working life. Certain payments which were treated as earnings for the purposes of the additional component under the SERPS scheme also did not qualify for that purpose in the calculation of the GMP under the provisions of SSPA 1975 (ss.33-36). The GMP was therefore unlikely to exceed the additional pension and could be less. If the pensioner’s employment was contracted out in this way then reduced National Insurance contributions were payable by both employer and employee: see SSPA 1975 s.27.[5]An important aspect of the provisions of SSPA 1975 and subsequent legislation for the purposes of this appeal is that the computation and payment of a Category A pension under what is now s.44 of SSCBA 1992 was not qualified by reference to whether or not the employment had been contracted out. Under s.44(3) (and under SSPA 1975 s.6(1) which was its equivalent), the additional pension (or additional component as it was termed under SSPA 1975) depended simply on whether there had been a surplus in the pensioner’s earnings factor in the relevant years. Eligibility was determined simply by reference to age and the contributions made. The consequence of this was that a person in contracted-out employment would nonetheless be entitled to the additional SERPS pension in respect of surplus earnings during his or her contracted-out years as well as to a full pension entitlement (including the GMP) under the contracted-out scheme.[6]Parliament addressed this in s.29(1) of SSPA 1975 as follows: "29(1) Where for any period a person is entitled both—(a) to a Category A or Category B retirement pension, a widowed mother's allowance or a widow's pension; and(b) to one or more guaranteed minimum pensions, the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal to its additional component or, if less, an amount equal to the weekly rate or aggregate weekly rates of the pension or pensions mentioned in paragraph (b) above.” (a) to a Category A or Category B retirement pension, a widowed mother's allowance or a widow's pension; and (b) to one or more guaranteed minimum pensions,[7]These provisions have been re-enacted in what is now s.46 of the Pensions Schemes Act 1993 (“PSA 1993”). This was a consolidation Act and it is common ground on this appeal that it did not alter the effect of s.29(1) of SSPA 1975. However, for completeness (and since it is the provision which governed the revised calculation of Mr Wilkinson’s pension which is the subject of this appeal), I set it out below:
"46(1) Where for any period a person is entitled both— (a) to a Category A or Category B retirement pension, a widowed mother's allowance, a widowed parent's allowance or a widow's pension under the Social Security Contributions and Benefits Act 1992; and (b) to one or more guaranteed minimum pensions, the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal— (i) to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day, or (ii) to the weekly rate of the pension mentioned in paragraph (b) (or, if there is more than one such pension, their aggregate weekly rates), whichever is the less." (a) to a Category A or Category B retirement pension, a widowed mother's allowance, a widowed parent's allowance or a widow's pension under the Social Security Contributions and Benefits Act 1992; and (b) to one or more guaranteed minimum pensions, (i) to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day, or (ii) to the weekly rate of the pension mentioned in paragraph (b) (or, if there is more than one such pension, their aggregate weekly rates), whichever is the less." whichever is the less."

The issue on the appeal

[8]The appellant, Mr Wilkinson, was born in 1937. He was a qualified electrical engineer. From 6th April 1985 until 31st March 1991 he was employed by Bovis Construction Limited which was one of a number of subsidiary companies in the P&O Group. Throughout this period of employment he was a member of the Bovis Pension Fund (“the Bovis Scheme”) which was an occupational pension scheme.[9]In accordance with the rules of the Bovis Scheme, Mr Wilkinson’s employment was contracted out of SERPS. A contracting-out certificate had been issued to Bovis Limited by the Occupational Pensions Board on 1st March 1978 stating that employments with Bovis Limited and various related companies including Bovis Construction Limited were to be treated as contracted-out employments with effect from 6th April 1978.[10]As from 1st April 1988 various pension schemes operated by companies in the P&O Group (including the Bovis Scheme) were terminated and their assets, liabilities and members were transferred to the P&O Pension Scheme. In June 1989 the Occupational Pensions Board issued a further contracting-out certificate which confirmed that from 1st April 1988 the employments of various stated members of the P&O Pension Scheme were to be treated as contracted-out employments. These included employments with Bovis Construction Limited. Before us Mr Wilkinson took a number of points about the effectiveness of the transfer of the members and assets of the Bovis Scheme to the P&O Pension Scheme based on what he said was incomplete or inaccurate documentation used as part of that process. But these and other similar points relating to his employment status have already been considered and determined by a Special Commissioner (Dr A.N. Brice) in a decision released on 30th October 2006 and they are not open to Mr Wilkinson on this appeal.[11]Dr Brice decided that Mr Wilkinson was in contracted-out employment from 6th April 1985 until 31st March 1991 and that, during that period, he was liable to pay and only entitled to pay Class 1 National Insurance contributions at the reduced rate applicable to contracted-out employment. As of 31st March 1991 when he ceased to be employed by Bovis Construction Limited, Mr Wilkinson was 53. He decided to draw his pension under the P&O scheme and has been in receipt of it since then. On 12th May 2002 he became 65 and claimed his state retirement pension on 22nd April 2002.[12]Nothing on this appeal or in the earlier proceedings before the Social Security Commissioner and in the Upper Tribunal is concerned with the calculation and payment of Mr Wilkinson’s P&O pension. The appeal to the Upper Tribunal (during which Mr Wilkinson was represented by experienced pensions counsel through the FRU) was solely concerned with the calculation of his state retirement pension and, in particular, with the deduction made from it on account of the GMP received as part of his P&O pension.[13]Mr Wilkinson’s pension is made up of a basic pension of £75.50 per week; a pre-April 1997 additional pension of £67.82; and a post-April 1997 additional pension of £15.45 per week. In addition, he receives graduated retirement benefit of £4.51 per week. The GMP received as part of his P&O pension amounts to £40.66 per week. In the revised calculation made by the Secretary of State in December 2006 the total weekly pension of £122.62 was arrived at by deducting the GMP of £40.66 per week from his pre-April 1997 additional pension entitlement of £67.82. Before the Upper Tribunal Mr Wilkinson accepted that PSA 1993 s.46(1) required his GMP to be set-off against and deducted from his pre-April 1997 additional pension but argued that the extent of the deduction should be limited to that part of the pre-April 1997 additional pension which was attributable to the years in which he was in contracted-out employment.[14]Essentially the same argument has been repeated before us. Mr Wilkinson (who has appeared in person) contended that the effect of ss. 12 and 13 of the Social Security Act 1975 (“SSA 1975”) which dealt with the computation of various categories of benefit including Class A retirement pensions, required the additional pension to be calculated in accordance with the contributions actually paid. It is (he submits) implicit in this that additional pension benefits should be payable without deduction. Alternatively, any set-off under s.46 should be done fairly by limiting the deduction of any GMP to that part of the additional pension which is properly attributable to the contracted-out years.[15]The first part of Mr Wilkinson’s argument is obviously untenable. Both SSA and SSPA 1975 (together with their statutory successors) dealt with the computation of retirement pensions and the eligibility criteria separately from the question of entitlement and payment. As I explained earlier in this judgment, a person in contracted-out employment like Mr Wilkinson would be entitled, under SSCBA 1992 ss. 44 and 45, to an additional pension based on surpluses occurring during his contracted-out years. But Parliament, in what is now PSA 1993 s.46(1), has introduced a provision which has the effect of reducing what would otherwise be Mr Wilkinson’s additional pension by reference to his GMP entitlement which accrued during the contracted-out period. The issue therefore is not whether some deduction should be made, but what is the legitimate extent of it.[16]On the appeal to the Upper Tribunal Mr James Clifford of Counsel (for Mr Wilkinson) accepted that the decision of the Secretary of State was consistent with the literal interpretation of s.46. That is obviously right. In both s.46 and in s.29(1) of SSPA 1975 the reference to “any period” in the opening line is clearly a reference to the period in which the additional pension and a GMP are both payable. It is not directed to the period of employment in which contributions were made and pension entitlement accrued. The amount of the reduction is similarly related to the additional pension payable in that period and is not limited by reference to any period of accrual. The deduction is to be made against the additional pension as a whole up to the amount of the GMP if less. Section 46(1)(i) does, of course, limit the deduction to additional pension earned up to 5th April 1997 after which GMP ceased to accrue as a result of changes made by the Pensions Act 1995 and additional pensions were no longer calculated by reference to earnings from contracted-out employment. But the reference to the qualifying additional pension being “attributable to earnings factors for any tax years ending before (5th April 1997)” serves to emphasise that all additional pension derived from any periods of prior employment, whether contracted-out or not, are included for purposes of the statutory set-off.[17]This view about the construction of s.46(1) has been accepted by various Social Security Commissioners and by Lloyd LJ when refusing permission to appeal in Pearce v Secretary of State for Work and Pensions [2005] EWCA Civ 453 with whose judgment I agree. Neither side on this appeal has suggested that any other construction of either s.46(1) or s.29(1) is even seriously arguable. But, notwithstanding this, Judge Rowland expressed the view that it was anomalous that the legislation required any GMP to be set off against the totality of the pre-April 1997 additional pension rather than being limited to additional pension attributable to the contracted-out years. In his judgment he said that:
“24. It does seem to me that, looking at the scheme of the legislation as a whole, it is anomalous that a guaranteed minimum pension derived from a contracted-out pension scheme should be offset against an additional pension derived from earnings factors attributable to contributions or earnings in employment that was not contracted-out. Although the state scheme had a topping-up role in relation to pensions attributable to contracted-out employment as well as providing pensions in respect of other employment, occupational pension schemes generally have a role only in relation to the contracted-out employment to which they are linked and are not expected to subsidise pensions attributable to contributions paid in respect of other periods. It would be easy to amend the wording to make it clear that the offset should be limited to the additional pension attributable to the contracted-out earnings, although the words I would read in would not be precisely the same as those suggested by Mr Clifford. Moreover, this is just the sort of point that a draftsman can overlook. It is very easy, when a draftsman has a clear vision of the effect that legislation should have, for him or her to forget the need to make explicit all the points that he or she considers obvious. For an example of a very similar case, where benefits could be offset against compensation and the draftsman did not expressly limit the amount of benefits that might be offset to the amount paid in the period in respect of which compensation for loss of earnings had been paid, see paragraphs 31 and 32 of R(CR) 2/04. 25. However, at the end of the day, I am not “abundantly sure” that the anomaly was overlooked in this case, even though none of the contemporaneous material produced by Mr Henshaw dealt specifically with the issue, or that, if it was, it would necessarily have been avoided. 26. The state scheme is a “pay-as-you-go” scheme and is not funded, so that a contributor cannot expect complete correlation between contributions and benefits. It seems to me to be important to keep in mind that the state scheme bore a substantial part of the risk of inflation and, at least when the scheme started, was far more likely to be topping up provision made through an occupational pension scheme in respect of period when a claimant was in contracted-out employment than gaining in respect of other periods from the existence of a guaranteed minimum pension. It was possible to envisage the state scheme as providing a safety net over the whole of a claimant’s working life and, as between occupational pension schemes and the State, it makes sense that, if the risk of a fixed-rate revaluation being at a rate less than inflation is borne by the State, the State should gain if the revaluation rate turns out to be greater than the rate of inflation. That is not a particularly compelling approach because, although it makes sense as between pensions schemes as a whole and the State, it operates arbitrarily as between one contributor and another. However, the point is not unarguable, particularly as it may have been thought that the scale of the anomaly was likely to be small.”
[18]These observations were directed to Mr Clifford’s alternative submission which was that the obvious or overwhelming likelihood was that Parliament had intended to limit the statutory set-off to additional pension earned in contracted-out employment and that the draftsman of s.29(1) had made a mistake when he formulated the section in the way that he did. It was therefore open to the court to apply the principles set out by the House of Lords in Inco Europe v First Choice Distribution [2000] 1 WLR 586 and to revise the language used in a way which will give effect to what was intended.[19]It has to be recognised at once that this is a very limited jurisdiction. The relevant conditions for its exercise are set out in the speech of Lord Nicholls of Birkenhead at page 592C to 593A as follows:
“It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words. Some notable instances are given in Professor Sir Rupert Cross' admirable opuscule, Statutory Interpretation, 3rd ed., pp. 93-105. He comments, at page 103: “In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role.”
This power is confined to plain cases of drafting mistakes. The courts are ever mindful that their constitutional role in this field is interpretative. They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature. So the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed. The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see Lord Diplock in Jones v. Wrotham Park Settled Estates [1980] A.C. 74, 105. In the present case these three conditions are fulfilled. Sometimes, even when these conditions are met, the court may find itself inhibited from interpreting the statutory provision in accordance with what it is satisfied was the underlying intention of Parliament. The alteration in language may be too far-reaching. In Western Bank Ltd. v. Schindler [1977] Ch. 1, 18, Scarman L.J. observed that the insertion must not be too big, or too much at variance with the language used by the legislature. Or the subject matter may call for a strict interpretation of the statutory language, as in penal legislation. None of these considerations apply in the present case. Here, the court is able to give effect to a construction of the statute which accords with the intention of the legislature.” “In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role.”[20]No evidence was produced before Judge Rowland which could support a finding that the draftsman of s.29(1) or s.46(1) had misunderstood or otherwise failed to give effect to what was intended. For this reason, the judge could not be (to use Lord Nicholls’ words) “abundantly sure” either that a mistake had been made or what it was. Mr Wilkinson’s appeal was therefore dismissed but Sir Richard Buxton gave permission to appeal on this one ground to enable a full Court of Appeal to review this matter in the light of the concerns expressed by the specialist judge.[21]The absence of any legal representation for Mr Wilkinson has meant that none of the material necessary to support the revision of s.46(1) on Inco Europe grounds has been put before the court by the appellant. But we asked Mr Henshaw and those instructing him on behalf of the Secretary of State to make specific inquiries in order to see whether anything appeared in a White Paper or other pre-statutory material which might shed some light on whether Parliament did intend to limit the statutory set-off in the way which Mr Wilkinson contends.[22]The result of these inquiries can be summarised quite shortly. In the 1974 White Paper (Cmnd 5713) which preceded SSPA 1975 the emphasis was on ensuring that the benefits offered by contracted-out occupational pension schemes would match those provided under SERPS but there is no express consideration of the set-off provisions contained in what became s.29(1) or how they were intended to operate in the event that the GMP exceeded in value the additional pension earned in the same period. In paragraph 68 consideration was given to the position of employees who left contracted-out employment before reaching pension age but, again, there is no consideration of the possibility of the re-valuation of the GMP leading to it exceeding the additional pension. The most relevant passage is perhaps paragraph 73 which states that:
“Working out such an arrangement will inevitably involve the study of many technical details and the Government are anxious to enter into early consultation on these. But they are satisfied that, with good will on all sides, solutions can be found to any problems arising from the proposed arrangements in time for the necessary legislation to be introduced at an early date.”
[23]When the Bill was published the notes on s.29 read as follows:
“This clause provides that in calculating the payable rate of certain specified state benefits the additional component of the state scheme is calculated as though there had been no contracting-out: the guaranteed minimum pension is then deducted from that component. Following an uprating a fresh calculation will be made and the guaranteed minimum pension, which will remain fixed, will be deducted from the new higher rate of additional component. In this way those contracted-out will receive increases in GMP from the state. Subsection (1) lists the benefits affected as Category A or Category B retirement pension, widowed mother’s allowance or widow’s pension, i.e. those benefits subject to the contracting-out arrangements. It provides that the amount by which the benefit is to be reduced is either the weekly amount of the additional component or, if less, the weekly amount or aggregate weekly amount of the guaranteed minimum pension or pensions. Limiting the maximum reduction to the amount of the additional component ensures that the basic component of the benefit is unaffected by the adjustment. This provision takes account of the fact that the additional component of the state scheme benefit is calculated as though there had been no contracting-out. ...”
[24]There is nothing in this to suggest that Parliament intended to limit the set-off to only that part of the additional pension which is referable to the contracted-out period and the note in fact confirms the possibility that the amount of the GMP might equal or exceed the amount of the additional pension derived from all periods of employment. Only the basic pension was to be ring fenced against any reduction on account of GMP.[25]The Hansard record of the relevant debates on the Bill has been looked at and supplied to the court but there is nothing in that which assists on this point. The only other item of research which is perhaps relevant is the note on Commons amendment 349 which relates to the amendment to s.46(1) to include the reference to the principal appointed day of 6th April 1997 which was introduced by the Pensions Act 1995. The note reads:
“This amendment is consequential on the decision to break the links between contracted-out employment and the State Earnings Related Pension Scheme whereby guaranteed minimum pension (GMP) rights will cease to accrue from the principal appointed day. As a result, the Contracted-Out Deduction made from an individual’s state pension entitlement at pension age will be restricted to that part of their additional pension earned up to and including the 1996/1997 tax year or the total accrued GMP entitlement, whichever is less.”
(emphasis added)[26]Again the concluding words of the second sentence do not assist Mr Wilkinson on the Inco point.[27]Having considered this material, I am clearly of the view that there is no basis for contending that the absence of any restriction of the statutory set-off to additional pension accruing in the contracted-out period of employment was due to an error on the part of the draftsman and did not represent the intention of the legislature. The effect of s.29(1) and of s.46 is, I think, accurately summarised in an earlier decision of Commissioner Mesher (CP/1318/2001) where he dealt with the point on this appeal as follows:
“15. [My conclusion] rests on the plain words of section 46(1) of the Pension Schemes Act. They require one to look first at the category A retirement pension to which a person has become entitled by contributions made throughout the person's working life. Then one must look at the part of the additional pension attributable to earnings factors for all the tax years in the period when GMP entitlements could be built up and at the total actual GMP entitlement for those years. The offset effectively required is of an amount equal to the total GMP entitlement (subject to the limit of the amount of the additional pension attributable to those tax years). The operation is to be carried out looking at overall entitlements as they exist after the ending of the person's working life and the taking of a state retirement pension. … 16. There is no scope within the legislation for there to be a separation of periods in which a person was not contracted out of SERPS and for additional pension earned in those periods to be taken out of the operation of section 46 and paid without any deduction. If, because of differences in the ways in which the real values of GMP entitlements and of earnings factors are protected, that involves some eating into additional pension earned in contracted-in years, that simply has to be accepted as part of the structure of the scheme.”
[28]Although not critical to the outcome of this appeal, it is perhaps worth noting that the circumstances faced by Mr Wilkinson have arisen in only a limited number of cases. They are all ones in which a person has left contracted-out employment before reaching pensionable age and the re-valuation of the GMP in the period up to retirement age has exceeded the rate applicable to the additional pension under SERPS.

Judge Rowland dealt with this in paragraphs 17 to 22 of his judgment as follows:

“17. As far as I can see, the only circumstance in which a guaranteed minimum pension might exceed an additional pension attributable to contracted-out earnings could be where a person had left contracted-out employment before reaching pensionable age, in which case section 35(7) of the 1975 Act provided that the scheme should provide for the guaranteed minimum pension to be increased by at least 5 per cent compound or the rate used to revalue earnings factors, for each relevant year after the year the employment ended, “whichever makes the lesser increase (so however that this sub-section is not to be taken as preventing the scheme from providing increases above those alternative minima)”
. Thus, it was only if the scheme chose to provide a high fixed rate of revaluation of the guaranteed minimum pension for an early leaver that the rate of revaluation might turn out to be greater than the rate of inflation and the guaranteed minimum pension might exceed the additional component calculated in respect of earnings received during the same period. It is not entirely clear to me why a pension scheme should choose such a rate of revaluation but one consideration may have been the calculation of a state scheme premium under section 45. Such a premium, known as a “limited valuation premium” was paid to the National Insurance Fund to cover increases in inflation above the fixed rate of revaluation. 18. By the time the Social Security Act 1986 was passed, the 1975 Act was perceived as having been too generous. The 1986 Act substantially amended the 1975 Act and in particular abolished the “best twenty years” rule and reduced the level of the additional pension or guaranteed minimum pension to 20% of inflation-proofed earnings but neither section 29(1) nor section 35(7) was affected (save that the reference to the “additional component” in the former became a reference to an “additional pension”, a difference described by Mr Commissioner Mesher in CP/1318/2001 as “merely a change of name”). The main relevance of the 1986 Act to the present case, apart from requirement to make different calculations based on earnings before and from 6 April 1988, is that, in the long run, it would become less likely that a guaranteed minimum pension would be substantially less than an additional pension based on contracted-out contributions paid in respect of the same employment. In the short term, the likelihood was actually increased because the reduced level of the guaranteed minimum pension was introduced immediately, whereas the reduced level of the additional pension was phased in gradually, being 23.5% of inflation-proofed earnings from 6 April 1988 in the claimant’s case (see section 6 of the 1975 Act, as amended by section 18 of the 1986 Act). 19. In 1993, sections 29(1) and section 35(7) of the 1975 Act became section 46(1) and section 16(2) and (3) of the 1993 Act, respectively. 20. The Pensions Act 1995 wrought further changes and, in particular did away with guaranteed minimum pensions with respect to years from 6 April 1997 and also provided that additional pensions would not be calculated by reference to earnings from contracted-out employment, thus separating additional pensions from occupational pensions. As I have already noted, it amended section 46(1) by substituting the current head (i) for the previous version. 21. Perhaps more significantly for the present case, the 1995 Act also amended section 16(3) of the 1993 Act by providing that, if the guaranteed minimum pension was not to be revalued in line with inflation in accordance with revaluation orders, the scheme should provide for it to be increased by at least the prescribed percentage. The relevant prescribed percentage where a person ceased to be employed between 6 April 1988 and 5 April 1993 is 7.5% (see regulation 62(2)(b) of the Occupational Pensions Schemes (Contracting Out) Regulations 1996 (S.I. 1996/1172)). That is the percentage applicable in the present case. 22. This amendment removed the possibility of opting for a fixed limited revaluation rate safe in the knowledge that, if the inflation rate fell below it, revaluation would be limited to the inflation rate. Now, opting for a fixed revaluation rate carried some risk, but from the point of view of the pension scheme that may have been outweighed by the likelihood of the pension fund increasing in value at a substantially greater rate and by the advantages of certainty. One consequence of the amendment may therefore have been substantially to increase the likelihood of a guaranteed minimum pension increasing in value at a greater rate than a prospective additional pension.”[29]There is, however, nothing in the historical material to suggest that this was foreseen when either s.29 or s.46 came to be enacted or that Parliament intended to make any special provision to deal with the difficulty.[30]I would therefore dismiss the appeal.

Lady Justice Smith :

[31]I agree.

Lord Justice Longmore :

[32]I also agree.

Cited in 2 later judgments