Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Upper Tribunal case No.  CP/2202/2013

ADMINISTRATIVE APPEALS CHAMBER

 

Mr D Brent v Secretary of State for Work & Pensions

 

Before: Mr E Mitchell, Judge of the Upper Tribunal

 

Decision:  The appeal is dismissed. The decision of the First-tier Tribunal (11^th April 2013, Sutton, file reference SC 154/12/07523) is not set aside. This disposal of the proceedings is in accordance with a consent order made by the Upper Tribunal at the invitation of both parties.

 

REASONS FOR DECISION

 

Introduction

 

1. This decision is the culmination of a saga in which Mr Brent determinedly sought to avoid the effect of new legislation about the relationship between state pension credit and deferral of state retirement pension. Altered in April 2001, the new rules treat a deferrer as if s/he were in receipt of retirement pension income for state pension credit purposes despite deferral no longer involving, for pension credit claimants, an accumulation of retirement pension benefits.

 

2. While Mr Brent’s appeal is formally dismissed, he achieves his desired outcome. The appeal was dismissed by a consent order made on the basis of a settlement agreement under which Mr Brent is paid sums equivalent to the pension he says he was wrongly denied.

 

How the legislation changed and why

 

3. The backdrop to this case is the interaction between two legislative schemes:

 

(a) that for deferral of a Category A or B state retirement pension under section 55 of the Social Security Contributions and Benefits Act 1992. Following deferral, the pensioner elects for either a lump-sump payment or an increased pension, calculated by reference to the deferral period. Simply put, deferral accumulates further pension benefits; and

 

(b) the calculation of income for the purposes of state pension credit, in particular the treatment of deferred state pension under the State Pension Credit Regulations 2002.

 

4. Briefly, the relationship between the schemes had been that a deferred pension was treated as notional income. This reflected that, during deferral, the pensioner continued to accumulate additional pension benefits. The purpose was to prevent a double benefit.

 

5. However, that purpose was in some cases undermined by administrative errors, as described in a November 2010 DWP submission to the Social Security Advisory Committee (SSAC):

 

“…we have identified cases where errors by staff have resulted in people having no notional income deduction made in respect of their State Pension Credit assessment and then subsequently qualifying for a deferral reward in respect of the same period. This has meant they have received a higher rate of State Pension Credit than other customers from whom a deduction has been made and improved their eventual State Pension entitlement. This was not the policy intention. We do not have a mechanism available to abate or to offset the payments of State Pension Credit against the deferral award. The simplest method to restore the policy intention for these cases, and any that arise in the future, is to add the income-related benefits to the list of benefits that will exclude the period for the deferral calculation”.

 

6. So rather than ensuring that the rules were applied, the response was a legislative one:

 

(a) regulations governing accumulation of state pension deferral benefits were amended so that, in calculating those benefits, no account was taken of a period during which a deferrer  received state pension credit. To put it simply, the deferrer’s state pension pot would be frozen (regulation 3 of the Social Security (Deferral of Retirement Pensions) Regulations 2005, as amended by S.I. 20011/634 with effect from 6 April 2011). A linked amendment was made to the Social Security (Widow’s and Retirement Pensions) Regulations 1979; but

 

(b) the state pension credit income rules remained unchanged.

 

7. Accordingly, deferral freezes the individual’s pension pot yet, at the same time, s/he is deemed to receive notional pension income which reduces the pension credit award. It is doubtful, therefore, whether anyone’s interests would be served by beginning, or continuing, to defer retirement pension while also claiming state pension credit. The DWP recognised this and, in response, prepared a communication strategy about the new rules.

 

8. For those individuals who at 6 April 2011 were both deferring and receiving state pension credit, the communication strategy utilised the statutory back-dating rules for retirement pension claims. Contained in regulation 17 of and Schedule 2 to the Social Security (Claims and Payments) Regulations 1987, these allow backdating for up to 12 months. As I understand it, the aim was to ensure that affected individuals knew about the changes within 12 months of 6 April 2011 so they could claim retirement pension and have their award backdated to 6 April 2011 which would cancel out the loss of deferred pension benefits. I note the SSAC papers said one reason for the strategy was to avoid claims for compensation. This is how the DWP submission to the SSAC described it:

 

“The proposal is to run the feasibility and Design, Development & Delivery stages of this project in parallel. This will enable us to condense these two stages to ensure that customer notifications are produced and posted to customers during February 2012, to ensure they can claim their State Pension (plus 52 weeks backdating) prior to the 5^th April 2012.”

 

9. I observe this appears to overlook those deferrers who, before February 2012, claimed retirement pension, thus ending their period of deferral. Unless these individuals requested backdating of their retirement pension, they would find (a) their retirement pension pot had been frozen since April 2011 yet (b) during that period they received reduced state pension credit because notional pension income had been taken into account, and (c) their retirement pension would commence as from the date of claim rather than April 2011.

 

What happened in Mr Brent’s case

 

10. At April 2011, Mr Brent was deferring his retirement pension and, as a result, receiving reduced state pension credit. In other words, he was not an individual whose pension credit award had been inflated by officials mistakenly ignoring notional retirement pension income.

 

11. The DWP decided that Mr Brent claimed his retirement pension, thus terminating the period of deferral, with effect from 5^th December 2011.

 

12. On 20^th January 2012, DWP officials wrote to Mr Brent to explain that he could take his deferral benefits in the form of a lump sum or increased retirement pension. He opted for a lump sum. This letter did not mention his claim could have been backdated to April 2011.

 

13. On 14^th February 2012, Mr Brent received a standard letter about the changes to the deferral / state pension credit rules. This said “as a result of the changes you will not benefit from continuing to defer and you need to look again at your decision”. Of course, by now Mr Brent had claimed his retirement pension and so was no longer a deferrer. The letter also informed recipients they could backdate their claim to April 2011 but it had to be done by 5^th April 2012. This was the communication strategy referred to above.

 

14. On 21^st July 2012, Mr Brent wrote to the DWP making the fair point that he was given no opportunity upon claiming his pension in December 2011 to make a backdated claim to avoid most of the financial disadvantages flowing from the legislative change. Mr Brent appealed to the First-tier Tribunal. The DWP’s case before the Tribunal was that the legislation gave them no scope to alter their decision once Mr Brent had made his December 2011 claim.

 

15. A DWP official replied to the 21^st July 2012 letter stating that, in Mr Brent’s case, two decisions were taken, on 20^th January 2012 and 2^nd February 2012, based on written instructions emailed by Mr Brent on 13^th February 2012. Of course, without a time-machine that was impossible. This letter also asserted that Mr Brent had previously been advised of “the change in the law relating to deferral and overlapping benefits”. I can find no evidence to support this assertion.

 

16. On 22^nd August 2012, Mr Thom spoke to a DWP official to query the absence of deferral benefits for the period between 6^th April 2011 and 4^th December 2011. The record of the conversation states Mr Brent was told he could claim from April 2011 but he refused because he would not receive interest on the backdated payment of retirement pension. I note this offer to backdate is inconsistent with the DWP’s earlier communications.

 

17. There followed a series of increasingly furious and extensive letters written by Mr Thom to the DWP and various Ministers about the injustice he felt he had suffered. In these letters, Mr Brent relied on all manner of legal principles, both domestic and international.

 

18. Following a number of adjournments, punctuated by further extensive letters from Mr Brent, the First-tier Tribunal dismissed Mr Brent’s appeal on 11^th April 2013. The Tribunal accepted the DWP’s argument that the legislation was correctly applied in Mr Brent’s case and the Tribunal had no power to override or modify that legislation. On 29^th May 2013, the First-tier Tribunal granted Mr Brent permission to appeal to the Upper Tribunal.

 

The proceedings within the Upper Tribunal

 

19. Following a series of case management directions, the matter was transferred to myself. I thought that beneath the fury of Mr Brent’s written submissions, there were arguable points of law. I was content to raise these in the light of the Upper Tribunal’s inquisitorial function and the importance of the matter for Mr Brent who, like any pensioner, is acutely concerned about his pension benefits. On 30^th May 2014, I gave the following directions:

 

“Background

 

To put my directions in context, I need to recite some of the background. The  Secretary of State took a decision about how to respond to administrative failures by officials responsible for administering the state pension credit scheme. The policy papers within the file show that, in some cases, officials had failed to take account of deferred retirement pensions when fixing notional income. The result was that some individuals received more pension credit than the law said they were entitled to, as well as an increase in retirement pension due to having deferred.

 

It might be argued that the obvious way of responding to this policy problem would have been to issue administrative instructions to pension credit officials drawing attention to the rules about the treatment of deferred retirement pensions. But that course was not taken. Instead, the deferral regulations were amended to prevent a period during which a person was on pension credit from increasing the amount of a retirement pension. No change was made to the pension credit income rules.

 

Arguably, the approach taken created a risk that some claimants would lose out financially by continuing to defer (which had become pointless) instead of claiming their retirement pension as well as pension credit. The Secretary of State developed a communication strategy to address that risk, as is explained in the papers. However, the strategy appears not to have been implemented at the point when Mr Brent claimed his retirement pension.

 

Secretary of State’s directions

 

Direction 1. In the light of the above background, the Secretary of State is directed to supply the Upper Tribunal with a supplementary submission which addresses the following points:

 

(a) Was the communication strategy necessary to avoid a breach of Article 1 of Protocol 1 to the European Convention on Human Rights? It is arguable that it was because, without it, some retirees would lose the opportunity to make a back-dated claim for retirement pension and therefore secure their full financial entitlement. Having regard to the rationale for the change in the regulations, which seems to have been simply administrative expediency, could this be justified?

 

(b) If the communication strategy was necessary to avoid a breach of Convention rights, should its non-implementation at the point at which Mr Brent made his claim for retirement pension have affected the Secretary of State’s response to the claim? In particular, should the Secretary of State have taken the claim to include a request for it to be back-dated to the date on which the deferral rules changed?

 

(c) Is the result postulated above prevented by the case law under regulation 19(1) of the Social Security (Claims and Payments) Regulations 1987, i.e. the decision in R(SB) 9/84 [that puts the onus on the claimant to make a backdated claim]? If so, should that case law not be followed in order to avoid a breach of Convention rights?

 

(d)  If the Upper Tribunal finds that Mr Brent is entitled to payments of retirement pension from the date on which the deferral rules changed, it seems that he seeks interest on those sums. Is that result something that the Upper Tribunal is able to achieve? And, if so, does Mr Brent have any legal right to interest?

 

Direction 2. The Secretary of State must supply the Upper Tribunal with Mr Brent’s 2011 retirement pension claim form.

 

Direction 3. Directions 1 and 2 must be complied with within one month of the date on which these directions are issued.

 

Mr Brent’s directions

 

Direction 4. Mr Brent, once the Secretary of State has supplied his amended submission, you will be sent a copy. You will then have one month in which to reply to it, if you wish.”

 

20. Submissions were duly received and a hearing date fixed for 9^th June 2015. The Free Representation Unit (FRU) agreed to represent Mr Brent and I am sure that Mr Brent is very grateful, as am I, to them for doing so. At the hearing, the Secretary of State was represented by Naomi Ling of counsel and Mr Brent by Mr Andrew Watson of counsel, instructed by FRU.

 

21. I issued post-hearing directions for further written submissions to address matters raised for the first time at the hearing. However, the parties informed the Upper Tribunal they had reached a settlement agreement and requested a consent order disposing of the proceedings.

 

The consent order

 

22. Under rule 39 of the Tribunal Procedure (Upper Tribunal) Rules 2008 I made a consent order, being of the opinion that the conditions for making an order were met. The order formally dismissed the appeal and incorporated the following settlement agreement in an Annex to the order:

 

“It is agreed between the parties that:

 

1. The Secretary of State for Work & Pensions will pay to the Appellant the sum of £3,659.82 representing the following amounts:

 

£3,349.62 – in respect of the period (April 2011 to December 2011) for which State Pension has not been paid

 

£59.94 – interest for the delay in making payment

 

£250 – goodwill payment.

 

2. The Secretary of State will use his best endeavours to pay the above mentioned sum to the Appellant within 28 days of the date of the Upper Tribunal’s order under Rule 39 of the Tribunal Procedure (Upper Tribunal) Rules 2008 and, in any event, will make payment in a timely manner.

 

3. In consideration of the above promise the Appellant agrees that he will, together with the Secretary of State for Work & Pensions, request that the Upper Tribunal make a consent order disposing of the proceedings pursuant to Rule 39 of the Tribunal Procedure (Upper Tribunal) Rules 2008, in the terms of the draft consent order to which this agreement is attached.

 

4. This agreement is in full and final settlement of the Appellant’s claim number CP/2202/2013.

 

5. Graeme Wallace, Director Pensions Operations, makes the following statement:

 

“The Department makes a sincere apology to Mr Brent for its failings when Mr Brent first made contact with the Department to claim his State Pension and the subsequent inconvenience this has caused him. The information he was given was inaccurate. We are very sorry this occurred. It was a mistake and it should not have happened.””

 

 

 

(Signed on the Original)

Mr E Mitchell

Judge of the Upper Tribunal

18^th November 2015