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Low Earnings Threshold set for 2003/4
by Ian Neale 24/02/2003 Printer-friendly version of this page
The Social Security Pensions (Low Earnings Threshold) Order 2003 (SI 2003/324), laid on 21 February 2003, sets the low earnings threshold (LET) "for tax years following 2002-03" at £11,200.
The LET is the amount by reference to which the three surplus earnings bands are determined for the purpose of calculating the additional pension (the state second pension, S2P) in a state retirement pension. Under s.148A(1) of the Social Security Administration Act (SSAA) 1992, in every tax year the Secretary of State has to review "the general level of earnings" - which in practice means the National Average Earnings Index (Whole Economy, ie not seasonally adjusted) for the period from 1st October to 30th September - and decide on that basis whether the LET should be altered.
During the period from 1st October 2001 to 30th September 2002, the NAE increased by 3.6%. The threshold for 2002/03 was £10,800, by virtue of SI 2002/36. Application of a 3.6% increase gives £11,188.80. S.148A prescribes rounding to the nearest £100, hence the new LET is to be £11,200.
We may anticipate the annual s.148 Order (made under s.148 of the 1992 Act) for revaluation of earnings factors, which provides the percentages by which band earnings are revalued in order to calculate the accrued GMP. Normally laid around mid-March, the 2003 Order is almost certain to prescribe the same 3.6% increase for members leaving contracted-out employment in 2003/04. The bases of ss.148 and 148A are virtually identical.
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