Office of Public Sector Information
279.Paragraph 14 inserts new section 148AB in the Social Security Administration Act 1992 which introduces provisions for earnings revaluation of the consolidated amount.
280.Paragraphs 15 to 22 amend PSA 1993 to insert the necessary references to new section 46A in sections 46, 47, 48, 49, 164, 165 and 167 to ensure the consolidated contracted-out reduction is taken into account where appropriate.
281.An assessed income period (AIP) is a specified period during which time the state pension credit customer does not need to report changes to his or her retirement provision. Currently the maximum length of an AIP is five years (except under transitional provisions).
282.Subsection (2) substitutes a new subsection (1) in section 9 of the State Pension Credit Act 2002 so that from 6 April 2009 claimants aged 75 or over will generally be given an indefinite AIP. Exceptions to this general rule are set out in the following subsections of section 9 so that, for example, an indefinite AIP may be brought to an end early on the occurrence of certain circumstances, such as where the claimant ceases to be treated as a member of a couple.
283.Under Subsection (4) which inserts a new subsection (6) into section 9, if the claimant has an AIP of five years or more which expires when he or she is aged 80 or over then the AIP will also be extended indefinitely. Again, however, this indefinite AIP may be brought to an end early in certain circumstances. This provision is temporary as five years after its coming into force every AIP that has been set for a claimant over 80 will either be an indefinite AIP or will be under five years.
284.Section 106 repeals the main sections of the PSA1993 which deal with protected rights. This includes sections that were inserted by the PA 2007 which provide for survivor benefits. The PA 2007 repealed several sections of the PSA 1993 which dealt with protected rights; section 106 repeals most of the remainder. This section, taken with the PA 2007 changes and section 145(2), will ensure that all rules for past protected rights are removed at the same time as contracting out on a defined contribution basis is abolished.
285.This section sets out the scope of the pension compensation sharing mechanism that will enable compensation paid by the Pension Protection Fund to be shared on divorce or dissolution of a civil partnership.
286.Subsection (2) sets out that pension compensation rights will be shareable subject to certain exceptions that will be set out in regulations.
287.This section sets out the intended meaning of particular words and phrases used throughout Chapter 1 of Part 3.
288.This section sets out the possible orders a court could make under the MCA1973, the Matrimonial and Family Proceedings Act 1984, the Civil Partnerships Act 2004 and the Family Law (Scotland) Act 1985 which, upon taking effect, would trigger the new pension compensation sharing regime. With regard to Scotland, the section also allows for pension compensation sharing to be provided for in a ‘qualifying agreement’ – an agreement between the parties to a marriage or partners in a civil partnership as to the sharing of assets on divorce or dissolution. Although not a court order, such agreements, if made in the correct form and registered, can be enforced through the courts.
289.This section makes additional provision in relation to Scotland, concerning the manner and time limits within which the order or qualifying agreement is to be passed to the Board of the PPF.
290.Pension compensation sharing will be initiated by an order of the court specifying a percentage of the compensation rights which are to be “shared” (i.e. transferred). The effect of this section is that the rights to compensation are valued for the purpose of the transfer on “valuation day” – a day during the “implementation period” (seesection 115) chosen by the Board.
291.Subsection (4) provides a regulation-making power to enable any description of benefit to be disregarded for the purposes of the compensation sharing calculation. For example, benefits due to a survivor as a consequence of a previous marriage or civil partnership.
This section allows the Secretary of State to establish, in regulations, the method for the calculation of the cash equivalent in pension compensation sharing cases. It is intended that this will broadly reflect the principles set out for calculating cash equivalents for early leavers.
292.This section provides for the reduction of the transferor’s pension compensation payments by the percentage specified in the pension compensation sharing order (or qualifying agreement). Subsection (3)(b) provides for the calculation of a percentage, where, in Scotland, the order or agreement has specified an amount.
293.Section 114 provides that the Board must implement the order conferring rights to compensation on the beneficiary of a pension compensation sharing order (or qualifying agreement) during the implementation period – defined in section 115 as 4 months beginning on the date on which the sharing order (or qualifying agreement) takes effect or, if later, the date on which the Board of the Pension Protection Fund receives the relevant documents.
294.Regulation-making powers are provided to allow the Secretary of State to define the parameters of this requirement. Regulations may provide for:-
the circumstances where the implementation period can be extended;
the information required (for example addresses, ages, National Insurances numbers)
the procedure for notifying the transferor and transferee of the day on which the implementation period begins; and
the effect on the implementation period where the pension compensation sharing order (or qualifying agreement) is the subject of an application for leave to appeal out of time.
295.Section 116 sets out the procedure which the Board must follow in order to discharge its liability in respect of a pension compensation credit. The beneficiary of a pension compensation order (or qualifying agreement) will in the first place receive a notice stating that they are entitled to periodic compensation and setting out the initial annual amount of that compensation (subsection (2) and (7)). The initial annual amount will have been calculated by the Board (subsection (4)) and will reflect the value of the rights transferred by the court (subsection (5)). The timing of payments, and calculation of their amounts in the future, is set out in Schedule 5.
296.Subsection (8) provides a power to make provision for what is to happen if the person dies before the Board makes its calculation and sends out the notice. For example, regulations will provide for survivor’s benefits to be paid where appropriate.
297.Schedule 5 makes detailed provision concerning the calculation of compensation payable to the transferee (former spouse or civil partner). The way the compensation is calculated depends upon the status of the transferee at the date the transfer takes place.
298.The Schedule is accordingly divided into four Parts:-
Part 1 is introductory, covering interpretation and the determination of a pension compensation age;
Part 2 makes provision where transferees attain pension compensation age before or on transfer day;
Part 3 makes provision where transferees attain pension compensation age after transfer day; and
Part 4 provisions apply irrespective of the age of the transferee on transfer day.
299.The Schedule is intended to operate in a similar way to the corresponding provisions of Schedule 7 to the PA 2004 (Pension Compensation Provisions) as they apply to the calculation of pension compensation generally.
300.Paragraph 3 makes provision about the age at which the transferee is to start receiving periodic compensation under the Schedule (the transferee’s “pension compensation age”). In the usual case this will be when they reach the age at which the transferor starts to receive pension compensation payments.
301.Where the transferee is, at the point the pension compensation order takes effect, over the pension compensation age they will receive periodic compensation for life (paragraph 4). This compensation starts from the transfer day, and comprises the initial annual rate of the compensation plus any annual increases due to inflation underparagraph 12. It is subject to any regulations applying the compensation cap made underparagraph 18.
302.Paragraph 5 provides that 50% of the pension compensation in payment, or payable, will be paid to the transferee's surviving partner (widow, widower or surviving civil partner) after the death of the transferee. Regulations may set out when the surviving partner will not be entitled to compensation. This will allow provision to be made for cases where the scheme rules under which the transferor’s compensation is calculated did not provide for pensions to a surviving partner.
303.Where the transferee has not reached the pension compensation age at the point of transfer they will become entitled to receive compensation payments for life starting from when they do reach the pension compensation age (paragraph 6). That compensation will comprise the initial annual rate, adjusted by any increases for inflation, up until the point when they reach pension compensation age under paragraph 8, plus any annual increases due to inflation under paragraph 17. The compensation will be subject to the provisions for commutation (paragraph 9), early payment (paragraph 10), deferred payment (paragraph 11) and the compensation cap (paragraph 18).
304.Paragraph 7 provides that 50% of the pension compensation in payment or payable, plus increases for inflation under paragraph 17, will be paid to the transferee's surviving partner after the death of the transferee. Regulations may set out exceptions. This will allow provision to be made for cases where the scheme rules, under which the transferor’s compensation is calculated, did not provide for pensions to a surviving partner.
305.Paragraph 8 provides for the initial rate of compensation to be increased to take account of the increases in prices, subject to a cap equal to inflation running at 2.5% every year, between the transfer day and the day before the day the transferee becomes entitled to payment. This is subject to the power in Paragraph 20 for the Board of the Pension Protection Fund to alter the maximum rate of revaluation from 2.5% (the rate established by the amendments made by section 101 and Schedule 2).
306.Paragraph 9 provides that the transferee can commute part of their pension compensation as a lump sum in prescribed circumstances, up to a maximum of 25%. The amount paid as a lump sum will be 25% of the pension compensation payable after reductions are made to take account of the compensation cap. The lump sum payable will be the actuarial equivalent of the commuted portion of the pension compensation calculated from tables designated for this purpose by the Board of the Pension Protection Fund. Regulations may set out the manner in which the option to commute may be exercised. The intention is that regulations will prescribe that the transferee can exercise the right to commute where the transferor had such a right and has not already exercised it before the transfer day. This paragraph also allows Secretary of State to change the maximum sum commuted by order.
307.Paragraph 10 provides that regulations may prescribe when the transferee may receive pension compensation and lump sum compensation before their normal pension age. This applies to transferees under pension compensation age. The Board of the Pension Protection Fund will determine the actuarial reduction to be applied to compensation paid early. The intention is to prescribe that the transferee may take compensation early any time after they reach the age of 50. This provides for the transferee to take compensation early in the same way as the transferor would under Schedule 7 to PA 2004.
308.Paragraph 11 will enable transferees in prescribed circumstances to delay receipt of the pension compensation until a date after they would reach the pension compensation age. The Board will determine the amount by which the compensation will increase to take account of the delayed payment. This provides for the transferee to defer compensation in the same way as the transferor will be entitled to do once the amendment of Schedule 7 to PA 2004 made by paragraph 13 of Schedule 8 to the Act comes into force.
309.Paragraph 12 will enable transferees who have a progressive disease in consequence of which death can reasonably be expected in the following six months, and who are not already receiving compensation in respect of a particular pension scheme, to apply for a lump sum equal to twice the annual rate of compensation which they would have been entitled to had they reached normal pension age.
310.Paragraph 13 sets out the manner in which an application can be made, and provides for the Board of the PPF to require certain information, for example, concerning the transferee’s illness.
311.Paragraph 14 sets out how the Board must respond to an application, and provides for applications to be held over and determined at a later date where the transferee does not satisfy the conditions relating to their terminal illness, but may satisfy the conditions in a the next six months.
312.Paragraph 15 means that a successful applicant will receive a lump sum calculated in accordance with sub-paragraph (2) in lieu of future rights to compensation.
313.Paragraph 16 provides for the Board of the PPF to have access to certain information held by the Secretary of State to assist in dealing with applications for terminal illness lump sums.
314.The provisions in paragraphs 12 to 16 make corresponding provision in respect of transferees as the new paragraphs 25B to 25F inserted into Schedule 7 to the PA 2004 by Schedule 8 to this Act make in respect of PPF members more generally.
315.Paragraph 17 provides for the amount of compensation derived from the transferor’s service after 1997 to be increased every year in line with the increase in prices, subject to a maximum increase of 2.5% a year. This provides for the transferee to receive increases due to take account of inflation in the same way as the transferor. This is subject to the power in paragraph 20 for the Board to alter the maximum rate of increase from 2.5% (the rate established by the amendments made by section 101 and Schedule 2).
316.Paragraph 18 allows the Secretary of State to set out in regulations how the compensation cap under paragraph 26(7) of Schedule 7 to the PA 2004 will apply to the compensation payable to the transferee. The intention is that the cap will apply in a way that ensures that both the transferee and transferor receive the appropriate levels of compensation without creating additional liabilities for the Board of the Pension Protection Fund or opportunities for evasion of the cap.
317.Paragraph 19 provides that regulations may provide for compensation to be payable to partners and dependants of prescribed descriptions. This allows for the extension of compensation payment to surviving civil partners.
318.Paragraph 20 provides that the Board of the Pension Protection Fund may determine the maximum indexation rates for the purposes of paragraphs 8 and 17. For the purposes of paragraph 17 this can only apply to future increases and can apply to all cases or those cases where entitlement arose after the determination. The Board of the Pension Protection Fund must consult anyone it considers appropriate and publish details of the proposed determination as it considers appropriate. The Board must consider any representations made. This is an equivalent power to that which applies in respect of the rates of revaluation and indexation in paragraph 29 of Schedule 7 to the PA 2004.
319.The purpose of this section is to enable provision to be made to allow the Board of the Pension Protection Fund to recover, from the transferor and transferee, administrative costs incurred as a result of implementing the pension compensation share (for example the reasonable costs of valuing the rights to be shared and of calculating and making payments to an additional person). The precise amount of the charges will depend on the activities the Board will need to carry out in a particular case, but are likely to be similar to the charges parties pay to pension schemes where a pension is shared, for example in the region of £2,000 to £3,000 in total.
320.The intention is to use the regulation-making power to require that charges must relate to the costs incurred in implementing the pension compensation sharing order; and that the parties are offered a chance to pay charges at the outset so that they need not be deducted from compensation payments.
321.Regulations may include the following provisions:-
paragraph (a): postponement of the start of the implementation period. This could allow the Board of the Pension Protection Fund to postpone the start of the implementation until the administration charges have been met (see also section 115 (Implementation Period)) above;
paragraph (b): off setting charges that a party owes to the Board against compensation payable to the party by the Board;
paragraph (c): reimbursement. This could allow charges to be recovered from one party where that party has defaulted on meeting the administrative charges, and the charges have been met by the other party.
322.Subsection (3) controls how the regulations will deal with the question of apportionment of charges between the parties. If apportionment of charges is included in the pension compensation sharing order (or qualifying agreement) then charges will be apportioned by that provision. If there is no such provision, charges are attributable to the member of the couple whose compensation is being shared (the transferor).
323.These sections allow the Secretary of State to make regulations relating to the Board of the Pension Protection Fund releasing information on pension compensation sharing cases.
324.Section 118 provides for the Secretary of State to make regulations requiring information to be supplied by the Board, or about the calculation and verification of compensation rights, in connection with proceedings for divorce or dissolution of a civil partnership in England, Wales, Scotland and Northern Ireland. It also enables regulation to be made imposing charges for the provision of such information.
325.Section 119 allows for the Secretary of State to make regulations requiring the Board of the Pension Protection Fund to provide prescribed persons with information regarding the implementation of pension compensation sharing. For example, regulations would prescribe that the parties to the divorce or dissolution of a civil partnership are provided with information of their future entitlements to compensation.
326.This section gives effect to Schedules 6 and 7. Schedule 6 amends matrimonial and civil partnership legislation for England and Wales so that the Court can make pension compensation sharing orders and orders for the attachment of pension compensation. Schedule 7 amends legislation with respect to Scotland.
327.Schedule 6 makes various amendments to family legislation in respect of England and Wales to enable the courts to make pension compensation sharing orders and attachment orders in respect of pension compensation paid by the Pension Protection Fund.
328.Part 1 amends MCA 1973.
329.New section 24E (Pension compensation sharing orders in connection with divorce proceedings) sets out the circumstances in which a pension compensation sharing order may be made. The circumstances mirror those set out in relation to the making of a pension sharing order in section 24B of the MCA 1973. The effect of this provision is that pension sharing will not be available in relation to rights which have already been shared between parties. Nor will it be available in relation to rights which are the subject of attachment (whether in favour of one of the parties or in favour of a third party).
330.New section 24F (Pension compensation orders: duty to stay) provides powers to the Lord Chancellor to specify in regulations when the implementation of a sharing order is delayed. This mirrors the existing provision made in relation to pension sharing orders made by section 24C and will allow time for any appeals arising from the order to be heard.
331.New section 24G (Pension compensation sharing orders: apportionment of charges) mirrors the existing provision made in relation to pension sharing orders by section 24D and provides that a court order may provide for the apportionment of any charge made by the Board of the Pension Protection Fund under section 117 (charges in respect of compensation sharing costs).
332.Paragraphs 4 to 6 of the Schedule make consequential amendments to other provisions in the MCA 1973 following from the other amendments in the Schedule, such as adding cross-references to the new sections.
333.Paragraph 7 makes provision in the MCA 1973 allowing for the making of attachment orders by inserting new sections 25F and 25G. These ensure that the court may make attachment orders in respect of Pension Protection Fund compensation in a similar way to the making of attachment orders in respect of pensions under the current provisions of sections 25B and 25D of the MCA1973.
334.An attachment order is an alternative to a pension sharing order that will be available to the court on divorce etc. where one of the parties has rights to pension compensation. It is a less drastic alternative in that it does not involve the complications of dividing the rights. An attachment order simply requires the Board to subtract a specified amount from each payment it makes to one party and send it instead to the other party.
335.New section 25G (Attachment of pension compensation: supplementary) mirrors section 25D and allows the Lord Chancellor, through regulations, to specify in relation to the implementation of an attachment order under section 25F the manner in which the Pension Protection Fund discharges its liability, the manner in which payment is calculated and is made, and the information to be provided in relation to payments.
336.Paragraph 8 makes consequential amendments to section 31 (variation, discharge etc of certain orders for financial relief) of the MCA 1973 to reflect the amendments made to that Act by this Schedule, such as inserting necessary cross-references to the new sections and references to compensation sharing orders.
337.Paragraph 9 inserts a new section 40B (appeals relating to pension compensation sharing orders which have taken effect) into the MCA 1973. This new section allows the court to make such further orders as required to put the parties, including the Board of the Pensions Protection Fund, in the appropriate position following a successful appeal.
338.Part 2 of the Schedule makes amendments to the Matrimonial and Family Proceedings Act 1984 so that the provisions of that Act relating to the making of financial provision after overseas settlements on divorce, such as the making of interim orders and orders relating to financial provision and property adjustment also apply to, and enable the making of, orders in relation to Pension Protection Fund compensation under the various provisions inserted into the MCA1973 by this Schedule.
339.Part 3 amends the civil partnership legislation. The amendments correspond with those made to the matrimonial legislation by Part 1.
340.Schedule 7 makes various amendments to the Family Law (Scotland) Act 1985 (the ‘1985 Act’) to enable the courts to make pension compensation sharing orders and, in certain circumstances, orders in respect of qualifying agreements which concern pension compensation paid by the Pension Protection Fund.
341.Paragraph 2 amends section 8 (orders for financial provision) of the 1985 Act to provide that in an action for divorce either party to a marriage, and in an action for dissolution of a civil partnership either partner, can apply to the court for a pension compensation sharing order and a pension compensation earmarking order (an order under section 12B(2)) in an action for divorce or dissolution of a civil partnership. The paragraph also sets out the circumstances in which a pension compensation sharing order may be made. The effect of this provision is that compensation sharing will not be available in relation to rights which have already been shared between parties or civil partners. This provision also applies when a court is making an order with respect to a qualifying agreement which concerns pension compensation sharing.
342.Paragraph 3 inserts a new section 8B (Pension compensation sharing orders: apportionment of charges) which mirrors the existing provision made in relation to pension sharing orders by section 8A and states that a court order may provide for the apportionment of any charge made by the Board of the Pension Protection Fund under Section 114 (charges in respect of compensation sharing costs).
343.Paragraph 4 amends section 10 (sharing of value of matrimonial property or partnership property) of the 1985 Act to include new subsections 8B and 8(C) which mirror the existing provision at section 10(8A) and provide for the Scottish Ministers to make regulations in relation to the calculation, verification and apportionment of benefits under Pension Protection Fund compensation.
344.Paragraph 6 inserts a new section 12B (order for payment of capital sum: pension compensation) which ensures that the court can make earmarking orders in respect of Pension Protection Fund compensation in a similar way to the making of earmarking orders in respect of pensions under the current provisions of sections 12A of the 1985 Act. An earmarking order is an alternative to a pension sharing order that will be available to the court on divorce or dissolution of a civil partnership where one of the parties has rights to pension compensation.
345.Paragraph 8 amends section 16 (agreements on financial provision) of the 1985 Act to ensure that qualifying agreements in respect of pension compensation sharing can be dealt with by the court in the same as way as they would deal with qualifying agreements which concern pension sharing provision.
346.Paragraph 9 inserts relevant definitions in the 1985 Act.
347.This section inserts a new section 168A into the PA 2004 which would give the Secretary of State the power to make provision through regulations for the purpose of enabling the Board of the PPF to recover charges, including allowing the Board to offset charges against PPF compensation.
348.This section gives effect to Schedule 8.
349.This Schedule makes amendments to Schedule 7 to the PA 2004 (Pension Compensation Provisions) which relates to the calculation of pension compensation with the aim of improving the way it works.
350.The amendments in Schedule 8 are intended to –
clarify, through the amendments made in paragraphs 2, 3, 17 and 18, the interpretation of admissible rules in paragraph 35 of Schedule 7. Both rule changes and discretionary increases made, in relation to the scheme, in the period immediately before the insolvency event are ignored for the purposes of calculating pension compensation under Schedule 7.
provide, through the amendments made in paragraphs 4 to 9 and 14, for a terminal illness lump sum to be paid to members, on application, who have a progressive disease in consequence of which death can reasonably be expected in the following six months. The main provisions for the new terminal illness payment are as follows:
New paragraph 25B inserted into Schedule 7 to the PA 2004 will enable members who have a progressive disease, and who are not already receiving compensation in respect of a particular pension scheme, to apply for a terminal illness lump sum payment.
New paragraph 25C sets out the manner in which an application must be made and allows the Board of the PPF to require the application to include certain information. The Board could use this power for example, to obtain information concerning the member’s illness.
New paragraph 25D sets out how the Board must respond to an application, and allows for applications to be held over and determined at a later date where the member does not satisfy the conditions relating to their terminal illness, but may satisfy the conditions in the next six months.
New paragraph 25E means that a successful applicant will receive a lump sum calculated in accordance with sub-paragraph (2) (twice the annual rate of compensation which they would have been entitled to had they reached normal pension age)in lieu of future rights to compensation.
New paragraph 25F gives for the Board of the PPF access to certain information held by the Secretary of State for Work and Pensions to assist in dealing with applications for terminal illness lump sums.
remove an anomaly in the treatment of pension credit members of schemes which enter the Fund. Through amendments made by paragraphs 10 to 12, where a pension credit member (i.e. a member whose rights derive from a pension sharing order or qualifying agreement) was entitled to revaluation under the scheme in which they were a pension credit member, they will be entitled to receive a revaluation addition under paragraph 21 of Schedule 7 like other scheme members.
351.Paragraph 13 inserts powers to specify in regulations when a person may choose to delay receipt of pension compensation and to receive an adjusted amount from a later date. The regulations allow sucha delay, for example, when a person has several small tranches of entitlement under their scheme rules payable at different dates, but would rather delay receipt of the earlier tranches and receive a higher income at a later time.
352.Paragraph 15 make amendments which deal with schemes whose rules would provide for a higher, or lower, rate of pension payment after a period of time, (for example, upon the pensioner reaching a certain age). Currently, the compensation provisions in Schedule 7 to the PA 2004 specify that compensation is calculated based on the rate of pension a person would be entitled to on the assessment date, or on reaching their normal pension age. The provisions introduced by this paragraph will enable regulations to provide that a different amount of compensation is to be paid. For example, the compensation could reflect the level of pension which would have been payable at the time the compensation is paid.
353.Paragraph 16 provides for more consistent wording in the provisions which set out the methods for establishing a member's normal pension age.
354.This section makes a consequential amendment to the PA 2004 following from the creation of pension compensation sharing.
355.This section amends section 286(2) of the PA 2004 (financial assistance scheme for members of certain pension schemes). Currently, the definition of a “qualifying member” who may qualify for payments from the Financial Assistance Scheme (the FAS) only includes those members who have not received, or who are unlikely to receive, all their scheme benefits from their pension scheme.
356.Following the Young Review, the Government’s stated intention is to take over the available assets remaining in the qualifying schemes and make all the associated payments itself. This means that, as well as making payments to those whose pensions are not fully covered, the FAS will also make payments to many of those people whose benefits would have been met in full by their pension schemes.
357.This section amends the definition of “qualifying member” (subsection (2)) to include this latter group of scheme members. Once the section is brought into force and the amendment to section 286(2) is made, a qualifying member in relation to a qualifying pension scheme will no longer be restricted to someone who will not, or who will not be likely to, receive their benefits in full from the scheme. Instead a qualifying member will be someone who is or was a member of a qualifying scheme at a time which may be prescribed and who satisfied prescribed conditions at such time as may be prescribed.
358.The section also amends the definition of “qualifying pension scheme” to take account of the changes to the definition of “qualifying member”. The changes to “qualifying member” mean that references to schemes having insufficient assets no longer appear in that definition and so the definition of “qualifying pension scheme” is amended to limit the FAS provisions to schemes which are under-funded. The section also removes a definition and other wording (subsection (6)) which is no longer needed as a result of the amendments described above.
359.Subsection (3) allows for exceptions to one aspect of the definition of a FAS qualifying pension scheme. There are a small number of schemes which cannot qualify for the FAS or the PPF because their employer went insolvent before the PPF start date, thus preventing eligibility for the PPF, and the pension scheme delayed winding up until after that date, thereby also preventing FAS qualification. This amendment will enable exceptions to be made to the winding-up date qualification criterion, to enable these schemes to be FAS qualifying schemes.
360.Subsection (5) removes the need for an employer-related condition as part of the definition of a FAS qualifying pension scheme. This will allow greater flexibility for further changes to the FAS eligibility criteria if necessary, in addition to those provided for by the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2008, which enable certain schemes which wound up under funded with solvent employers to qualify for the FAS.
361.Subsections (7) to (10) provide that regulations providing for such an exception are to be subject to the negative resolution procedure unless they are included with other provisions in regulations that are subject to affirmative resolution.
362.Regulations were made, following the PA 2007, to protect scheme assets by restricting the purchase of annuities. The restriction imposed by those regulations expired on 25th June 2008. This section extends the restriction on purchasing annuities. It also introduces a sanction (s.286A(5) to (7)) which allows the FAS scheme manager to make void any annuity contract entered into contrary to the restriction.
363.Purchases of annuities or agreements to purchase can be made if trustees had entered into a binding commitment prior to the regulations being in force, or if the FAS scheme manager approves a written application from a trustee to annuitise. Such approval can be given subject to appropriate conditions.
364.Both the restriction and the power to make annuity contracts void are effective from 26th June 2008, the day following the expiry of the restriction.
365.Section 126 inserts Schedule 9. This Schedule amends sections 38 and 39 of the PA 2004, which set out the Pensions Regulator’s powers to issue a contribution notice where certain acts or deliberate failures to act have occurred. It also amends sections 43 and 44 of the same Act which set out the Regulator’s power to issue a direction requiring that the recipient put in place appropriate financial support for an occupational pension scheme.
366.Paragraph 1 introduces the amendments made by Schedule 9.
367.Paragraph 2(1) inserts reference to the material detriment test into section 38(5)(a) of the PA 2004 (main purpose or one of the main purposes of act or failure to prevent recovery of employer debt under section 75 of the PA 1995 etc.)
368.Sub-paragraph (2) inserts section 38A into the PA 2004.
369.Subsection (1) of new section 38A enables the Pensions Regulator to issue a contribution notice where it is of the opinion that an act or failure to act has detrimentally affected in a material way the likelihood of the accrued scheme benefits being received (the “material detriment test”).
370.Subsection (2) sets out for the purposes of section 38A what are accrued scheme benefits.
371.Subsection (3) defines “the relevant time” in the case of an act or a failure to act and specifies that in the case of acts or failures to act forming part of a series, any reference to the act or failure is a reference to the last of those acts or failures.
Pensions Act 2008