Office of Public Sector Information
SCHEDULE 7 continued
(2) Subject to sub-paragraph (4), the widow or widower of the deferred member is entitled to periodic compensation commencing on the day following the deferred member’s death and continuing for life.
(3) The annual rate of the periodic compensation at any time is—
(a) where the deferred member died after attaining normal pension age, half of the annual rate of the periodic compensation (including any increases under paragraph 28) to which the deferred member would at that time have been entitled under paragraph 15 in respect of the pension had the member not died,
(b) where the deferred member died before attaining normal pension age, half of the annual rate of the periodic compensation (including any increases under paragraph 28) to which the deferred member would have been entitled at that time under paragraph 15 if—
(i) normal pension age had been the deferred member’s actual age immediately before the date of the deferred member’s death, and
(ii) the deferred member had not died.
(4) The deferred member’s widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed.
(5) In this paragraph “the deferred member” and “the pension” are to be construed in accordance with paragraph 15.
19 (1) Compensation is payable in accordance with this paragraph where, under the admissible rules of the scheme, a deferred member has not attained normal pension age in respect of his rights to a lump sum under the scheme (“the scheme lump sum”) before the assessment date.
(2) If the deferred member survives to attain normal pension age in respect of the scheme lump sum, he is entitled to compensation under this paragraph on attaining that age.
(3) The compensation is a lump sum equal to 90% of the protected amount.
(4) In sub-paragraph (3) “the protected amount” means the aggregate of—
(a) the accrued amount,
(b) the revaluation amount for the first revaluation period, and
(c) the revaluation amount for the second revaluation period.
(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the amount of the scheme lump sum to which the deferred member would have been entitled in accordance with the admissible rules had normal pension age been the actual age attained by the deferred member when the pensionable service relating to the lump sum ended.
(6) Paragraphs 16 and 17 apply in relation to this paragraph as if in those paragraphs—
(a) references to the pension were to the scheme lump sum, and
(b) “the deferred member” and “the accrued amount” had the same meaning as in this paragraph.
(7) This paragraph does not apply in relation to a lump sum to which a person is entitled by reason of commuting any part of a pension under the scheme.
(8) This paragraph is subject to—
paragraph 26 (compensation cap), and
paragraph 30 (power of Secretary of State to change percentage rates by order).
20 (1) Compensation is payable in accordance with this paragraph where—
(a) a person’s pensionable service terminates on the commencement of the assessment period,
(b) as a result, he has rights, under the admissible rules, to—
(i) a transfer payment calculated by reference to the value of benefits which have accrued to him under the scheme (“the protected transfer payment”), or
(ii) a cash payment calculated by reference to the amount of contributions made by him or on his behalf to the scheme (“the protected contribution repayment”),
(c) Chapter 5 of Part 4 of the Pension Schemes Act 1993 (c. 48) (early leavers: cash transfer sums and contribution refunds) does not apply to him, and
(d) he does not have relevant accrued rights to benefit (within the meaning of section 101AA(4) of that Act).
(2) That person is entitled to compensation in the form of a lump sum in respect of the protected transfer payment or protected contribution repayment.
(3) The amount of the compensation is 90% of the amount of the protected transfer payment or protected contribution repayment (whichever is the greater).
(4) For the purposes of sub-paragraph (3), the amount of the protected transfer payment or protected contribution repayment is to be calculated in accordance with the admissible rules, which are to be applied for this purpose subject to any prescribed modifications.
(5) The compensation is payable immediately after the transfer notice given under section 160 is received by the trustees or managers of the scheme.
(6) This paragraph is subject to paragraph 30 (power of Secretary of State to change percentage rates by order).
(7) Regulations may modify any provision of paragraph 8, 10, 11 or 14 (compensation for persons who were active members immediately before assessment date) as it applies in the case of a person who is entitled to compensation under this paragraph.
(8) Regulations may modify any provision of sub-paragraphs (1) to (6) as it applies in the case of a person who is entitled to compensation under paragraph 8, 10, 11 or 14.
21 (1) Paragraphs 15, 18 and 19 apply in relation to a pension credit member of the scheme who has not attained normal benefit age at the assessment date as they apply to a deferred member who has not attained normal pension age at that date, subject to the modifications in sub-paragraph (2).
(2) The modifications are as follows—
(a) in paragraph 15(1) and (2) the references to normal pension age are to be read as references to normal benefit age,
(b) in paragraph 15(4) for the words from “the aggregate of” to the end substitute “the accrued amount”,
(c) for paragraph 15(5) substitute—
“(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the initial annual rate of the pension which, under the admissible rules, the deferred member is entitled to receive at normal benefit age by virtue of his pension credit rights.”,
(d) for paragraph 18(1)(b) substitute—
“(b) the pension was attributable (directly or indirectly) to a pension credit to which the deferred pensioner became entitled under section 29(1)(b) of the Welfare Reform and Pensions Act 1999 (c. 30).”,
(e) in paragraph 19(1) and (2) the references to normal pension age are to be read as references to normal benefit age,
(f) in paragraph 19(4) for the words from “the aggregate of” to the end substitute “the accrued amount”,
(g) for paragraph 19(5) substitute—
“(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the amount of the scheme lump sum which, under the admissible rules, the deferred member is entitled to receive at normal benefit age by virtue of his pension credit rights.”, and
(h) paragraph 19(6) does not apply.
22 (1) Compensation is payable in accordance with this paragraph where—
(a) a member of the scheme has died before the assessment date,
(b) as a result of that death, a pension, which is attributable to the member’s pensionable service, is payable to that person’s widow or widower or any other person (“the survivor”) if conditions specified in the scheme rules are met, and
(c) the survivor first satisfies those conditions on or after that date.
(2) The survivor is entitled to periodic compensation in respect of that pension (“the pension”)—
(a) commencing if, and when, the pension would have become payable under the admissible rules, and
(b) continuing until such time as entitlement to the pension would have ceased under the admissible rules.
(3) The annual rate of the periodic compensation is 100% of the aggregate of—
(a) the initial rate of the pension which would have been payable in accordance with the admissible rules had the conditions mentioned in sub-paragraph (1)(c) been satisfied, immediately before the assessment date, and
(b) any increases under paragraph 28 (annual increases in periodic compensation).
(4) This paragraph is subject to paragraph 30 (power of Secretary of State to change percentage rates by order).
23 (1) Regulations may provide for compensation to be payable, in such circumstances as may be prescribed, to or in respect of—
(a) partners of prescribed descriptions of persons of prescribed descriptions who were members of the scheme immediately before the assessment date;
(b) dependants of prescribed descriptions of persons of prescribed descriptions who—
(i) were members of the scheme, or had rights to benefits payable under the scheme rules in respect of a member, immediately before the assessment date,
(ii) became entitled to benefits under the scheme rules in respect of a member on or after the assessment date but before the time the trustees or managers of the scheme received a transfer notice under section 160, or
(iii) have become entitled to compensation under paragraph 22 (survivors who do not meet conditions for scheme benefits at assessment date), in relation to the scheme.
(2) Regulations may in particular—
(a) provide for compensation in the form of periodic or lump sum payments;
(b) provide for periodic compensation to be payable for a prescribed period;
(c) apply paragraphs 28 and 29(2) (annual increases in respect of periodic compensation) in respect of compensation in the form of periodic payments (with or without modifications).
24 (1) In prescribed circumstances, a person entitled to periodic compensation under paragraph 5, 8, 11 or 15 may opt to commute for a lump sum a portion of the periodic compensation with effect from the time it becomes payable.
(2) Except in such circumstances as may be prescribed, the portion commuted under sub-paragraph (1) must not exceed 25%.
(3) Any reduction required to be made under paragraph 26 (compensation cap) must be made before determining the amount of a person’s periodic compensation which may be commuted under this paragraph.
(4) Where a person opts to commute any part of his periodic compensation under this paragraph, the lump sum payable under sub-paragraph (1) is the actuarial equivalent of the commuted portion of the periodic compensation calculated from tables designated for this purpose by the Board.
(5) The Board must publish in such manner as it considers appropriate the tables designated by it for the purposes of sub-paragraph (4).
(6) Regulations may prescribe the manner in which an option to commute periodic compensation under this paragraph may be exercised.
(7) This paragraph does not apply where—
(a) before the assessment date, the person concerned has received benefits under the scheme rules which were in the form of a lump sum (otherwise than as a result of the commutation of any part of a pension) and were attributable to his own service under the scheme, or
(b) immediately before the assessment date, the person concerned has rights to a lump sum under the admissible rules (otherwise than by commutation of any part of a pension) and those rights are attributable to such service.
(8) The Secretary of State may, by order, amend sub-paragraph (2) to substitute a different percentage for the percentage for the time being specified in that sub-paragraph.
25 (1) Regulations may prescribe circumstances in which, and conditions subject to which, a person may become entitled to—
(a) periodic compensation under paragraph 11 or 15, or
(b) lump sum compensation under paragraph 14 or 19,
before he attains normal pension age (or, in a case to which paragraph 21 applies, normal benefit age).
(2) The Board must determine the amount of the actuarial reduction to be applied to compensation where a person becomes so entitled by virtue of regulations under this paragraph.
(3) Where, by virtue of this paragraph, periodic compensation is payable to a person under paragraph 11 or 15 before that person attains normal pension age—
(a) paragraph 12(2) applies as if the reference to the date on which the active member attains normal pension age were a reference to the date on which the compensation is payable by virtue of this paragraph, and
(b) paragraph 17(2)(b) applies as if the reference to the date on which the deferred member attains normal pension age were a reference to the date on which the compensation is payable by virtue of this paragraph.
26 (1) Where—
(a) a person becomes entitled to relevant compensation in respect of a benefit (“benefit A”) under the scheme, and
(b) sub-paragraph (2)(a) or (b) applies,
the amount of the compensation must be restricted in accordance with sub-paragraph (3).
(2) For the purposes of sub-paragraph (1)—
(a) this paragraph applies if—
(i) the annual value of benefit A exceeds the compensation cap, and
(ii) paragraph (b)(i) does not apply, and
(b) this paragraph applies if—
(i) at the same time as the person becomes entitled to relevant compensation in respect of benefit A he also becomes entitled to relevant compensation in respect of one or more other benefits under the scheme or a connected occupational pension scheme (“benefit or benefits B”), and
(ii) the aggregate of the annual values of benefit A and benefit or benefits B exceeds the compensation cap.
(3) Where the relevant compensation in respect of benefit A is required to be restricted in accordance with this sub-paragraph—
(a) if that compensation is within sub-paragraph (4)(a), the protected pension rate for the purposes of paragraph 3(3)(a) is the cap fraction of the rate determined in accordance with paragraph 3(5);
(b) if that compensation is within sub-paragraph (4)(b), the protected notional pension for the purposes of paragraph 11(3)(a) is the cap fraction of the rate determined in accordance with paragraph 11(4);
(c) if that compensation is within sub-paragraph (4)(c), the protected amount for the purposes of paragraph 14(3) is the cap fraction of the amount determined in accordance with paragraph 14(4);
(d) if that compensation is within sub-paragraph (4)(d), the protected pension rate for the purposes of paragraph 15(3)(a) is the cap fraction of the rate determined in accordance with paragraph 15(4);
(e) if that compensation is within sub-paragraph (4)(e), the protected amount for the purposes of paragraph 19(3) is the cap fraction of the amount determined in accordance with paragraph 19(4).
(4) For the purposes of this paragraph “relevant compensation” means—
(a) periodic compensation under paragraph 3 (in a case to which sub-paragraph (7) of that paragraph applies),
(b) periodic compensation under paragraph 11,
(c) compensation under paragraph 14,
(d) periodic compensation under paragraph 15, or
(e) compensation under paragraph 19.
(5) For the purposes of this paragraph, “the cap fraction” means—
Where—
C is the compensation cap, and
V is the annual value of benefit A or, in a case to which sub-paragraph (2)(b) applies, the aggregate of the annual values of benefit A and benefit or benefits B.
(6) For the purposes of this paragraph the “annual value” of a benefit in respect of which a person has become entitled to relevant compensation means—
(a) if the relevant compensation is within sub-paragraph (4)(a) and neither paragraph (b) nor (c) below applies, the amount of the protected pension rate for the purposes of paragraph 3(3)(a);
(b) if the relevant compensation is within sub-paragraph (4)(a) and is in respect of a pension of which a portion has been commuted for a lump sum, the amount which would have been the protected pension rate for those purposes had that portion not been commuted;
(c) if the relevant compensation is within sub-paragraph (4)(a) and the person became entitled to a relevant lump sum under the scheme at the same time as he became entitled to the pension to which that compensation relates, an amount equal to the aggregate of—
(i) the protected pension rate for the purposes of paragraph 3(3)(a), and
(ii) the annualised value of the relevant lump sum;
(d) if the relevant compensation is within sub-paragraph (4)(b), the amount of the protected notional pension for the purposes of paragraph 11(3)(a);
(e) if the relevant compensation is within sub-paragraph (4)(c), the annualised value of the protected amount for the purposes of paragraph 14(3);
(f) if the relevant compensation is within sub-paragraph (4)(d), the amount of the protected pension rate for the purposes of paragraph 15(3)(a);
(g) if the relevant compensation is within sub-paragraph (4)(e), the annualised value of the protected amount for the purposes of paragraph 19(3);
and for the purposes of determining the annual value of a benefit any reduction required to be made by this paragraph is to be disregarded.
(7) In this paragraph—
“annualised value” of a lump sum or amount means the annualised actuarially equivalent amount of that sum or amount determined in accordance with actuarial factors published by the Board;
“the compensation cap”, in relation to the person who becomes entitled to relevant compensation in respect of benefit A, means—
the amount specified by the Secretary of State by order, or
where the person—
has not attained the age of 65, or
has attained the age of 66,
at the time he first becomes entitled to that compensation, that amount as adjusted by the Board in accordance with actuarial adjustment factors published by it;
and for the purposes of this paragraph, except in prescribed circumstances, the scheme is connected with another occupational pension scheme if the same person is or was an employer in relation to both schemes.
(8) For the purposes of sub-paragraph (6)(c) a lump sum under the scheme is a relevant lump sum if the person’s entitlement to the lump sum—
(a) is attributable to his pensionable service, and
(b) did not arise by virtue of any provision of the admissible rules of the scheme making special provision as to early payment of pension on grounds of ill health.
(9) Regulations may provide for this paragraph to apply with prescribed modifications where a person becomes entitled to relevant compensation in respect of a benefit and he has previously—
(a) become entitled to relevant compensation in respect of a benefit or benefits under the scheme or a connected occupational pension scheme, or
(b) become entitled to one or more lump sums under the scheme or a connected occupational pension scheme.
(10) Regulations may prescribe sums which are to disregarded for the purposes of this paragraph.
27 (1) This paragraph applies where, on a review under subsection (2) of section 148 of the Social Security Administration Act 1992 (c. 5) (review of general level of earnings obtaining in Great Britain) in a tax year, the Secretary of State concludes that the general level of earnings obtaining in Great Britain (“the new level”) exceeds the general level at the end of the period mentioned in paragraph (a) or, as the case may be, the date determined under paragraph (b) of that subsection (“the old level”).
(2) The Secretary of State must make an order under sub-paragraph (7) of paragraph 26 which has the effect of increasing the amount specified for the purposes of that sub-paragraph by the percentage by which the new level is greater than the old level.
(3) The order must provide for the increase to have effect on and after the 1st April next following the end of the tax year to which the review relates.
28 (1) This paragraph provides for the increases mentioned in sub-paragraph (3)(b) of paragraphs 3, 5, 8, 11, 15 and 22.
(2) Where a person is entitled to periodic compensation under any of those paragraphs, he is entitled, on the indexation date, to an increase under this paragraph of—
(a) the appropriate percentage of the amount of the underlying rate immediately before that date, or
(b) where the person first became entitled to the periodic compensation during the period of 12 months ending immediately before that date, 1/12th of that amount for each full month for which he was so entitled.
(3) In sub-paragraph (2)—
“appropriate percentage” means the lesser of—
the percentage increase in the retail prices index for the period of 12 months ending with the 31st May last falling before the indexation date, and
2.5%;
“indexation date” means—
the 1st January next falling after a person first becomes entitled to the periodic compensation, and
each subsequent 1st January during his lifetime;
“underlying rate” means, in the case of periodic compensation under any of the paragraphs mentioned in sub-paragraph (1), the aggregate of—
so much of the amount mentioned in sub-paragraph (3)(a) of the paragraph in question as is attributable to post-1997 service, and
the amount within sub-paragraph (3)(b) of that paragraph immediately before the indexation date.
(4) Where paragraph 26(3) (compensation cap) applies to restrict the amount of periodic compensation under one of the paragraphs mentioned in sub-paragraph (1), the amount mentioned in sub-paragraph (3)(a) of the paragraph in question is attributable to post-1997 service and pre-1997 service in the same proportions as the amount so mentioned would have been so attributable had paragraph 26(3) not applied.
(5) Where a portion of periodic compensation under one of the paragraphs mentioned in sub-paragraph (1) has been commuted under paragraph 24—
(a) for the purposes of sub-paragraph (2), the definition of “underlying rate” in sub-paragraph (3) applies as if the reference in paragraph (a) of the definition to the amount mentioned in sub-paragraph (3)(a) of the paragraph in question was a reference to that amount reduced by the commutation percentage, and
(b) that amount (as so reduced) is attributable to post-1997 service and pre-1997 service in the same proportions as that amount would have been so attributable had no part of the periodic compensation been commuted.
(6) In this paragraph—
“post-1997 service” means—
pensionable service which is within paragraph 36(4)(a) and occurs on or after 6th April 1997, or
pensionable service which is within paragraph 36(4)(b) and meets such requirements as may be prescribed;
“pre-1997 service” means—
pensionable service which is within paragraph 36(4)(a) and occurred before 6th April 1997, or
pensionable service which is within paragraph 36(4)(b) and meets such requirements as may be prescribed;
“the commutation percentage”, in relation to periodic compensation, means the percentage of that compensation commuted under paragraph 24.
(7) But in this paragraph, in relation to any relevant pension credit amount, “post-1997 service” and “pre-1997 service” have such meanings as may be prescribed.
(8) In sub-paragraph (7), “relevant pension credit amount” means an amount mentioned in sub-paragraph (3)(a) of—
(a) paragraph 3,
(b) paragraph 5, or
(c) paragraph 15 as it applies by virtue of paragraph 21,
which is attributable (directly or indirectly) to a pension credit.
(9) This paragraph is subject to paragraph 29 (Board’s power to alter rates of revaluation and indexation).
29 (1) The Board may determine the percentage that is to be the maximum revaluation rate for the purposes of paragraphs 12(4) and 17(4), and where it does so paragraphs 12(5) and 17(5) do not apply.
(2) The Board may also determine the percentage that is to be the appropriate percentage for the purposes of paragraph 28 (and where it does so the definition of “appropriate percentage” in paragraph 28(3) does not apply).
(3) Before making a determination under this paragraph the Board must—
(a) consult such persons as it considers appropriate, and
(b) publish details of the proposed determination in such manner as it considers appropriate and consider any representations made in respect of it.
(4) The rate determined under this paragraph may be nil.
(5) A determination under this paragraph may be expressed so as to have effect for a limited period.
(6) A determination under sub-paragraph (2)—
(a) has effect in relation to future increases under paragraph 28 only, and
(b) may be expressed to have effect—
(i) in all cases (whether the entitlement to the periodic compensation first arose before or after the date the determination is made), or
(ii) only in cases where entitlement to the periodic compensation first arose on or after a date determined by the Board.
(7) Notice of any determination under this paragraph must be published in such manner as the Board considers appropriate.
30 (1) The Secretary of State may, on the recommendation of the Board, by order provide that any of the provisions mentioned in sub-paragraph (2) is to have effect as if a different percentage were substituted for the percentage specified in the provision on the passing of this Act (“the original percentage”).
(2) The provisions are paragraphs 3(4)(a) and (b), 5(3), 7(2), 8(3), 10(2), 11(3), 14(3), 15(3), 19(3), 20(3) and 22(3) of this Schedule (percentage used to calculate periodic or lump sum compensation entitlement).
(3) Subject to sub-paragraph (4), an order under sub-paragraph (1) has effect only in respect of any period for which the Board has, under paragraph 29—
(a) reduced the maximum revaluation rate for the purposes of paragraphs 12(4) and 17(4) to nil, and
(b) reduced the appropriate percentage for the purposes of paragraph 28 to nil in all cases.
(4) Sub-paragraph (3) does not prevent an order under sub-paragraph (1) having effect to the extent that it provides for paragraph 3(4)(a), 11(3), 14(3), 15(3), 19(3) or 20(3) (provisions where the original percentage is 90%) to have effect as if for the original percentage there were substituted a higher percentage.
(5) Before making a recommendation for the purposes of sub-paragraph (1) the Board must—
(a) consult such persons as it considers appropriate, and
(b) publish details of the proposed recommendation in such manner as it considers appropriate and consider any representations made in respect of it.
(6) Subject to sub-paragraph (3), an order under this paragraph may have effect—
(a) for a limited period specified in the order;
(b) in relation—
(i) to all payments of compensation which fall to be made after such date as may be specified in the order (whether the entitlement to the periodic compensation first arose before or after that date), or
(ii) only to payments of compensation to which a person first becomes entitled after such a date.
(7) The date specified under sub-paragraph (6)(b)(i) or (ii) must not be earlier than the date of the order.
31 (1) The powers conferred by this paragraph are exercisable in relation to cases where—
(a) immediately before the assessment date, a person (“the pensioner”) is entitled to present payment of a pension under the scheme rules (“the pre-assessment date pension”), but
(b) the effect of disregarding rules within paragraphs (a) and (b) of paragraph 35(2) is that the pensioner is not entitled to compensation under paragraph 3(2) by reason of the pension or a part of the pension.
(2) Regulations may provide—
(a) for the pensioner to be treated, for the purposes of the pension compensation provisions, as entitled, immediately before the assessment date, to present payment of a pension under the admissible rules, and
(b) for the compensation payable under paragraph 3 in respect of that pension to be determined in the prescribed manner and, for this purpose, for any provision of this Schedule to be applied with such modifications as may be prescribed.
(3) Regulations may also provide, in cases where—
(a) the pensioner is not treated as entitled to present payment of a pension by virtue of regulations under sub-paragraph (2), but
(b) he is or may become entitled to compensation in respect of the pre-assessment date pension otherwise than under paragraph 3,
for any provision of this Schedule to apply with such modifications as may be prescribed.
32 (1) This paragraph applies to a member of the scheme if—
(a) his pensionable service terminates on the commencement of the assessment period, and
(b) as a result, he has rights, in relation to the scheme, under Chapter 5 of Part 4 of the Pension Schemes Act 1993 (c. 48) (early leavers: cash transfer sums and contribution refunds).
(2) Where this paragraph applies, for the purposes of this Schedule the member is to be treated as if, immediately before the assessment date, he—
(a) had relevant accrued rights to benefits under the scheme (within the meaning of section 101AA(4) of that Act), and
(b) did not have any other rights to benefits (other than benefits attributable (directly or indirectly) to a pension credit) under the scheme.
Pensions Act 2004