PART 1 continued CHAPTER 1 continued
(1) A hybrid scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if it satisfies the requirements mentioned in whichever of these is the appropriate paragraph—
(a) the requirements for a money purchase scheme under section 20, subject to any prescribed modifications;
(b) the requirements for a defined benefits scheme under sections 21 to 23, subject to any prescribed modifications.
(2) Which paragraph of subsection (1) is appropriate for any hybrid scheme is to be determined by rules made by the Secretary of State.
(3) The rules may provide for different paragraphs to be appropriate for different provisions of a scheme.
(4) The rules may provide for the paragraphs to be appropriate as alternatives, for any scheme or any provisions of a scheme.
The Secretary of State may by regulations make provision as to the quality requirement to be satisfied in the case of an occupational pension scheme within section 18(b) or (c).
(1) This section applies to a personal pension scheme if the operation of the scheme—
(a) is carried on in such a way as to be a regulated activity for the purposes of the Financial Services and Markets Act 2000 (c. 8), and
(b) is carried on in the United Kingdom by a person who is in relation to that activity an authorised person or an exempt person under section 19 of that Act.
(2) The scheme satisfies the quality requirement in relation to a jobholder if the following conditions are satisfied.
(3) The first condition is that all of the benefits that may be provided to the jobholder under the scheme are money purchase benefits.
(4) The second condition is that, in relation to the jobholder, there is an agreement between the provider of the scheme and the employer under which—
(a) the employer must pay contributions in respect of the jobholder;
(b) the employer’s contribution, however calculated, must be equal to or more than 3% of the amount of the jobholder’s qualifying earnings in the relevant pay reference period.
(5) In subsection (6), “shortfall” means the difference (if any) between—
(a) the employer’s contribution in respect of the jobholder under the agreement referred to in subsection (4), and
(b) 8% of the amount of the jobholder’s qualifying earnings in the relevant pay reference period.
(6) The third condition is that if there is a shortfall there is an agreement between the provider of the scheme and the jobholder under which the jobholder must pay contributions which, however calculated, are equal to or more than the shortfall.
(7) The fourth condition is that, in relation to the jobholder, there are direct payment arrangements (within the meaning of section 111A of the Pension Schemes Act 1993 (c. 48)) between the jobholder and the employer.
(8) The Secretary of State may by regulations provide that, where the scheme is an appropriate scheme within the meaning of section 7(4) of the Pension Schemes Act 1993, subsections (4)(b) and (5)(b) have effect with prescribed modifications.
(9) A scheme does not fail to satisfy the quality requirement under this section merely because the provider of the scheme may on any occasion refuse to accept a contribution below an amount prescribed for the purposes of this section on the grounds that it is below that amount.
The Secretary of State may by regulations make provision as to the quality requirement to be satisfied in the case of a personal pension scheme to which section 26 does not apply.
(1) The Secretary of State may by regulations provide that, subject to provision within subsection (6)(f), a scheme to which this section applies is to be taken to satisfy the relevant quality requirement in relation to any jobholder of an employer if a certificate given in accordance with the regulations is in force in relation to the employer.
(2) The certificate must state that, in relation to the jobholders of the employer who are active members of the scheme, the scheme is in the opinion of the person giving the certificate able to satisfy the relevant quality requirement throughout the certification period.
(3) This section applies to—
(a) a money purchase scheme to which section 20 applies;
(b) a personal pension scheme to which section 26 applies;
(c) a hybrid scheme, to the extent that requirements within section 24(1)(a) apply.
(4) The “relevant quality requirement”—
(a) for a scheme within subsection (3)(a), means the quality requirement under section 20;
(b) for a scheme within subsection (3)(b), means the quality requirement under section 26;
(c) for a scheme within paragraph (c) of subsection (3), means the requirements mentioned in that paragraph.
(5) Regulations may make further provision in relation to certification under this section.
(6) Regulations may in particular make provision—
(a) as to the period for which a certificate is in force (the “certification period”);
(b) as to the persons by whom a certificate may be given;
(c) as to procedures in connection with certification or where a certificate has been given;
(d) requiring persons to have regard to guidance issued by the Secretary of State;
(e) requiring an employer to calculate the amount of contributions that a scheme, and any section 26 agreements, required to be paid by or in respect of any jobholder in the certification period;
(f) as to cases where the requirements of a scheme, and any section 26 agreements, as to payment of contributions by or in respect of jobholders of an employer did not satisfy prescribed conditions.
(7) Provision within subsection (6)(f) includes in particular provision for a scheme not to be treated by virtue of regulations under this section as having satisfied the relevant quality requirement unless prescribed steps are taken (which may include the making of prescribed payments).
(8) In subsection (6) “section 26 agreements” means the agreement required, in the case of a scheme within subsection (3)(b), by section 26(4) and any agreement required, in the case of such a scheme, by section 26(6).
(9) The Secretary of State may by order repeal this section.
(1) During the first transitional period for money purchase and personal pension schemes—
(a) sections 20(1)(b) and 26(4)(b) have effect as if for “3%” there were substituted “1%”;
(b) sections 20(1)(c) and 26(5)(b) have effect as if for “8%” there were substituted “2%”.
(2) The first transitional period is a prescribed period of at least one year, beginning with the coming into force of section 20.
(3) During the second transitional period for money purchase and personal pension schemes—
(a) sections 20(1)(b) and 26(4)(b) have effect as if for “3%” there were substituted “2%”;
(b) sections 20(1)(c) and 26(5)(b) have effect as if for “8%” there were substituted “5%”.
(4) The second transitional period is a prescribed period of at least one year, beginning with the end of the first transitional period.
(1) Subsection (3) applies if, in relation to a person who on the employer’s first enrolment date is a jobholder to whom section 3 applies, the conditions in subsection (2) are satisfied, and continue to be satisfied during the transitional period for defined benefits and hybrid schemes.
(2) The conditions are that—
(a) the jobholder has been employed by the employer for a continuous period beginning before the employer’s first enrolment date,
(b) at a time in that period before the employer’s first enrolment date, the jobholder became entitled to become an active member of a defined benefits scheme or a hybrid scheme,
(c) the jobholder is, and has always since that time been, entitled to become an active member of a defined benefits scheme or a hybrid scheme, and
(d) the scheme to which that entitlement relates is a qualifying scheme, and any scheme to which it has related on or after the employer’s first enrolment date has been a qualifying scheme.
(3) Where this subsection applies, section 3 has effect in relation to the jobholder with the substitution for subsection (2) of the following subsection—
“(2) The employer must make prescribed arrangements by which the jobholder becomes an active member, with effect from the end of the transitional period for defined benefits and hybrid schemes, of an automatic enrolment scheme which is a defined benefits scheme or a hybrid scheme.”
(4) If at any time in the transitional period for defined benefits and hybrid schemes the condition in subsection (2)(c) or (d) of this section ceases to be satisfied, subsection (5) applies instead of subsection (3) (and the day after the last day on which that condition is satisfied is referred to as “the closure date”).
(5) Where this subsection applies, section 3 has effect in relation to the jobholder with the substitution for subsection (2) of the following subsection—
“(2) The employer must make prescribed arrangements by which the jobholder either—
(a) becomes an active member, with effect from the closure date, of an automatic enrolment scheme which is a defined benefits scheme or a hybrid scheme, or
(b) becomes an active member, with effect from the automatic enrolment date, of an automatic enrolment scheme which is a money purchase scheme.”
(6) If the jobholder becomes a member of a scheme under arrangements made under subsection (2)(b) of that section (as substituted by subsection (5))—
(a) the employer’s contributions are payable with effect from the automatic enrolment date;
(b) any requirement of the scheme (in accordance with section 20(1)) for contributions to be payable by the jobholder does not apply in respect of the period of the jobholder’s membership before the closure date;
(c) regulations made for the purposes of section 3(2)(b) must secure that the jobholder may pay, within a period prescribed by the regulations, any contributions which would have been payable by the jobholder but for paragraph (b) of this subsection.
(7) Where subsection (3) or (5) of this section applies, section 3(3) and (4) apply as if references to the automatic enrolment date were references to the day on which arrangements would by virtue of this section fall to be made in respect of the jobholder.
(8) The transitional period for defined benefits and hybrid schemes is a prescribed period beginning with the day on which section 3 comes into force.
(9) In this section, the “employer’s first enrolment date” means the first day on which section 3 applies in the case of the employer (where that day falls within the transitional period for defined benefits and hybrid schemes).
(1) Where a jobholder is an active member of a qualifying scheme and a freezing event occurs in relation to the scheme, the jobholder does not, for the purposes of this Chapter, cease to be an active member of the scheme, and the scheme does not, for those purposes, cease to be a qualifying scheme, by virtue of any relevant provision.
(2) Where a worker is an active member of a scheme that satisfies the requirements of section 9 and a freezing event occurs in relation to the scheme, the worker does not, for the purposes of section 9(1)(c), cease to be an active member of the scheme by virtue of any relevant provision.
(3) In this section—
“freezing event” in relation to a scheme means—
the making of a freezing order under section 23 of the Pensions Act 2004 (c. 35) in relation to the scheme, or
the beginning of an assessment period within the meaning of section 132 of that Act in relation to the scheme;
“relevant provision” means—
in relation to a freezing order, provision contained in the order, or the provision made with respect to the order by section 23 of the Pensions Act 2004;
in relation to an assessment period, the provision made with respect to the period by section 133 of that Act.
(1) The trustees of an occupational pension scheme may by resolution modify the scheme—
(a) with a view to enabling the scheme to comply with the conditions in section 17(2), or
(b) by increasing the amount required to be paid in contributions, in order for the scheme to satisfy the requirements contained in section 20(1) or those requirements as modified under section 24(1)(a).
(2) An increase under subsection (1)(b) may be made only—
(a) by increasing the amount of any contribution, directly or by modifying the basis on which it is calculated, or
(b) by increasing the frequency of any contributions.
(3) No modification may be made by virtue of subsection (1) without the consent of the employer in relation to the scheme.
(4) In the application of subsection (3) to a scheme in relation to which there is more than one employer, references to the employer have effect as if they were references to a person nominated by the employers, or by the scheme, to act as the employers' representative for the purposes of this section or, if no such nomination is made, to all of the employers.
(5) Regulations may provide that this section does not apply to occupational pension schemes within a prescribed class or description.
(1) An employer who arranges for a person to become a member of a scheme in accordance with section 3(2), 5(2) or 7(3), or of an occupational pension scheme in accordance with section 9(2), may deduct the person’s contributions to the scheme from the person’s remuneration and pay them to the trustees or managers of the scheme (in the case of an occupational pension scheme) or the provider of the scheme (in the case of a personal pension scheme).
(2) Regulations prescribing arrangements for the purposes of section 3(2), 5(2), 7(3) or 9(2), may require the employer to make such a deduction or payment at any time on or after the date with effect from which the jobholder is to become an active member of a scheme under the arrangements.
(1) Contravention of any of the employer duty provisions does not give rise to a right of action for breach of statutory duty.
(2) But nothing in the employer duty provisions or this Chapter affects any right of action arising apart from those provisions.
(3) In this Chapter, references to the employer duty provisions are references to any provision of sections 2 to 11 or of regulations under those sections.
(1) The Regulator may issue a compliance notice to a person if the Regulator is of the opinion that the person has contravened one or more of the employer duty provisions.
(2) A compliance notice is a notice directing the person to whom it is issued to take, or refrain from taking, the steps specified in the notice in order to remedy the contravention.
(3) A compliance notice may, in particular—
(a) state the period within which any step must be taken or must cease to be taken;
(b) require the person to whom it is issued to provide within a specified period specified information relating to the contravention;
(c) require the person to inform the Regulator, within a specified period, how the person has complied or is complying with the notice;
(d) state that, if the person fails to comply with the requirements of the notice, the Regulator may issue a fixed penalty notice under section 40.
(4) The steps specified in the notice may, in particular, include such steps as the Regulator thinks appropriate for placing the worker in the same position (as nearly as possible) as if the contravention had not occurred.
(5) If the compliance notice is issued in respect of a failure to comply with an enrolment duty and the specified steps relate to membership of a defined benefits scheme or a hybrid scheme, the notice may, in particular, require the employer to ensure that the worker is entitled to the same benefits under the scheme as if the employer had complied with that duty.
(1) The Regulator may issue a third party compliance notice if it is of the opinion that—
(a) a person has contravened one or more of the employer duty provisions,
(b) the contravention is or was, wholly or partly, a result of a failure of another person (the “third party”) to do any thing, and
(c) that failure is not itself a contravention of any of the employer duty provisions.
(2) A third party compliance notice is a notice directing the third party to take, or refrain from taking, the steps specified in the notice in order to remedy or prevent a recurrence of the failure.
(3) A third party notice may, in particular—
(a) state the period within which any step must be taken or must cease to be taken;
(b) require the third party to inform the Regulator, within a specified period, how the third party has complied or is complying with the notice;
(c) state that, if the third party fails to comply with the requirements of the notice, the Regulator may issue a fixed penalty notice under section 40.
(4) A third party notice may give the third party a choice between different ways of remedying or preventing the recurrence of the third party’s failure.
(1) The Regulator may issue an unpaid contributions notice to an employer if it is of the opinion that relevant contributions have not been paid on or before the due date.
(2) An unpaid contributions notice is a notice requiring an employer to pay into a pension scheme by a specified date an amount in respect of relevant contributions that have not been paid.
(3) “Due date” has the meaning prescribed.
(4) An unpaid contributions notice may, in particular—
(a) specify the scheme to which the contributions are due;
(b) specify the workers, or category of workers, in respect of whom the contributions are due;
(c) state the period in respect of which the contributions are due;
(d) state the due date in respect of the contributions;
(e) require the employer to take such other steps in relation to remedying the failure to pay the contributions as the Regulator considers appropriate;
(f) state that if the employer fails to comply with the notice, the Regulator may issue a fixed penalty notice under section 40.
(5) In this section, “employer” in relation to a worker means the person by whom the worker is or, if the employment has ceased, was employed.
(1) This section applies to—
(a) a compliance notice issued to an employer in respect of a contravention of section 2(1) or a failure to comply with an enrolment duty;
(b) an unpaid contributions notice.
(2) The notice may, in particular, include—
(a) a requirement to calculate the amount of relevant contributions that are of a description specified in the notice (“unpaid relevant contributions”);
(b) if the contributions are being paid within the prescribed period after the appropriate date, a requirement to pay an amount equal to the amount of unpaid relevant contributions within section 39(2)(a);
(c) if the contributions are not being paid within the prescribed period after the appropriate date, a requirement to pay (on the employer’s own account) an amount equal to the amount of unpaid relevant contributions;
(d) if paragraph (b) applies, a requirement to ensure—
(i) that the worker is not required to pay an amount equal to the balance of the unpaid relevant contributions during the prescribed period, and
(ii) that, if the worker chooses to pay that amount, it may be paid in instalments;
(e) if the contributions are payable to a money purchase scheme, a hybrid scheme or a personal pension scheme, a requirement to pay interest on the amount required by the notice to be paid in respect of unpaid relevant contributions, at a rate and in respect of a period determined in accordance with regulations.
(3) The Secretary of State may by regulations make provision about the way in which the Regulator may (without prejudice to subsection (2)(a)) estimate the amount of contributions that an employer has failed to pay on behalf or in respect of a worker.
(4) Regulations under subsection (3) may include, in particular, provision about the sources of information that the Regulator may use in estimating that amount, other than information provided by the employer.
(5) In this section, “appropriate date” means—
(a) in the case of a compliance notice, such date as may be specified in the notice;
(b) in the case of an unpaid contributions notice, the due date within the meaning of section 37(3).
(6) In this section, “employer” in relation to a worker means the person by whom the worker is or, if the employment has ceased, was employed.
(1) In sections 37 and 38 “relevant contributions” are—
(a) in relation to a jobholder, employer contributions payable to a qualifying scheme in relation to the jobholder;
(b) in relation to a worker to whom section 9 applies, employer contributions payable to a pension scheme which satisfies the requirements of that section.
(2) In subsection (1), employer contributions means contributions payable by the employer—
(a) on the employer’s own account (but in respect of the worker), or
(b) on behalf of the worker out of deductions from the worker’s earnings.
(1) The Regulator may issue a fixed penalty notice to a person if it is of the opinion that the person has failed to comply with—
(a) a compliance notice under section 35,
(b) a third party compliance notice under section 36,
(c) an unpaid contributions notice under section 37, or
(d) a notice issued under section 72 of the Pensions Act 2004 (c. 35) (provision of information).
(2) The Regulator may issue a fixed penalty notice to a person if it is of the opinion that the person has contravened—
(a) any provision of regulations under section 3(2) or 5(2) (prescribed arrangements for automatic enrolment or re-enrolment),
(b) any provision of regulations under section 7(4) (prescribed arrangements: jobholder’s right to opt in),
(c) section 8(2)(b) (refund of contributions if jobholder opts out of scheme membership), and any provision of regulations under that provision,
(d) section 10 (requirement to give information to workers), and any provision of regulations under that section, or
(e) any provision of regulations under section 60 (requirement to keep records).
(3) A fixed penalty notice is a notice requiring the person to whom it is issued to pay a penalty within the period specified in the notice.
(4) The penalty—
(a) is to be determined in accordance with regulations, and
(b) must not exceed £50,000.
(5) A fixed penalty notice must—
(a) state the amount of the penalty;
(b) state the date, which must be at least 4 weeks after the date on which the notice is issued, by which the penalty must be paid;
(c) state the period to which the penalty relates;
(d) if the notice is issued under subsection (1), specify the failure to which the notice relates;
(e) if the notice is issued under subsection (2), specify the provision or provisions that have been contravened;
(f) if the notice is issued under subsection (1), state that, if the failure to comply continues, the Regulator may issue an escalating penalty notice under section 41;
(g) notify the person to whom the notice is issued of the review process under section 43 and the right of referral to the Pensions Regulator Tribunal under section 44.
(1) The Regulator may issue an escalating penalty notice to a person if it is of the opinion that the person has failed to comply with—
(a) a compliance notice under section 35,
(b) a third party compliance notice under section 36,
(c) an unpaid contributions notice under section 37, or
(d) a notice under section 72 of the Pensions Act 2004 (c. 35) (provision of information).
(2) But the Regulator may not issue an escalating penalty notice if—
(a) it relates to failure to comply with a notice within subsection (1)(a), (b) or (c), the person to whom that notice was issued has applied for a review of it under section 43, and any review has not been completed;
(b) it relates to failure to comply with any notice within subsection (1), the person has exercised the right of referral to the Pensions Regulator Tribunal under section 44 in respect of a fixed penalty notice issued in relation to that notice, and the reference has not been determined.
(3) An escalating penalty notice is a notice requiring a person to pay an escalating penalty if the person fails to comply with a notice referred to in subsection (1) before a specified date.
(4) An escalating penalty is a penalty which is calculated by reference to a prescribed daily rate.
(5) The prescribed daily rate—
(a) is to be determined in accordance with regulations, and
(b) must not exceed £10,000.
(6) An escalating penalty notice must—
(a) specify the failure to which the notice relates;
(b) state that, if the person fails to comply with the notice referred to in subsection (1) before a specified date, the person will be liable to pay an escalating penalty;
(c) state the daily rate of the escalating penalty and the way in which the penalty is calculated;
(d) state the date from which the escalating penalty will be payable, which must not be earlier than the date specified in the fixed penalty notice under section 40(5)(b);
(e) state that the escalating penalty will continue to be payable at the daily rate until the date on which the person complies with the notice referred to in subsection (1) or such earlier date as the Regulator may determine;
(f) notify the person of the review process under section 43 and the right of referral to the Pensions Regulator Tribunal under section 44.
(1) Any penalty payable under section 40 or section 41 is recoverable by the Regulator.
(2) In England and Wales, any such penalty is, if a county court so orders, recoverable under section 85 of the County Courts Act 1984 (c. 28) or otherwise as if it were payable under an order of that court.
(3) In Scotland, a fixed penalty notice or escalating penalty notice is enforceable as if it were an extract registered decree arbitral bearing a warrant for execution issued by the sheriff court of any sheriffdom in Scotland.
(4) The Regulator must pay into the Consolidated Fund any penalty recovered under this section.
(1) The Regulator may review a notice to which this section applies—
(a) on the written application of the person to whom the notice was issued, or
(b) if the Regulator otherwise considers it appropriate.
(2) This section applies to—
(a) a compliance notice issued under section 35;
(b) a third party compliance notice issued under section 36;
(c) an unpaid contributions notice issued under section 37;
(d) a fixed penalty notice issued under section 40;
(e) an escalating penalty notice issued under section 41.
(3) Regulations may prescribe the period within which—
(a) an application to review a notice may be made under subsection (1)(a);
(b) a notice may be reviewed under subsection (1)(b).
(4) On a review of a notice, the effect of the notice is suspended for the period beginning when the Regulator determines to carry out the review and ending when the review is completed.
(5) In carrying out a review, the Regulator must consider any representations made by the person to whom the notice was issued.
(6) The Regulator’s powers on a review include power to—
(a) confirm, vary or revoke the notice;
(b) substitute a different notice.