Section 297 and Schedule 11 of the Pensions Act 2004 make provision for an increased incremental rate for those deferring their state pension and for a choice between increments and a lump sum for those who have deferred their entitlement for 12 months or more. Three sets of regulations laid yesterday supplement these provisions and come into force on 6 April 2005.
The Social Security (Deferral of Retirement Pensions) Regulations 2005 (SI 2005/453)
These Regulations prescribe the day on which the accrual period for the lump sum is to start, and the circumstances in which the amount of retirement pension which the deferrer would have received in an accrual period shall not be included in the calculation of the lump sum. These include receipt of certain benefits or increases in benefits or imprisonment.
The Social Security (Graduated Retirement Benefit) Regulations 2005 (SI 2005/454)
These Regulations (at 15 pages, three times as long as SI 2005/453) concern deferment of graduated retirement benefit (GRB) and arise from changes in the rules relating to the deferment of retirement pension made by the Pensions Acts 1995 and 2004. They repeal and re-enact the existing rules relating to increments of GRB where entitlement to either retirement pension or to GRB alone* is deferred, so that they correspond with the rules for deferment of entitlement to retirement pension.
* As the absolute maximum GRB a man can get for the whole year 2005/06 is just £444 (£371 for a woman), it is probably uncommon to defer entitlement to GRB alone.
The two changes introduced are an increase in the incremental rate from 1/7% to 1/5% and a new reward of a lump sum; both for those who have deferred entitlement to their GRB for at least 12 months, and for widows and widowers where their deceased spouses deferred entitlement to their GRB for at least 12 months as at the date of death. The lump sum is to be calculated on the basis of the amount of GRB foregone in the period of deferment, with interest accrued on it at a rate 2% above the Bank of England base rate.
The Social Security (Claims and Payments) Amendment Regulations 2005 (SI 2005/455)
These Regulations amend the Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968) in respect of claims for retirement pension or graduated retirement benefit. Claims must be made in advance of the date on which a period of deferment ends.
A person may make a claim for a Category A or B retirement pension and GRB on behalf of a person who has died, if the deceased was not married at the time of death. A maximum of 3 months' arrears of pension or benefit may be claimed. Where there is a claim on behalf a person who deferred his entitlement during the 12 months before his death, he will be treated as having made an election in favour of an increase, rather than a lump sum in respect of the deferment.
