Split additional State Pension by the period's State Pension type

changelog.d/additional-state-pension-period-type.fixed.md

@@ -0,0 +1 @@
+Split additional State Pension by each person's State Pension type in the year simulated, as basic and new State Pension already are, instead of their type in the data year. Survey ages are held fixed across projected years, so records that were on the basic State Pension in the data year stand for new State Pension cohorts later, and the part of their reported State Pension between the two flat rates was paid twice. Basic, new and additional State Pension now add up to the reported amount uprated by the flat rate.

docs/book/programs/gov/dwp/state-pension.md

@@ -25,13 +25,40 @@ Three variables under `gov/dwp/`:
     accrual that exceeds the new flat rate, folded into NSP under
     current law but tracked separately in PolicyEngine so the reform
     surface stays clean.
-  - Both are computed as `max(reported - flat_max_for_type, 0)` per week,
-    multiplied by `WEEKS_IN_YEAR`.
+  - Both are the reported weekly amount above the type's full rate in the
+    data year, `max(reported - flat_max_for_type, 0)`, uprated as described
+    below and multiplied by `WEEKS_IN_YEAR`.
+
+All three split the amount a person reported in the data year (the
+dataset's first year) by the person's `state_pension_type` in the year
+simulated. The part up to that type's full rate in the data year is basic
+or new State Pension, and the part above it is additional State Pension.
+Both parts are uprated by the type's full rate (the year's over the data
+year's), so together they pay the reported amount uprated by the flat rate,
+for anyone over State Pension age. In law, additional pensions and
+protected payments rise with prices instead: the Social Security Benefits
+Up-rating Order 2026 raised them by 3.8% in April 2026 (articles 4(3) and
+6(3)), and the full rates by 4.8%. This is tracked in
+[#1941](https://github.com/PolicyEngine/policyengine-uk/issues/1941).
+
+Survey ages are held fixed in the years a dataset is projected to, so a
+record's birth cohort moves one year later for each year projected, and its
+type can change: a man aged 75 in the 2024-25 data reached State Pension age
+in 2014, on the basic State Pension, but a man aged 75 in 2030-31 reached it
+in 2021, on the new State Pension. Until the fix for
+[#1921](https://github.com/PolicyEngine/policyengine-uk/issues/1921),
+`additional_state_pension` used the data year's type while the other two
+used the year's, so for records like his the part of the reported amount
+between the basic and new flat rates was paid twice. The records keep their
+reported amounts: a record that moves to a new State Pension cohort is not
+given a new State Pension award. That is one reason the model's State
+Pension per recipient grows more slowly than DWP's (see Known aggregate gap
+below).
 
 The flag-up split (`state_pension_type`) is settled by [PR #1618](https://github.com/PolicyEngine/policyengine-uk/pull/1618):
 classification is based on whether the person reaches State Pension age
-before or on/after 6 April 2016. No component is paid before State
-Pension age.
+before or on/after 6 April 2016. A computed `state_pension_type` is `NONE`
+below State Pension age, so no component is paid there.
 
 ## State Pension age
 
@@ -246,10 +273,68 @@ still included and the rise needed to reach the earnings path, rounded up to
 
 ## Known aggregate gap (#1632)
 
-After the BASIC/NEW classification fix in PR #1618 and the pro-rating
-+ Protected Payment fixes in [PR #1634](https://github.com/PolicyEngine/policyengine-uk/pull/1634),
-the model's State Pension aggregate is **~£127.5 bn** against the OBR
-2025 target of **~£140 bn** — a **-£12 bn gap**.
+The model's State Pension covers UK private households: the Family
+Resources Survey covers private households only, not nursing homes and
+other communal establishments. DWP's State Pension spending covers Great
+Britain and UK State Pensions paid to people living abroad, but not
+Northern Ireland, whose State Pension the Department for Communities pays.
+DWP's Spring Forecast 2026 is consistent with the OBR's March 2026 forecast.
+From 2026-27 the two differ by about £2m a year. The OBR's figures are
+£1.4bn higher in 2024-25, which the OBR records as outturn, and £0.1bn
+higher in 2025-26.
+
+The table compares full microsimulation runs on the enhanced FRS 2024-25
+(policyengine-uk-data-private 1.57.4) with DWP's spending less its payments
+abroad.
+
+| £bn | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | 2030-31 |
+|---|---:|---:|---:|---:|---:|---:|---:|
+| Model State Pension | 119.0 | 124.8 | 129.6 | 131.6 | 133.6 | 137.5 | 141.6 |
+| OBR March 2026 EFO, State Pension | 138.0 | 146.2 | 154.2 | 158.9 | 164.0 | 172.2 | 180.7 |
+| DWP Spring Forecast 2026, State Pension | 136.6 | 146.1 | 154.2 | 158.9 | 164.0 | 172.2 | 180.7 |
+| of which paid abroad | 5.3 | 5.6 | 5.9 | 6.1 | 6.2 | 6.4 | 6.6 |
+| Model minus DWP less paid abroad | -12.2 | -15.6 | -18.6 | -21.3 | -24.2 | -28.3 | -32.5 |
+
+The model also includes Northern Ireland, which DWP's figures do not, so the
+like-for-like gap is larger by Northern Ireland's State Pension.
+
+**The data year.** In 2024-25 the model has 11.36m State Pension recipients
+averaging £201.6 a week, for the UK. The FRS's own grossed figures for Great
+Britain are 11.53m recipients averaging £212 a week, and DWP's administrative
+figures are 11.88m and £212 (FRS methodology tables M.6a and M.6b, which
+cover Great Britain). The FRS's grossed estimate for the
+UK, with benefit amounts linked to DWP records, is £130.6bn, against
+£135.1bn from administrative data. So most of the model's £16bn shortfall
+against administrative data for the UK arises in building the enhanced FRS,
+not in the survey. For FRS respondents, `state_pension_reported` is the
+FRS benefits table's weekly State Pension amount times 52
+(policyengine-uk-data's `datasets/frs.py`). On the rows the enhanced FRS
+adds from the Survey of Personal Incomes, it is imputed
+(`datasets/imputations/frs_only.py`). The shortfall is tracked in
+[policyengine-uk-data#493](https://github.com/PolicyEngine/policyengine-uk-data/issues/493).
+
+**Projected years.** The gap widens after the data year for two reasons,
+tracked in [#1929](https://github.com/PolicyEngine/policyengine-uk/issues/1929):
+
+- **Caseload.** Survey ages are held fixed in projected years and household
+  weights grow with total population
+  (`policyengine_uk/data/uprating_indices.yaml`), so the pension-age
+  population keeps the data year's age structure. From 2025-26 to 2030-31
+  the model's State Pension recipients fall 3.0%, as State Pension age rises
+  to 67, while DWP's caseload less those paid abroad rises 4.8%.
+- **Awards.** Each record keeps its reported amount, uprated by the flat
+  rate, including records whose cohort moves from basic to new State
+  Pension. The model's State Pension per recipient grows 17.0% over those
+  years. DWP's spending per recipient, less those paid abroad, grows 18.3%,
+  as its new State Pension spending grows from £56.1bn to £102.4bn and its
+  basic State Pension spending falls from £66.7bn to £57.8bn.
+
+Until the fix for [#1921](https://github.com/PolicyEngine/policyengine-uk/issues/1921),
+`additional_state_pension` paid the band between the flat rates twice for
+records moving from basic to new State Pension cohorts (see Components
+above): £0.8bn in 2025-26, rising to £6.8bn in 2030-31. That made the
+model's State Pension per recipient grow 21.8%, faster than DWP's, and hid
+part of the widening.
 
 ### What's been fixed
 
@@ -258,34 +343,28 @@ the model's State Pension aggregate is **~£127.5 bn** against the OBR
 | BASIC vs NEW classification used `is_SP_age` heuristic | Fixed | #1618 |
 | `new_state_pension` returned flat max for every NEW retiree, ignoring partial NI records | Fixed | #1634 |
 | Protected Payment only computed for BASIC-type recipients | Fixed | #1634 (ASP now extends to NEW) |
+| `additional_state_pension` split the reported amount by the data year's State Pension type, paying part of it twice for records moving from basic to new cohorts | Fixed | #1921 |
 
 ### What's still open
 
-The remaining ~£12 bn gap appears to come from the **data side** rather
-than the formula. The FRS records State Pension as a single weekly
-benefit value (`state_pension_reported`), which is derived from the
-DWP-administered single weekly figure (SRP). For BASIC-type retirees
-who reported exactly the maximum basic rate, the formula assigns ASP =
-0 — but in reality many of those retirees also received SERPS / S2P
-top-ups that the single weekly figure either caps or rounds.
+- The data year's shortfall in the enhanced FRS:
+  [policyengine-uk-data#493](https://github.com/PolicyEngine/policyengine-uk-data/issues/493).
+- The pension-age population and new-cohort awards in projected years:
+  [#1929](https://github.com/PolicyEngine/policyengine-uk/issues/1929).
 
-The proposed data-side fix lives in `policyengine-uk-data` and would:
-
-- Impute an ASP component on BASIC-type rows whose reported state
-  pension matches the max basic rate exactly, using the DWP-published
-  share of SERPS / S2P recipients in that band.
-- Source the ASP-by-band distribution from ONS *National Pensioners
-  Survey* breakdowns or DWP administrative caseload by pension type.
-
-This is tracked under [#1632](https://github.com/PolicyEngine/policyengine-uk/issues/1632)
+Both are part of [#1632](https://github.com/PolicyEngine/policyengine-uk/issues/1632)
 and the broader UK pipeline-alignment tracker
 [#1621](https://github.com/PolicyEngine/policyengine-uk/issues/1621).
 
 ## References
 
 - DWP, [New State Pension](https://www.gov.uk/new-state-pension) and [Basic State Pension](https://www.gov.uk/state-pension) user-facing pages.
-- HMRC, [State Pension forecast](https://www.gov.uk/check-state-pension) (the underlying SP1 figure that lands in the FRS).
+- GOV.UK, [Check your State Pension forecast](https://www.gov.uk/check-state-pension).
 - [Pensions Act 2014](https://www.legislation.gov.uk/ukpga/2014/19/contents) — introduces the New State Pension and the BASIC / NEW boundary.
 - [Social Security Contributions and Benefits Act 1992, Part 2](https://www.legislation.gov.uk/ukpga/1992/4/part/II) — primary statute for the basic scheme.
-- OBR March 2026 EFO — State Pension expenditure target.
+- OBR, [Economic and fiscal outlook, March 2026: detailed forecast tables, expenditure](https://obr.uk/download/march-2026-economic-and-fiscal-outlook-detailed-forecast-tables-expenditure/), table 4.9, "State pension".
+- DWP, [Benefit expenditure and caseload tables 2026: outturn and forecast, Spring Forecast 2026](https://assets.publishing.service.gov.uk/media/69dcdc8c6b695d635c34dcc4/outturn-and-forecast-tables-spring-forecast-2026.xlsx), "State Pension" sheet: total, paid outside the UK, components and caseload.
+- DWP, [Family Resources Survey, integrating administrative data for benefits: tables](https://assets.publishing.service.gov.uk/media/69c416acb66ff902f45441f0/family-resources-survey-transformation-benefits.xlsx), sheet 16, State Pension: admin-linked survey and administrative estimates, 2024-25.
+- DWP, [Family Resources Survey 2024-25: methodology and standard error tables](https://assets.publishing.service.gov.uk/media/69c3c0d2471d520038d0f571/ch1_methodology_and_standard_errors.xlsx), tables M.6a and M.6b: State Pension recipients and weekly amounts, FRS against administrative data.
+- DWP, [Family Resources Survey 2024-25: background information and methodology](https://www.gov.uk/government/statistics/family-resources-survey-financial-year-2024-to-2025/family-resources-survey-background-information-and-methodology), section 4.1, for the survey's coverage of private households.
 - House of Commons Library, [State Pension triple lock](https://commonslibrary.parliament.uk/research-briefings/cbp-7812/) — context for the triple-lock parameters.