Statutory Instrument 1998 No. 1397

The Occupational Pension Schemes (Contracting-out) (Amount Required for Restoring State Scheme Rights and Miscellaneous Amendment) Regulations 1998

---

© Crown Copyright 1998

Statutory Instruments printed from this website are printed under the superintendence and authority of the Controller of HMSO being the Queen's Printer of Acts of Parliament.

The legislation contained on this web site is subject to Crown Copyright protection. It may be reproduced free of charge provided that it is reproduced accurately and that the source and copyright status of the material is made evident to users.

It should be noted that the right to reproduce the text of Statutory Instruments does not extend to the Queen's Printer imprints which should be removed from any copies of the Statutory Instrument which are issued or made available to the public. This includes reproduction of the Statutory Instrument on the Internet and on intranet sites. The Royal Arms may be reproduced only where they are an integral part of the original document.

The text of this Internet version of the Statutory Instrument which is published by the Queen's Printer of Acts of Parliament has been prepared to reflect the text as it was Made. A print version is also available and is published by The Stationery Office Limited as the The Occupational Pension Schemes (Contracting-out) (Amount Required for Restoring State Scheme Rights and Miscellaneous Amendment) Regulations 1998 , ISBN 0 11 079223 1. The print version may be purchased by clicking here. Braille copies of this Statutory Instrument can also be purchased at the same price as the print edition by contacting TSO Customer Services on 0870 600 5522 or e-mail:customer.services@tso.co.uk.

Further information about the publication of legislation on this website can be found by referring to the Frequently Asked Questions.

To ensure fast access over slow connections, large documents have been segmented into "chunks". Where you see a "continue" button at the bottom of the page of text, this indicates that there is another chunk of text available.

"additional pension" means the additional pension in a Category A retirement pension or in any other benefit under Part II of the Social Security Contributions and Benefits Act 1992[3] which is payable by virtue of section 44(3)(b) of that Act;

"earner" means - 

(a) in the case of a surviving spouse member, the deceased spouse from whose employment that member's rights under the scheme are derived; and

(b) in any other case, the member;

"effective date" means the date on which the Secretary of State determines, for the purposes of paragraph 5(3A) to (3E) of Schedule 2 to the 1993 Act[4], the extent to which the resources of the scheme are insufficient to meet the liability for the cash equivalent of the member's rights under the scheme;

"pensionable age" has the meaning given by the rules in paragraph 1 of Schedule 4 to the Pensions Act 1995;

"relevant employment" means any employment of the earner to which any of his section 9(2B) rights, rights to a guaranteed minimum pension or protected rights under the scheme are directly or indirectly attributable;

"relevant tax year" means the tax year in which the effective date falls;

"section 9(2B) rights" has the same meaning as in regulation 1(2) of the Occupational Pension Schemes (Contracting-out) Regulations 1996[5];

"the scheme" means an occupational pension scheme referred to in regulation 2 below;

"surviving spouse member" means a person who has a right to the payment of a widow's or widower's pension under the scheme.

Determination of the amount required for restoring State scheme rights
     2. For the purposes of paragraph 5(3A) to (3E) of Schedule 2 to the 1993 Act the amount required for restoring State scheme rights in relation to a member of a contracted-out occupational pension scheme which is being wound up shall be - 

(a) in a case where the prescribed person may elect under section 55(2) of that Act[6] to pay a contributions equivalent premium, the amount of that premium calculated in accordance with section 58(4) of that Act; and

(b) in any other case, the amount calculated in accordance with regulation 3.

Method of calculation where no election to pay a contributions equivalent premium may be made
     3.  - (1) In a case to which regulation 2(b) applies, the amount required for restoring a member's State scheme rights shall be - 

(a) in the case of a man (other than a surviving spouse member) who has not attained pensionable age on the effective date - 


     X × Factor A × 52 × market level indicator

     plus

     (y₁ × Factor B1 + y₂ × Factor B2) × 52 × market level indicator

     plus

     (z₁ × Factor C1 + z₂ × Factor C2) × 52 × market level indicator;



(b) in the case of a woman (other than a surviving spouse member) who has not attained pensionable age on the effective date - 



     X × Factor D × 52 × market level indicator

     plus

     (y₁ × Factor E1 + y₂ × Factor E2) × 52 × market level indicator

     plus

     (z₁ × Factor F1 + z₂ × Factor F2) × 52 × market level indicator;



(c) in the case of a man (other than a surviving spouse member) who has attained pensionable age on the effective date - 



     X × Factor G × 52 × market level indicator

     plus

     (y₁ + y₂) × Factor H × 52 × market level indicator

     plus

     (z₁ + z₂) × Factor I × 52 × market level indicator;



(d) in the case of a woman (other than a surviving spouse member) who has attained pensionable age on the effective date - 



     X × Factor J × 52 × market level indicator

     plus

     (y₁ + y₂) × Factor K × 52 × market level indicator

     plus

     (z₁ + z₂) × Factor L × 52 × market level indicator;



(e) in the case of a man who is a surviving spouse member - 



     X × Factor M × 52 × market level indicator

     plus

     (z₁ + z₂) × Factor N × 52 × market level indicator;



(f) in the case of a woman who is a surviving spouse member - 



     X × Factor O × 52 × market level indicator

     plus

     (y₁ + y₂) × Factor P × 52 × market level indicator

     plus

     (z₁ + z₂) × Factor Q × 52 × market level indicator;

where - 


X is the relevant weekly amount relating to any relevant employment after 5th April 1997;
y₁ is the relevant weekly amount relating to any relevant employment before 6th April 1988 in a case where limited revaluation applies;
y₂ is the relevant weekly amount relating to any relevant employment before 6th April 1988 in a case where full or fixed revaluation applies;
z₁ is the relevant weekly amount relating to any relevant employment after 5th April 1988 and before 6th April 1997 in a case where limited revaluation applies;
z₂ is the relevant weekly amount relating to any relevant employment after 5th April 1988 and before 6th April 1997 in a case where full or fixed revaluation applies.

    (2) For the purposes of paragraph (1) - 

(a) the amount of each factor (that is Factor A, B1, B2 and so on) shall be - 


(i) in the case of a woman (other than a surviving spouse member) who has a pensionable age of between 60 and 65 and has not attained that age on the effective date, the amount derived from Table 4 in Schedule 1, being the amount shown for the relevant factor in the column below the relevant tax year, in relation to the tax year in which the member was born, as specified in the first column of that Table;

(ii) in any other case, the amount shown in the column below the relevant factor, in whichever of Tables 1, 2, 3, 5 or 6 in Schedule 1 is applicable, in relation to the age attained by the member in the relevant tax year as specified in the first column of that Table;



(b) "the relevant weekly amount" is the weekly amount, determined by the Secretary of State, representing - 



(i) as regards any relevant employment after 5th April 1997, the weekly amount of additional pension to which the member would be entitled, or would have become entitled at pensionable age, in respect of that employment, if the scheme had not been a contracted-out scheme (whether by virtue of his own contributions or, in the case of a surviving spouse member, by virtue of the earner's contributions); and

(ii) as regards any relevant employment before 6th April 1997, the member's guaranteed minimum pension or any guaranteed minimum pension to which the member is, or would on attaining pensionable age be, treated as entitled by virtue of section 48 of the 1993 Act[7] (reduced benefits where minimum payments or minimum contributions paid) in respect of that employment,

and, for the purposes of determining those weekly amounts, except where such provision made by the scheme as is mentioned in section 16(2) of the 1993 Act (revaluation of earnings factors: early leavers) applies, the earner's earnings factors shall be taken to have been increased by reference to the last order under section 148 of the Social Security Administration Act 1992[8] to come into force before the end of the tax year preceding the relevant tax year;



(c) full revaluation applies where, for the purposes of determining the relevant weekly amount, the earner's earnings factors are taken to have been increased in accordance with sub-paragraph (b);

(d) limited revaluation applies where the relevant weekly amount has been determined in accordance with any provision made by the scheme under subsection (3) of section 16 of the 1993 Act[9] (as in force immediately before 6th April 1997) not conforming with the additional requirements referred to in that subsection;

(e) fixed revaluation applies where the relevant weekly amount has been determined in accordance with such provision as is mentioned in that subsection as in force immediately after 5th April 1997; and

(f) the market level indicator is the amount calculated in accordance with regulation 4 below.

Market Level Indicator
     4. For the purposes of regulation 3 the market level indicator is - 

(a) in the case of a member who has attained pensionable age or who attains that age in the relevant tax year or who is a surviving spouse member, the index number shown in the second column of the Table in Schedule 2 opposite the range of yields shown in the first column of that Table in which falls the gross redemption yield compiled, on the effective date, by the Financial Times and the Faculty of Actuaries and Institute of Actuaries, applicable to 15-year British Government Stocks with medium coupons;

(b) in the case of a member (other than a surviving spouse member) who attains an age in the relevant tax year which is 10 or more years below pensionable age, 3.5 per cent. divided by x per cent. where x per cent. is the net dividend yield, applicable on the effective date, to the All Share Index compiled by the Financial Times and the Faculty of Actuaries and Institute of Actuaries;

(c) in the case of a member (other than a surviving spouse member) who attains an age in the relevant tax year which is less than 10 years below pensionable age, an average of the numbers derived from paragraphs (a) and (b) respectively, weighted according to the number of whole years remaining before the member attains that age, so that, for example - 


(i) where the age attained in the relevant tax year is 5 years less than pensionable age, the market level indicator is the sum of one half of the number derived from paragraph (a) and one half of the number derived from paragraph (b); and

(ii) where the age attained in that tax year is one year less than pensionable age, the market level indicator is the sum of nine tenths of the number derived from paragraph (a) and one tenth of the number derived from paragraph (b).

Amendment of the Occupational Pension Schemes (Contracting-out) Regulations 1996
     5. After regulation 50 of the Occupational Pension Schemes (Contracting-out) Regulations 1996[10] there shall be inserted - 

" Persons to be regarded as members
     50A. For the purposes of paragraph 5(3A) to (3E) of Schedule 2 to the 1993 Act and regulations 49 and 50 the persons to be regarded as members of an occupational pension scheme shall include a person who has the right to payment of a widow's or widower's pension under the scheme."

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


John Y. Denham
Parliamentary Under-Secretary of State, Department of Social Security

4th June 1998

[2] See section 185(1) of the Pension Schemes Act 1993, as amended by paragraph 46 of Schedule 3 and paragraph 80 of Schedule 5 to the Pensions Act 1995.back

[3] 1992 c.4.back

[4] Sub-paragraphs (3A) to (3E) were inserted in paragraph 5 of Schedule 2 by section 141(2) of the Pensions Act 1995.back

[5] S.I. 1996/1172; a relevant amending instrument is S.I. 1997/786.back

[6] Section 55(2) was substituted by section 141(1) of the Pensions Act 1995.back

[7] Section 48 was amended by paragraph 58 of Schedule 1 to the Social Security (Incapacity for Work) Act 1994 and section 140(2) and (3) of the Pensions Act 1995.back

[8] 1992 c.5. Section 148 was amended by paragraph 27 of Schedule 8 to the Pension Schemes Act 1993.back

[9] Section 16(3) was amended by paragraph 28 of Schedule 5 to the Pensions Act 1995 but is saved for transitional purposes by Article 3 of the Pensions Act 1995 (Commencement No. 10) Order 1997 (S.I. 1997/664) (c.23).back

[10] S.I. 1996/1172.back