Office of Public Sector Information
PART 2 continued CHAPTER 3 continued
(1) Where a transfer notice is given to the trustees or managers of an eligible scheme, the Board assumes responsibility for the scheme in accordance with this Chapter.
(2) The effect of the Board assuming responsibility for a scheme is that—
(a) the property, rights and liabilities of the scheme are transferred to the Board, without further assurance, with effect from the time the trustees or managers receive the transfer notice,
(b) the trustees or managers of the scheme are discharged from their pension obligations from that time, and
(c) from that time the Board is responsible for securing that compensation is (and has been) paid in accordance with the pension compensation provisions,
and, accordingly, the scheme is to be treated as having been wound up immediately after that time.
(3) In subsection (2)(a) the reference to liabilities of the scheme does not include any liability to, or in respect of, any member of the scheme, other than—
(a) liabilities in respect of money purchase benefits, and
(b) such other liabilities as may be prescribed.
(4) In subsection (2)(b) “pension obligations” in relation to the trustees or managers of the scheme means—
(a) their obligations to provide pensions or other benefits to or in respect of persons (including any obligation to provide guaranteed minimum pensions within the meaning of the Pension Schemes Act 1993 (c. 48)), and
(b) their obligations to administer the scheme in accordance with the scheme rules and this or any other enactment.
(5) Schedule 6 makes provision in respect of the transfer of the property, rights and liabilities of a scheme under subsection (2)(a).
(6) Regulations may make further provision regarding such transfers.
(7) Without prejudice to the generality of subsection (6), regulations may authorise the Board to modify a term of a relevant contract of insurance if—
(a) any rights or liabilities under the contract are transferred to the Board by virtue of subsection (2)(a), and
(b) as a result of the transfer, the Board is required, by reason of that term, to pay a specified amount or specified amounts to a specified person who, immediately before the time mentioned in subsection (2)(a), was a member of the scheme or a person entitled to benefits in respect of such a member.
(8) In subsection (7)—
“relevant contract of insurance” means a contract of insurance which—
is entered with a view to securing the whole or part of the scheme’s liability for—
any pension or other benefit payable to or in respect of one particular person whose entitlement to payment of a pension or other benefit has arisen, and
any benefit which will be payable in respect of that person on his death, and
is a contract—
which may not be surrendered, or
in respect of which the amount payable on surrender does not exceed the liability secured;
“specified” means specified in, or determined in accordance with, the contract of insurance.
(1) Schedule 7 makes provision for compensation to be paid in relation to a scheme for which the Board assumes responsibility in accordance with this Chapter, including provision for—
(a) periodic compensation to be paid to or in respect of members,
(b) lump sum compensation to be paid to members,
(c) a cap to be imposed on the periodic compensation and lump sum compensation payable, and
(d) annual increases to be made to periodic compensation.
(2) In this Part references to the pension compensation provisions are to the provisions of, and the provisions made by virtue of, this section, sections 140 to 142, 161(2)(c), 164 and 168 and Schedule 7.
(Those references do not include any provision of, or made by virtue of, section 170 (discharge of liabilities in respect of money purchase benefits).)
(1) This section applies where the Board assumes responsibility for an eligible scheme in accordance with this Chapter.
(2) Any benefits (other than money purchase benefits) which—
(a) were payable under the scheme rules to any member, or to any person in respect of any member, during the period beginning with the assessment date and ending with the receipt by the trustees or managers of the transfer notice, and
(b) have been paid before the trustees or managers receive the transfer notice,
are to be regarded as going towards discharging any liability of the Board to pay compensation to the member or, as the case may be, person in accordance with the pension compensation provisions.
(3) Regulations may provide that, in prescribed circumstances, where—
(a) a member of the scheme died before the commencement of the assessment period, and
(b) during the period mentioned in subsection (2)(a), a person became entitled under the scheme rules to a benefit of a prescribed description in respect of the member,
the benefit, or any part of it, is, for the purposes of subsection (2), to be treated as having become payable before the assessment date.
(4) The Board must—
(a) if any amount paid, during the period mentioned in subsection (2)(a), by the trustees or managers of the scheme to a member, or to a person in respect of a member, exceeded the entitlement of that member or person under the pension compensation provisions, take such steps as it considers appropriate (including adjusting future compensation payments made in accordance with those provisions) to recover an amount equal to the aggregate of—
(i) the amount of the excess, and
(ii) interest on that amount, at the prescribed rate, for the period which begins when the excess was paid by the trustees or managers and ends with the recovery of the excess, and
(b) if any amount so paid was less than that entitlement (or no amount was paid in respect of that entitlement), pay an amount to the member or person concerned equal to the aggregate of—
(i) the amount of the shortfall, and
(ii) interest on that amount, at the prescribed rate, for the period which begins when the shortfall ought to have been paid by the trustees or managers and ends with the payment of the shortfall by the Board.
(5) In subsection (4) references to an amount paid do not include—
(a) an amount paid in respect of any money purchase benefit, or
(b) any other amount of a prescribed description.
(6) Nothing in subsection (4) requires the Board—
(a) to recover any amount from a person in such circumstances as may be prescribed, or
(b) to recover from any person any amount which it considers to be trivial.
(7) In this section “assessment date” is to be construed in accordance with Schedule 7.
(1) Regulations may provide that, where the Board assumes responsibility for an eligible scheme, the entitlement of any member of the scheme to compensation under this Chapter is, in such circumstances as may be prescribed, postponed for the whole or any part of the assessment period for which he continued in employment after attaining normal pension age.
(2) Regulations under subsection (1) may provide that the postponement is on such terms and conditions (including those relating to increments) as may be prescribed.
(3) In subsection (1) the reference to “normal pension age” is to normal pension age, within the meaning of paragraph 34 of Schedule 7, in relation to the pension or lump sum in respect of which the entitlement to compensation arises.
(1) The Board must notify the Commissioners of Inland Revenue where, by reason of it assuming responsibility for an eligible scheme in accordance with this Chapter, the trustees or managers of the scheme are discharged from their liability to provide a guaranteed minimum pension (within the meaning of the Pension Schemes Act 1993 (c. 48)) to or in respect of a member of the scheme.
(2) Notification under subsection (1) must be given as soon as reasonably practicable.
(3) In section 47 of the Pension Schemes Act 1993 (further provision concerning entitlement to a guaranteed minimum pension for the purposes of section 46), after subsection (7) insert—
“(8) For the purposes of section 46, a person shall be treated as entitled to a guaranteed minimum pension to which he would have been entitled but for the fact that the trustees or managers were discharged from their liability to provide that pension on the Board of the Pension Protection Fund assuming responsibility for the scheme.”
(1) This section applies where the Board assumes responsibility for a scheme in accordance with this Chapter.
(2) Subject to subsection (4), the Board must pay any amount by way of pensions or other benefits which a person had become entitled to payment of under the scheme rules before the assessment date but which remained unpaid at the time the transfer notice was received by the trustees or managers of the scheme.
(3) If, immediately before the assessment date, the person is entitled to the amount but has postponed payment of it, subsection (2) does not apply.
(4) Subsection (2) does not apply in relation to the amount of—
(a) any transfer payment, or
(b) any payment in respect of a refund of contributions.
(5) Regulations may provide that, in prescribed circumstances, where—
(a) a member of the scheme died before the commencement of the assessment period, and
(b) during the period beginning with the assessment date and ending with the receipt by the trustees or managers of the transfer notice, a person became entitled under the scheme rules to a benefit of a prescribed description in respect of the member,
that person’s entitlement to the benefit, or to any part of it, is, for the purposes of subsection (2), to be treated as having arisen before the assessment date.
(6) Regulations may make provision requiring the Board, in such circumstances as may be prescribed, to take such steps (including making payments) as may be prescribed in respect of rights of prescribed descriptions to which members of the scheme were entitled immediately before the commencement of the assessment period.
(7) For the purposes of regulations made under subsection (6)—
(a) this Chapter (other than this subsection), and
(b) the scheme rules (including any relevant legislative provision within the meaning of section 318(3)),
are to have effect subject to such modifications as may be prescribed.
(8) In this section “assessment date” is to be construed in accordance with Schedule 7.
(1) Regulations may modify any of the provisions of this Chapter as it applies to cases—
(a) where any liability to provide pensions or other benefits to or in respect of any member or members under a scheme is discharged during an assessment period in relation to the scheme by virtue of—
(i) regulations under section 135(4), or
(ii) the Board validating any action mentioned in section 135(9), or
(b) where, in prescribed circumstances, any such liability of a prescribed description is discharged on the assessment date but before the commencement of the assessment period.
(2) In this section “assessment date” is to be construed in accordance with Schedule 7.
(1) Regulations may make further provision regarding the operation and administration of this Chapter.
(2) Regulations under subsection (1) may, in particular, make provision—
(a) prescribing the manner in which and time when compensation is to be paid (including provision requiring periodic compensation to be paid by instalments);
(b) for calculating the amounts of compensation according to a prescribed scale or otherwise adjusting them to avoid fractional amounts or facilitate computation;
(c) prescribing the circumstances and manner in which compensation to which a person (“the beneficiary”) is entitled may be made to another person on behalf of the beneficiary for any purpose (including the discharge in whole or in part of an obligation of the beneficiary or any other person);
(d) for the payment or distribution of compensation to or among persons claiming to be entitled on the death of any person and for dispensing with strict proof of their title;
(e) for the recovery of amounts of compensation paid by the Board in excess of entitlement (together with interest on such amounts for the period from payment until recovery);
(f) specifying the circumstances in which payment of compensation can be suspended.
(3) In this section “compensation” means compensation payable under Schedule 7 or under section 141(2).
(1) This section applies where the Board assumes responsibility for an eligible scheme in accordance with this Chapter.
(2) The Board may provide for the discharge of any liability imposed by this Chapter to provide compensation—
(a) by the taking out of a policy of insurance or a number of such policies;
(b) by the entry into an annuity contract or a number of such contracts;
(c) by the transfer of the benefit of such a policy or policies or such a contract or contracts;
(d) in prescribed circumstances, by the payment of a cash sum calculated in the prescribed manner.
(1) This subsection applies where—
(a) the Board assumes responsibility for an eligible scheme in accordance with this Chapter, and
(b) one or more members are entitled, or have accrued rights, under the scheme rules to money purchase benefits.
(2) Regulations must make provision in respect of cases to which subsection (1) applies requiring the Board to secure that liabilities in respect of such benefits transferred to the Board under section 161 are discharged by it in the prescribed manner.
(3) The provision made under subsection (2) must include provision prescribing the manner in which protected rights are to be given effect to.
(4) In this section—
“accrued rights”, under the scheme rules of a scheme, include pension credit rights within the meaning of section 124(1) of the Pensions Act 1995 (c. 26);
“protected rights” has the meaning given by section 10 of the Pension Schemes Act 1993 (c. 48) (protected rights and money purchase benefits).
(1) This section applies where—
(a) a woman has been employed on like work with a man in the same employment,
(b) a woman has been employed on work rated as equivalent with that of a man in the same employment, or
(c) a woman has been employed on work which, not being work in relation to which paragraph (a) or (b) applies, was, in terms of the demands made on her (for instance under such headings as effort, skill and decision), of equal value to that of a man in the same employment,
and service in that employment was pensionable service under an occupational pension scheme.
(2) If, apart from this subsection, any of the payment functions so far as it relates (directly or indirectly) to that pensionable service—
(a) is or becomes less favourable to the woman than it is to the man, or
(b) is or becomes less favourable to the man than it is to the woman,
that function has effect with such modifications as are necessary to ensure that the provision is not less favourable.
(3) Subsection (2) does not operate in relation to any difference as between a woman and a man in the operation of any of the payment functions if the Board proves that the difference is genuinely due to a material factor which—
(a) is not the difference of sex, but
(b) is a material difference between the woman’s case and the man’s case.
(4) Subsection (2) does not apply in such circumstances as may be prescribed.
(5) This section has effect in relation to the exercise of any payment function in so far as it relates (directly or indirectly) to any pensionable service on or after 17th May 1990.
(6) In this section—
“payment function” means any function conferred on the Board by or by virtue of this Chapter which relates to a person’s entitlement to or the payment of any amount under or by virtue of—
the pension compensation provisions,
section 166 (duty to pay scheme benefits unpaid at assessment date etc),
section 169 (discharge of liabilities in respect of compensation), or
section 170 (discharge of liabilities in respect of money purchase benefits);
“pensionable service” has the meaning given by section 124(1) of the Pensions Act 1995 (c. 26).
(1) No transfer notice may be given in respect of a scheme within the first 12 months of an assessment period in relation to the scheme.
(2) Where an application has been made under section 182 (application for fraud compensation payment), no transfer notice may be given until—
(a) the Board has determined the application,
(b) the period within which the Board’s determination may be reviewed by virtue of Chapter 6 has expired, and
(c) if the determination is so reviewed—
(i) the review and any reconsideration,
(ii) any reference to the PPF Ombudsman in respect of the determination, and
(iii) any appeal against his determination or directions,
has been finally disposed of.
(3) Subsection (4) applies where during an assessment period in relation to a scheme the Board determines to make one or more fraud compensation payments (“the fraud compensation”) to the trustees or managers of the scheme under Chapter 4 of this Part.
(4) For the purposes of determining whether the condition in section 127(2)(a), 128(2)(a), 152(2) or 158(1) is satisfied, any fraud compensation payment which becomes payable after the relevant time is, to the extent that it relates to a loss incurred by the scheme before that time, to be regarded as an asset of the scheme at that time.
(5) For the purposes of subsection (4) “the relevant time”—
(a) in the case of section 127(2)(a), has the same meaning as in that provision,
(b) in the case of section 128(2)(a), has the same meaning as in that provision,
(c) in the case of section 152(2) means the reconsideration time (within the meaning of section 151), and
(d) in the case of section 158(1), has the same meaning as in that provision.
(6) Subsection (4) does not apply to the extent that the fraud compensation is payable in respect of a reduction in the value of money purchase assets of the scheme.
For this purpose “money purchase assets” means assets representing the value of any rights in respect of money purchase benefits under the scheme rules.
(1) The Pension Protection Fund shall consist of—
(a) property and rights transferred to the Board under section 161(2)(a),
(b) contributions levied under section 174 or 175 (initial and pension protection levies),
(c) money borrowed by the Board under section 115 for the purposes of this Chapter,
(d) any income or capital gain credited under subsection (2),
(e) any amount paid to the Board by virtue of section 139 (repayment of loans to trustees or managers and payment of interest),
(f) amounts recovered under section 163(4)(a) or by virtue of section 168(2)(e) (overpayments),
(g) any amount paid to the Board in respect of a debt due to the Board under section 40(7) by virtue of a contribution notice under section 38,
(h) any property transferred or amounts paid to the Board as required by a restoration order under section 52,
(i) any amount paid to the Board in respect of a debt due to the Board under section 56(7) by virtue of a contribution notice under section 55,
(j) amounts transferred from the Fraud Compensation Fund under section 187 (fraud compensation transfer payments), and
(k) amounts of a prescribed description (other than amounts paid, directly or indirectly, to the Board by the Crown).
(2) The Board must credit to the Pension Protection Fund any income or capital gain arising from the assets in the Fund.
(3) The following are to be paid or transferred out of the Pension Protection Fund—
(a) any sums required to meet liabilities transferred to the Board under section 161(2)(a),
(b) any sums required to make payments in accordance with the pension compensation provisions,
(c) any sums required for the repayment of, and the payment of interest on, money within subsection (1)(c),
(d) any sums required to make loans under section 139 (loans to trustees or managers),
(e) any sums required to make payments under section 163(4)(b) (underpayments during the assessment period),
(f) any sums required to make payments under section 166 (payment of unpaid scheme benefits etc),
(g) any sums required to discharge liabilities under section 169 or 170 (discharge of liabilities in respect of compensation or money purchase benefits),
(h) any sums required to meet any liabilities arising from obligations imposed on the Board by a restoration order under section 52,
(i) any property (other than sums) required to meet any liabilities—
(i) transferred to the Board as mentioned in paragraph (a) and arising from obligations imposed by a restoration order under section 52, or
(ii) arising from obligations imposed on the Board by such an order,
(j) any sums required to meet expenditure incurred by virtue of section 161(5) and paragraph 7 of Schedule 6 (expenditure associated with transfer of property, rights and liabilities to the Board), and
(k) sums required for prescribed purposes.
(4) No other amounts are to be paid or transferred out of the Pension Protection Fund.
(5) In subsection (1) (other than paragraph (d)) and subsection (3) (other than paragraph (c)) any reference to a provision of this Act is to be read as including a reference to any provision in force in Northern Ireland corresponding to that provision.
(1) Regulations must make provision for imposing a levy (“the initial levy”) in respect of eligible schemes for the period (“the initial period”) which—
(a) begins with the day appointed for this purpose by the regulations, and
(b) ends on the following 31st March or, if the regulations so provide, 12 months after the day referred to in paragraph (a).
(2) The regulations must prescribe—
(a) the factors by reference to which the initial levy is to be assessed,
(b) the rate of the levy, and
(c) the time or times during the initial period when the levy, or any instalment of the levy, becomes payable.
(3) Regulations under this section may only be made with the approval of the Treasury.
(1) For each financial year falling after the initial period, the Board must impose both of the following—
(a) a risk-based pension protection levy in respect of all eligible schemes;
(b) a scheme-based pension protection levy in respect of eligible schemes.
In this Chapter “pension protection levy” means a levy imposed in accordance with this section.
(2) For the purposes of this section—
(a) a risk-based pension protection levy is a levy assessed by reference to—
(i) the difference between the value of a scheme’s assets (disregarding any assets representing the value of any rights in respect of money purchase benefits under the scheme rules) and the amount of its protected liabilities,
(ii) except in relation to any prescribed scheme or scheme of a prescribed description, the likelihood of an insolvency event occurring in relation to the employer in relation to a scheme, and
(iii) if the Board considers it appropriate, one or more other risk factors mentioned in subsection (3), and
(b) a scheme-based pension protection levy is a levy assessed by reference to—
(i) the amount of a scheme’s liabilities to or in respect of members (other than liabilities in respect of money purchase benefits), and
(ii) if the Board considers it appropriate, one or more other scheme factors mentioned in subsection (4).
(3) The other risk factors referred to in subsection (2)(a)(iii) are factors which the Board considers indicate one or more of the following—
(a) the risks associated with the nature of a scheme’s investments when compared with the nature of its liabilities;
(b) such other matters as may be prescribed.
(4) The other scheme factors referred to in subsection (2)(b)(ii) are—
(a) the number of persons who are members, or fall within any description of member, of a scheme;
(b) the total annual amount of pensionable earnings of active members of a scheme;
(c) such other factors as may be prescribed.
(5) The Board must, before the beginning of each financial year, determine in respect of that year—
(a) the factors by reference to which the pension protection levies are to be assessed,
(b) the time or times by reference to which those factors are to be assessed,
(c) the rate of the levies, and
(d) the time or times during the year when the levies, or any instalment of levy, becomes payable.
(6) Different risk factors, scheme factors or rates may be determined in respect of different descriptions of scheme.
(7) The rate determined in respect of a description of scheme may be nil.
(8) In this section—
“initial period” is to be construed in accordance with section 174;
“pensionable earnings”, in relation to an active member under a scheme, means the earnings by reference to which a member’s entitlement to benefits would be calculated under the scheme rules if he ceased to be an active member at the time by reference to which the factor within subsection (4)(b) is to be assessed.
(9) In this section and sections 176 to 181 “financial year” means a period of 12 months ending with 31st March.
(10) The Board’s duty to impose pension protection levies in respect of any financial year is subject to—
(a) section 177 (amounts to be raised by the pension protection levies), and
(b) section 180 (transitional provision).
(1) The Board must consult such persons as it considers appropriate in the prescribed manner before making a determination under section 175(5) in respect of a financial year if—
(a) that year is the first financial year for which the Board is required to impose levies under section 175,
(b) any of the proposed levy factors or levy rates is different, or applies to a different description of scheme, from the levy factors and levy rates in respect of the pension protection levies imposed in the previous financial year, or
(c) no consultation has been required under this subsection in relation to the pension protection levies imposed for either of the previous two financial years.
(2) The Board must publish details of any determination under section 175(5) in the prescribed manner.
Pensions Act 2004