Office of Public Sector Information
(1) Regulations shall provide for the Board to issue certificates stating—
(a) that the employment of an earner in employed earner’s employment is contracted-out employment by reference to an occupational pension scheme; or
(b) that a personal pension scheme is an appropriate scheme;
and in this Act a certificate under paragraph (a) is referred to as “a contracting-out certificate” and a certificate under paragraph (b) as “an appropriate scheme certificate”.
(2) The regulations shall provide for contracting-out certificates to be issued to employers and to specify—
(a) the employments which are to be treated, either generally or in relation to any specified description of earners, as contracted-out employments; and
(b) the occupational pension schemes by reference to which those employments are to be so treated.
(3) An occupational pension scheme is a contracted-out scheme in relation to an earner’s employment if it is for the time being specified in a contracting-out certificate in relation to that employment; and references in this Act to the contracting-out of a scheme are references to its inclusion in such a certificate.
(4) A personal pension scheme is an appropriate scheme if there is in force an appropriate scheme certificate issued by the Board in accordance with this Chapter that it is such a scheme.
(5) An appropriate scheme certificate for the time being in force in relation to a scheme shall be conclusive that the scheme is an appropriate scheme.
(6) Regulations shall provide that any question whether a personal pension scheme is or at any time was an appropriate scheme shall be determined by the Board.
(7) Except in prescribed circumstances, no contracting-out certificate or appropriate scheme certificate shall have effect from a date earlier than that on which the certificate is issued.
(1) The employment of an earner in employed earner’s employment is “contracted-out employment” in relation to him during any period in which he is under pensionable age and—
(a) either—
(i) his service in the employment is for the time being service which qualifies him for a guaranteed minimum pension provided by an occupational pension scheme, or
(ii) his employer makes minimum payments in respect of his employment to an occupational pension scheme which is contracted-out by virtue of satisfying section 9(3) (in this Act referred to as “a money purchase contracted-out scheme”); and
(b) there is in force a contracting-out certificate issued by the Board in accordance with this Chapter stating that the employment is contracted-out employment by reference to the scheme.
(2) In this Act—
“guaranteed minimum pension” means any pension which is provided by an occupational pension scheme in accordance with the requirements of sections 13 and 17 to the extent to which its weekly rate is equal to the earner’s or, as the case may be, the earner’s widow’s or widower’s guaranteed minimum as determined for the purposes of those sections respectively; and
“minimum payment”, in relation to an earner’s employment in any tax week, means the rebate percentage of so much of the earnings paid to or for the benefit of the earner in that week as exceeds the current lower earnings limit but not the current upper earnings limit (or the prescribed equivalents if he is paid otherwise than weekly);
and for the purposes of this subsection “rebate percentage” means the sum of the percentages for the time being mentioned in paragraphs (a) and (b) of section 41(1).
(3) Regulations may make provision—
(a) for the manner in which, and time at which or period within which, minimum payments are to be made;
(b) for the recovery by employers of amounts in respect of the whole or part of minimum payments by deduction from earnings;
(c) for calculating the amounts payable according to a scale prepared from time to time by the Secretary of State or otherwise adjusting them so as to avoid fractional amounts or otherwise facilitate computation;
(d) for requiring that the liability in respect of a payment made in a tax week, in so far as the liability depends on any conditions as to a person’s age on retirement, shall be determined as at the beginning of the week or as at the end of it;
(e) for securing that liability is not avoided or reduced by the payment of earnings being made in accordance with any practice which is abnormal for the employment in respect of which the earnings are paid;
(f) without prejudice to paragraph (e), for enabling the Secretary of State, where he is satisfied as to the existence of any practice in respect of the payment of earnings whereby the incidence of minimum payments is avoided or reduced by means of irregular or unequal payments of earnings, to give directions for securing that minimum payments are payable as if that practice were not followed;
(g) for the intervals at which, for the purposes of minimum payments, payments of earnings are to be treated as made; and
(h) for this section to have effect, in prescribed cases, as if for any reference to a tax week there were substituted a reference to a prescribed period.
(4) Any contracting-out certificate for the time being in force in respect of an employed earner’s employment shall be conclusive that the employment is contracted-out employment.
(5) Regulations shall provide for the determination by the Board of any question whether an employment is to be treated as contracted-out employment or as to the persons in relation to whom, or the period for which, an employment is to be so treated.
(1) Subject to subsection (4), an occupational pension scheme can be contracted-out in relation to an earner’s employment only if it satisfies subsection (2) or (3).
(2) An occupational pension scheme satisfies this subsection only if—
(a) it complies in all respects with sections 13 to 24 or, in such cases or classes of case as may be prescribed, with those sections as modified by regulations; and
(b) the rules of the scheme applying to guaranteed minimum pensions are framed so as to comply with the relevant requirements.
(3) An occupational pension scheme satisfies this subsection only if—
(a) the requirements imposed by or by virtue of sections 22 and 26 to 32 and such other requirements as may be prescribed are satisfied in its case; and
(b) the rules of the scheme applying to protected rights are framed so as to comply with the relevant requirements.
(4) Where there are two or more occupational pension schemes in force in relation to an earner’s employment, none of which can by itself be a contracted-out scheme, the Board may, if they think fit, treat them for contracting-out purposes as a single scheme.
(5) A personal pension scheme can be an appropriate scheme only if—
(a) the requirements imposed by or by virtue of sections 26 to 32 and such other requirements as may be prescribed are satisfied in its case; and
(b) the rules of the scheme applying to protected rights are framed so as to comply with the relevant requirements.
(6) In this section “relevant requirements” means—
(a) the requirements of any regulations prescribing the form and content of rules of contracted-out or, as the case may be, appropriate schemes; and
(b) such other requirements as to form and content (not inconsistent with regulations) as may be imposed by the Board as a condition of contracting-out or, as the case may be, of being an appropriate scheme, either generally or in relation to a particular scheme.
(1) Subject to subsections (2) and (3), the protected rights of a member of a pension scheme are his rights to money purchase benefits under the scheme.
(2) If the rules of an occupational pension scheme so provide, a member’s protected rights are—
(a) his rights under the scheme which derive from the payment of minimum payments together with any payments by the Secretary of State to the scheme under section 7 of the [1986 c. 50.] Social Security Act 1986 in respect of the member;
(b) any rights of the member to money purchase benefits which derive from protected rights under another occupational pension scheme or under a personal pension scheme which have been the subject of a transfer payment; and
(c) such other rights as may be prescribed.
(3) If the rules of a personal pension scheme so provide, a member’s protected rights are—
(a) his rights under the scheme which derive from any payment of minimum contributions to the scheme; and
(b) any rights of his to money purchase benefits which derive from protected rights under another personal pension scheme or protected rights under an occupational pension scheme which have been the subject of a transfer payment; and
(c) such other rights as may be prescribed.
(1) Subject to the provisions of this Part, an employment otherwise satisfying the conditions for inclusion in a contracting-out certificate shall be so included if and so long as the employer so elects and not otherwise.
(2) Subject to subsections (3) and (4), an election may be so made, and an employment so included, either generally or in relation only to a particular description of earners.
(3) Except in such cases as may be prescribed, an employer shall not, in making or abstaining from making any election under this section, discriminate between different earners on any grounds other than the nature of their employment.
(4) If the Board consider that an employer is contravening subsection (3) in relation to any scheme, they may—
(a) refuse to give effect to any election made by him in relation to that scheme; or
(b) cancel any contracting-out certificate held by him in respect of it.
(5) Regulations may make provision—
(a) for regulating the manner in which an employer is to make an election with a view to the issue, variation or surrender of a contracting-out certificate;
(b) for requiring an employer to give a notice of his intentions in respect of making or abstaining from making any such election in relation to any existing or proposed scheme—
(i) to employees in any employment to which the scheme applies or to which it is proposed that it should apply;
(ii) to any independent trade union recognised to any extent for the purpose of collective bargaining in relation to those employees;
(iii) to the trustees and managers of the scheme; and
(iv) to such other persons as may be prescribed;
(c) for requiring an employer, in connection with any such notice, to furnish such information as may be prescribed and to undertake such consultations as may be prescribed with any such trade union as is mentioned in paragraph (b)(ii);
(d) for empowering the Board to refuse to give effect to an election made by an employer unless they are satisfied that he has complied with the requirements of the regulations;
(e) for referring to an industrial tribunal any question—
(i) whether an organisation is such a trade union as is mentioned in paragraph (b)(ii), or
(ii) whether the requirements of the regulations as to consultation have been complied with.
(1) A contracting-out certificate shall state whether the scheme is contracted-out by virtue of subsection (2) or (3) of section 9.
(2) Where a scheme satisfies both of those subsections the employers, in their application for a certificate, shall specify one of those subsections as the subsection by virtue of which they wish the scheme to be contracted-out.
(3) A scheme which has been contracted-out by virtue of one of those subsections may not become contracted-out by reason of the other except in prescribed circumstances.
(1) Subject to the provisions of this Part, the scheme must—
(a) provide for the earner to be entitled to a pension under the scheme if he attains pensionable age; and
(b) contain a rule to the effect that the weekly rate of the pension will be not less than his guaranteed minimum (if any) under sections 14 to 16.
(2) In the case of an earner who is a married woman or widow who is liable to pay primary Class 1 contributions at a reduced rate by virtue of section 19(4) of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992, subject to the provisions of this Part, the scheme must—
(a) provide for her to be entitled to a pension under the scheme if she attains pensionable age and does not have a guaranteed minimum under sections 14 to 16; and
(b) satisfy such other conditions as may be prescribed.
(3) Subject to subsection (4), the scheme must provide for the pension to commence on the date on which the earner attains pensionable age and to continue for his life.
(4) Subject to subsection (5), the scheme may provide for the commencement of the earner’s guaranteed minimum pension to be postponed for any period for which he continues in employment after attaining pensionable age.
(5) The scheme must provide for the earner’s consent to be required—
(a) for any such postponement by virtue of employment to which the scheme does not relate; and
(b) for any such postponement after the expiration of five years from the date on which he attains pensionable age.
(6) Equivalent pension benefits for the purposes of the former legislation are not to be regarded as constituting any part of the earner’s guaranteed minimum pension.
(7) The benefits referred to in subsection (6) are any to which the earner may be immediately or prospectively entitled in respect of a period of employment which—
(a) was for him non-participating employment under that legislation; and
(b) was not on its termination the subject of any payment in lieu of contributions;
but subsection (6) excludes only so much of those benefits as had to be provided in order that the employment should for that period be treated as non-participating.
(8) In this section “the former legislation” means Part III of the [1965 c. 51.] National Insurance Act 1965 and the previous corresponding enactments.
(1) An earner has a guaranteed minimum in relation to the pension provided by a scheme if in any tax week in a relevant year, earnings in excess of the current lower earnings limit (or the prescribed equivalent if he is paid otherwise than weekly) have been paid to or for his benefit in respect of employment which is contracted-out by reference to the scheme.
(2) Subject to section 15(1), the guaranteed minimum shall be the weekly equivalent of an amount equal to the appropriate percentage of the total of the earner’s earnings factors for the relevant years, so far as derived from earnings such as are mentioned in subsection (1) upon which primary Class 1 contributions have been paid or treated as paid.
(3) In determining the guaranteed minimum in a case where—
(a) earnings such as are mentioned in subsection (1) have been paid to a married woman or widow who is liable to pay primary Class 1 contributions at a reduced rate by virtue of section 19(4) of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992, and
(b) the tax week in which those earnings are paid falls in the tax year 1991-92 or any subsequent tax year,
the married woman or widow shall be treated for the purposes of this section as having such earnings factors derived from those earnings as she would have had if primary Class 1 contributions had been payable, and paid, upon them otherwise than at a reduced rate.
(4) Where the amount of a person’s earnings for any period is relevant for any purpose of subsection (1) or (2) and the Secretary of State is satisfied that records of those earnings have not been maintained or retained or are otherwise unobtainable, he may for that purpose—
(a) compute, in such manner as he thinks fit, an amount which shall be regarded as the amount of those earnings; or
(b) take their amount to be such sum as he may specify in the particular case.
(5) In subsection (2) the “appropriate percentage” means—
(a) in respect of the earner’s earnings factors for any tax year not later than the tax year 1987-88—
(i) if the earner was not more than 20 years under pensionable age on 6th April 1978, 1.25 per cent.;
(ii) in any other case 25/N per cent.;
(b) in respect of the earner’s earnings factors for the tax year 1988-89 and for subsequent tax years—
(i) if the earner was not more than 20 years under pensionable age on 6th April 1978, 1 per cent.;
(ii) in any other case 20/N per cent.;
where N is the number of years in the earner’s working life (assuming he will attain pensionable age) which fall after 5th April 1978.
(6) Regulations may prescribe rules as to the circumstances in which earnings factors are derived from earnings for the purposes of subsection (2).
(7) For the purposes of subsection (2) the weekly equivalent of the amount there mentioned shall be calculated by dividing that amount by 52.
(8) In this section “relevant year” means any tax year in the earner’s working life (not being earlier than the tax year 1978-79).
(1) Where in accordance with section 13(4) the commencement of an earner’s guaranteed minimum pension is postponed for any period and there are at least seven complete weeks in that period, his guaranteed minimum in relation to the scheme shall, for each complete week in that period, be increased by one-seventh per cent.—
(a) of the amount of that minimum apart from this subsection; or
(b) if for that week (or a period which includes that week) a pension is paid to him under the scheme at a weekly rate less than that minimum, of the difference between that pension and that minimum.
(2) In subsection (1) “week” means any period of seven consecutive days.
(3) Where an earner’s guaranteed minimum is increased under subsection (1), the increase of that part of it which is attributable to earnings factors for the tax year 1987-88 and earlier tax years shall be calculated separately from the increase of the rest.
(4) Where one or more orders have come into force under section 109 during the period for which the commencement of a guaranteed minimum pension is postponed, the amount of the guaranteed minimum for any week in that period shall be determined as if the order or orders had come into force before the beginning of the period.
(1) Subject to subsection (2), for the purpose of section 14(2) the earner’s earnings factor for any relevant year (so far as derived as mentioned in that section) shall be taken to be that factor as increased by the same percentage as that prescribed for the increase of that factor by the last order under section 21 of the [1975 c. 60.] Social Security Pensions Act 1975 or section 148 of the [1992 c. 5.] Social Security Administration Act 1992 to come into force before the end of the final relevant year.
(2) The scheme may provide that the earnings factors of an earner whose service in contracted-out employment by reference to the scheme is terminated before the final relevant year shall be determined for the purposes of section 14(2) by reference to the last such order to come into force before the end of the tax year in which that service ends (“the last service tax year”).
(3) Where a scheme provides as mentioned in subsection (2) the scheme shall provide for the weekly equivalent mentioned in section 14(2) to be increased by at least—
(a) 5 per cent. compound for each relevant year after the last service tax year; or
(b) the amount by which an earnings factor for that year equal to that weekly equivalent would be increased by the last order under section 21 of the [1975 c. 60.] Social Security Pensions Act 1975 or section 148 of the [1992 c. 5.] Social Security Administration Act 1992 to come into force before the end of the final relevant year,
whichever makes the lesser increase; and the provisions included by virtue of this subsection may also conform with such additional requirements as may be prescribed for the purposes of section 55(5).
(4) Except in such cases or classes of case as may be prescribed, the provision made by virtue of subsections (2) and (3) must be the same for all members of the scheme.
(5) In this section—
“relevant year” has the meaning given in section 14(8), and
“final relevant year” means the last tax year which is a relevant year in relation to the earner.
(1) Subject to the provisions of this Part, the scheme must provide that if the earner dies leaving a widow or widower (whether before or after attaining pensionable age), the widow or widower will be entitled to a guaranteed minimum pension under the scheme.
(2) The scheme must contain a rule to the effect that—
(a) if the earner is a man who has a guaranteed minimum under section 14, the weekly rate of the widow’s pension will be not less than the widow’s guaranteed minimum;
(b) if the earner is a woman who has a guaranteed minimum under that section, the weekly rate of the widower’s pension will be not less than the widower’s guaranteed minimum.
(3) The widow’s guaranteed minimum shall be half that of the earner.
(4) The widower’s guaranteed minimum shall be one-half of that part of the earner’s guaranteed minimum which is attributable to earnings factors for the tax year 1988-89 and subsequent tax years.
(5) The scheme must provide for the widow’s pension to be payable to her for any period for which a Category B retirement pension, widowed mother’s allowance or widow’s pension is payable to her by virtue of the earner’s contributions or for which a Category B retirement pension would be so payable but for section 43(1) of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 (persons entitled to more than one retirement pension).
(6) The scheme must provide for the widower’s pension to be payable to him in the prescribed circumstances and for the prescribed period.
(7) The trustees or managers of the scheme shall supply to the Secretary of State any such information as he may require relating to the payment of pensions under the scheme to widowers.
(1) Where an amount is required to be calculated in accordance with the provisions of sections 14(7), 15(1) or 17(2), (3) or (4) and, apart from this subsection, the amount so calculated is less than 0.5p, then, notwithstanding any other provision of this Act, that amount shall be taken to be zero, and other amounts so calculated shall be rounded to the nearest whole penny, taking 0.5p as nearest to the next whole penny above.
(2) Where a guaranteed minimum pension is attributable in part to earnings factors for the period before the tax year 1988-89 and in part to earnings factors for that tax year or for that tax year and subsequent tax years, the pension shall be calculated by—
(a) applying subsection (1) separately to the amount attributable to the period before the tax year 1988-89 and to the amount attributable to that and subsequent tax years, and
(b) aggregating the two amounts so calculated.
(1) A transaction to which this section applies discharges the trustees or managers of an occupational pension scheme from their liability to provide for or in respect of any person guaranteed minimum pensions—
(a) if it is carried out not earlier than the time when that person’s pensionable service terminates; and
(b) if and to the extent that it results in guaranteed minimum pensions for or in respect of that person being appropriately secured; and
(c) if and to the extent that the requirements set out in paragraph (a), (b) or (c) of subsection (5) are satisfied.
(2) This section applies to the following transactions—
(a) the taking out of a policy of insurance or a number of such policies;
(b) the entry into an annuity contract or a number of such contracts;
(c) the transfer of the benefit of such a policy or policies or such a contract or contracts.
(3) In this section “appropriately secured” means secured by an appropriate policy of insurance or an appropriate annuity contract, or by more than one such policy or contract.
(4) A policy of insurance or annuity contract is appropriate for the purposes of this section if—
(a) the insurance company with which it is or was taken out or entered into—
(i) is, or was at the relevant time, carrying on ordinary long-term insurance business in the United Kingdom or any other member State; and
(ii) satisfies, or at the relevant time satisfied, prescribed requirements; and
(b) it may not be assigned or surrendered except on conditions which satisfy such requirements as may be prescribed; and
(c) it contains or is endorsed with terms whose effect is that the amount secured by it may not be commuted except on conditions which satisfy such requirements as may be prescribed; and
(d) it satisfies such other requirements as may be prescribed.
(5) The requirements referred to in subsection (1) are—
(a) that the arrangement for securing the amount by means of the policy or contract was made—
(i) at the written request of the earner or, if the earner has died, of the earner’s widow or widower; or
(ii) with the consent of the earner or the widow or widower given in writing in a prescribed form;
(b) that—
(i) the case is one such as is mentioned in section 96(2); and
(ii) the policy or contract only secures guaranteed minimum pensions;
(c) that—
(i) the case is not one such as is mentioned in section 96(2); and
(ii) such conditions as may be prescribed are satisfied.
(6) In subsection (4)(a), “the relevant time” means the time when the policy of insurance was taken out or the annuity contract was entered into or, as the case may be, when the benefit of the policy or contract was transferred.
(7) In this section “ordinary long-term insurance business” has the same meaning as in the [1982 c. 50.] Insurance Companies Act 1982.
(1) Regulations may prescribe circumstances in which and conditions subject to which—
(a) a transfer of or a transfer payment in respect of—
(i) an earner’s accrued rights to guaranteed minimum pensions under a contracted-out scheme;
(ii) an earner’s accrued rights to pensions under an occupational pension scheme which is not contracted-out, to the extent that those rights derive from his accrued rights to guaranteed minimum pensions under a contracted-out scheme; or
(iii) the liability for the payment of guaranteed minimum pensions to or in respect of any person who has become entitled to them,
may be made by an occupational pension scheme to another such scheme or to a personal pension scheme;
(b) a transfer of or a transfer payment in respect of an earner’s accrued rights to guaranteed minimum pensions which are appropriately secured for the purposes of section 19 may be made to an occupational pension scheme or a personal pension scheme.
(2) Any such regulations may be made so as to apply to earners who are not in employment at the time of the transfer.
(3) Regulations under subsection (1) may provide that any provision of this Part (other than sections 18, 19 and 43 to 45, and sections 26 to 33 so far as they apply to personal pension schemes) or of Chapter III of Part IV or Chapter II of Part V shall have effect, where there has been a transfer to which they apply, subject to such modifications as may be specified in the regulations.
(4) Regulations under subsection (1) shall have effect in relation to transfers whenever made unless they provide that they are only to have effect in relation to transfers which take place after they come into force.
(5) The power conferred by subsection (1) is without prejudice to the generality of section 182(2).
(6) In the provisions mentioned in subsection (3) “accrued rights”, in relation to an earner, means the rights conferring prospective entitlement under the scheme in question to the pensions to be provided for the earner and the earner’s widow or widower in accordance with sections 13 and 17, and references to an earner’s accrued rights to guaranteed minimum pensions shall be construed accordingly.
(1) Where the annual rate of a pension required to be provided by a scheme in accordance with section 13 or 17 would not exceed the prescribed amount and the circumstances are such as may be prescribed, the scheme may provide for the payment of a lump sum instead of that pension.
(2) Neither section 13 nor section 17 shall preclude a scheme from providing for the earner’s or the earner’s widow’s or widower’s guaranteed minimum pension to be suspended or forfeited in such circumstances as may be prescribed.
The resources of the scheme must be derived in whole or in part from—
(a) payments made or to be made by one or more employers of earners to whom the scheme applies, being payments either—
(i) under an actual or contingent legal obligation; or
(ii) in the exercise of a power conferred, or the discharge of a duty imposed, on a Minister of the Crown, government department or any other person, being a power or duty which extends to the disbursement or allocation of public money; or
(b) such other payments by the earner or his employer, or both, as may be prescribed for different categories of scheme.
(1) The Board must be satisfied that the scheme complies with—
(a) regulations prescribing the means by which guaranteed minimum pensions under contracted-out schemes are to be secured (whether irrevocable trust, policy of insurance, annuity contract or other means); and
(b) the conditions which are required by the regulations to be satisfied in relation to any means adopted;
and generally as to the arrangements in force or to be in force from time to time for securing those pensions.
Pension Schemes Act 1993