Statutory Instrument 1987 No. 1112

The Personal Pension Schemes (Transfer Values) Regulations 1987

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© Crown Copyright 1987

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1987 No. 1112

PENSIONS

The Personal Pension Schemes (Transfer Values) Regulations 1987

The Secretary of State for Social Services, in exercise of the powers conferred upon him by section 168(1) of, and Schedule 20 to, the Social Security Act 1975^[1] , and paragraphs 13 and 14 of Schedule 1A to the Social Security Pensions Act 1975^[2] , and of all other powers enabling him in that behalf, by this instrument, which is made before the end of a period of 12 months from the commencement of the enactments under which it is made, makes the following regulations:

Citation, commencement and interpretation
    1.    —(1)  These Regulations may be cited as the Personal Pension Schemes (Transfer Values) Regulations 1987 and shall come into force on 27th July 1987.

    (2)  In these Regulations, unless the context otherwise requires—
"the Act" means the Social Security Pensions Act 1975;
"cash equivalent" has the same meaning as in Part II of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations;
"member" means a member of a personal pension scheme to whom Part II of Schedule 1A to the Act applies by virtue of the Modification Regulations;
"the Modification Regulations" means the Personal and Occupational Pension Schemes (Modification of Enactments) Regulations 1987^[3] ;
"money purchase benefits" and "personal pension scheme" have the meaning given to those expressions by section 84(1) of the Social Security Act 1986^[4] ;
"protected rights" shall be construed in accordance with Schedule 1 to the Social Security Act 1986;
"receiving scheme" means a scheme under whose rules transfer credits or rights are to be acquired by a member in exercise of his choice under paragraph 13(2)(a) of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations;
"scheme" means occupational pension scheme or personal pension scheme;
"trustees", in relation to a scheme which is not set up or established under a trust, means the managers of the scheme;

and other expressions have the same meaning as in Part II of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations.

Requirements to be satisfied
    2.    The prescribed requirements referred to in paragraph 13(2)(a) of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations (cash equivalent of member's rights under a personal pension scheme to be used for acquiring transfer credits or rights under another scheme) are that—
 (a) the receiving scheme—
 (i) is approved by the Commissioners of Inland Revenue for the purposes of Chapter II of Part II of the Finance Act 1970^[5] , or
 (ii) is a statutory scheme as defined in section 26(1) of the Finance Act 1970, or
 (iii) otherwise satisfies requirements of the Inland Revenue;
 (b) if the member's cash equivalent (or any portion of it to be used under paragraph 13(2)(a) of Schedule 1A to the Act, as applied to personal pension schemes by the Modification Regulations) is or includes the cash equivalent of his protected rights then the receiving scheme is one to which a transfer payment in respect of protected rights may be made in accordance with regulations 2 and 3 of the Protected Rights (Transfer Payment) Regulations 1987^[6] .

Manner of calculation and verification of cash equivalents
    3.—(1)  Except in a case to which paragraph (3) below applies, cash equivalents are to be calculated and verified in such manner as may be approved in particular cases by—
 (a) a Fellow of the Institute of Actuaries; or
 (b) a Fellow of the Faculty of Actuaries; or
 (c) a person with other actuarial qualifications who is approved by the Secretary of State, at the request of the trustees of the personal pension scheme in question, as being a proper person to act for the purposes of these regulations in connection with that scheme,
and in paragraph (2) below "actuary" means any person such as is referred to in sub-paragraph (a), (b) or (c) of this paragraph.

    (2)  Except in a case to which paragraph (3) below applies, cash equivalents are to be calculated and verified by adopting methods and making assumptions which—
 (a) if not determined by the trustees of the personal pension scheme in question, are notified to them by an actuary; and
 (b) are certified by an actuary to the trustees of the scheme as being consistent—
 (i) with the requirements of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations, and
 (ii) with "Retirement Benefit Schemes — Transfer Values (GN11)" , published by the Institute of Actuaries and the Faculty of Actuaries and current at the date of the calculation.

    (3)  Where a member's cash equivalent, or any portion of it—
 (a) represents his rights to money purchase benefits under the personal pension scheme in question; and
 (b) those rights do not fall, either wholly or in part, to be valued in a manner which involves making estimates of the value of benefits,
then that cash equivalent, or that portion of it, shall be calculated and verified in such manner as may be approved in particular cases by the trustees of the scheme, and by adopting methods consistent with the requirements of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations.

Increases and reductions of cash equivalents
    4.—(1)  If the whole or any part of the benefits referred to in paragraph 12(1) of Schedule 1A to the Act, as applied to personal pension schemes by the Modification Regulations, is or has been surrendered, commuted or forfeited before the trustees of the personal pension scheme do what is needed to comply with what the member requires, the cash equivalent shall be reduced in proportion to the reduction in the total value of the benefits.

    (2)  If the trustees of a personal pension scheme fail without reasonable excuse to do what is needed to carry out what a member of the scheme requires within 6 months of the relevant date, that member's cash equivalent shall be increased by—
 (a) the interest on that cash equivalent, calculated on a daily basis over the period from the relevant date to the date on which the trustees carry out what the member requires, at the same rate as that payable for the time being on judgment debts by virtue of section 17 of the Judgment Act 1838^[7] ; or, if it is greater,
 (b) the amount, if any, by which that cash equivalent falls short of what it would have been if the relevant date had been the date on which the trustees carry out what the member requires.

    (3)  In a case where both paragraphs (1) and (2) of this regulation fall to be applied to a calculation, they shall be applied in the order in which they occur in this regulation.

    (4)  In this regulation "the relevant date" has the same meaning as in paragraph 12(2) of Schedule 1A to the Act as applied to personal pension schemes by the Modification Regulations.

Signed by authority of the Secretary of State for Social Services.

Nicholas Scott

Minister of State, Department of Health and Social Security

25th June 1987

These Regulations are all made under provisions of the Social Security Pensions Act 1975 ("the 1975 Act" ) as modified by Regulations made under the Social Security Act 1986 ("the 1986 Act" ) before the end of 12 months from commencement of the relevant provisions as modified. Consequently, by virtue of section 61(5) of the 1986 Act, the provisions of section 61(2) and (3) of the 1975 Act (as amended by section 86(1) of, and paragraph 94 of Schedule 10 to, the 1986 Act), which require reference to the Occupational Pensions Board of, and a report by the Board on, proposals to make regulations for certain purposes of both Acts, do not apply to them.

They make provision in relation to personal pension schemes for the calculation and verification of cash equivalents (within the meaning of Part II of Schedule 1A to the Social Security Pensions Act 1975, as modified so as to have effect in relation to personal pension schemes by the Personal and Occupational Pension Schemes (Modification of Enactments) Regulations 1987).

Regulation 2 sets out the requirements which an occupational pension scheme, or a personal pension scheme, must satisfy if a cash equivalent is to be used for acquiring transfer credits or rights under it.

Regulation 3 provides for the manner in which a cash equivalent is to be calculated and verified: in particular, except where the calculation or variation does not involve making estimates of the future value of benefits, it must be such manner as may be approved by an actuary.

The publication "Retirement Benefit Schemes — Transfer Values (GN11)" , referred to in regulation 3(2)(b)(ii), may be obtained from the Institute of Actuaries, Staple Inn Hall, High Holborn, London WC1V 7QJ, and from the Faculty of Actuaries, 23 St Andrew Square, Edinburgh EH2 1AQ.

Regulation 4 sets out the circumstances in which a cash equivalent is to be increased or reduced to an amount greater or less than the exact equivalent of the benefits in question.

[1] 1975 c. 14. See definitions of "prescribe" and "regulations" in Schedule 20. Section 168(1) applies, by virtue of section 66(2) of the Social Security Pensions Act 1975 (c. 60), to the exercise of certain powers conferred by that Act. back

[2] 1975 c. 60. Schedule 1A was inserted by the Social Security Act 1985 (c. 53) section 2, and Part II of Schedule 1. Paragraphs 13 and 14 of Schedule 1A were amended by the Social Security Act 1986 (c. 50), section 86 and Schedule 10, paragraph 30, and have effect as modified, in relation to personal pension schemes, by virtue of the Personal and Occupational Pension Schemes (Modification of Enactments) Regulations 1987 (S.I. 1987/1116), regulation 3(10) and Schedule 4. back

[3] S.I. 1987/1116. back

[4] 1986 c. 50. back

[5] 1970 c. 24. back

[6] S.I. 1987/1118. back

[7] 1 & 2 Vic. c. 110; the rate of interest was amended by S.I. 1985/437. back