Citation, commencement and interpretation

1.—(1) These Regulations may be cited as the Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and shall come into force on 1st October 2008.

(2) In these Regulations, “the principal Regulations” means the Occupational Pension Schemes (Transfer Values) Regulations 1996(5).

Amendment of regulation 1 of the principal Regulations

2.  In regulation 1(2) of the principal Regulations(6) (interpretation)—

(a) in the appropriate alphabetical places, insert—

““actuary” means—

““discount rates” means the interest rates used to discount future payments of benefit for the purposes of placing a current value on them;”;

““initial cash equivalent” means the amount calculated in accordance with regulation 7(1)(a);”;

““insufficiency report” means the actuary’s last relevant report before the guarantee date prepared in accordance with Schedule 1B (insufficiency reports);”;

““insufficiency report liabilities” has the meaning given in paragraph 7 of Schedule 1B;”;

““insurance policy” means an insurance policy which is a contract on human life or a contract of annuity on human life, but excluding a contract which is linked to investment funds;”;

““salary related benefits” means benefits that are not money purchase benefits;”;

““statement of entitlement” has the meaning given in section 93A(1) of the 1993 Act (salary related schemes: right to statement of entitlement);”;

(b) for the definition of “effective date”, substitute—

““effective date” means the date as at which the assets and liabilities are valued for the purposes of the insufficiency report;”;

(c) for the definition of “member”, substitute—

““member” has the meaning given in section 124(1) of the 1995 Act (interpretation);”; and

(d) omit the definitions of “the Board for Actuarial Standards” and “scheme actuary”.

Substitution of regulation 6(1) of the principal Regulations

3.  For regulation 6(1) of the principal Regulations(9) (guaranteed statements of entitlement), substitute—

“(1) Subject to paragraph (1A), the guarantee date in relation to a statement of entitlement must be—

(a) within the period of three months beginning with the date of the member’s application under section 93A of the 1993 Act (salary related schemes: right to statement of entitlement) for a statement of entitlement; or

(b) where the trustees are unable to provide a statement of entitlement for reasons beyond their control within the period specified in sub-paragraph (a), within such longer period not exceeding six months beginning with the date of the member’s application as they may reasonably require.”.

Substitution of regulations 7 and 8 of the principal Regulations

4.  For regulations 7 and 8 of the principal Regulations(10), substitute—

“Manner of calculation and verification of cash equivalents - general provisions

7.—(1) Subject to paragraphs (4) and (7), cash equivalents are to be calculated and verified—

(a) by calculating the initial cash equivalent—

(i) for salary related benefits, in accordance with regulations 7A and 7B; or

(ii) for money purchase benefits, in accordance with regulation 7C,

and then making any reductions in accordance with regulation 7D; or

(b) in accordance with regulation 7E.

(2) The trustees must decide whether to calculate and verify the cash equivalent in accordance with paragraph (1)(a) or (b), but they can only choose paragraph (1)(b) if they have had regard to any requirement for consent to paying a cash equivalent which is higher than the amount calculated and verified in accordance with paragraph (1)(a).

(3) The trustees are responsible for the calculation and verification of cash equivalents and initial cash equivalents.

(4) Where a member, in relation to whom a cash equivalent is to be calculated and verified, is a member of a scheme modified by—

(a) the British Coal Staff Superannuation Scheme (Modification) Regulations 1994(11); or

(b) the Mineworkers’ Pension Scheme (Modification) Regulations 1994(12),

the cash equivalent of his bonus is to be calculated and verified by the trustees, having obtained the advice of the actuary, to reflect the fact that a reduced bonus, or no bonus, may become payable in accordance with the provisions governing the scheme in question.

(5) For the purposes of paragraph (4) “bonus” means any—

(a) augmentation of his benefits; or

(b) new, additional or alternative benefits,

which the trustees of the scheme in question have applied to the member’s benefits, or granted to him in accordance with the provisions governing that scheme, on the basis of findings as to that scheme’s funding position.

(6) Paragraph (7) applies where the cash equivalent is calculated and verified in accordance with paragraph (1)(a).

(7) Where a portion of the cash equivalent relates to a salary related benefit and a portion relates to a money purchase benefit, the initial cash equivalent is to be calculated—

(a) for the salary related benefit portion, in accordance with regulations 7A and 7B; and

(b) for the money purchase benefit portion, in accordance with regulation 7C.

Manner of calculation of initial cash equivalents for salary related benefits

7A.—(1) For salary related benefits, the initial cash equivalent is to be calculated—

(a) on an actuarial basis; and

(b) in accordance with paragraph (2) and regulation 7B.

(2) The initial cash equivalent is the amount at the guarantee date which is required to make provision within the scheme for a member’s accrued benefits, options and discretionary benefits.

(3) For the purposes of paragraph (2), the trustees must determine the extent—

(a) of any options the member has which would increase the value of his benefits under the scheme;

(b) of any adjustments they decide to make to reflect the proportion of members likely to exercise those options; and

(c) to which any discretionary benefits should be taken into account, having regard to any established custom for awarding them and any requirement for consent before they are awarded.

Initial cash equivalents for salary related benefits: assumptions

7B.—(1) The trustees must use the assumptions determined under this regulation in calculating the initial cash equivalent for salary related benefits.

(2) Having taken the advice of the actuary, the trustees must determine the economic, financial and demographic assumptions.

(3) In determining the demographic assumptions, the trustees must have regard to—

(a) the main characteristics of the members of the scheme; or

(b) where the members of the scheme do not form a large enough group to allow demographic assumptions to be made, the characteristics of a wider population sharing similar characteristics to the members.

(4) The trustees must have regard to the scheme’s investment strategy when deciding what assumptions will be included in calculating the discount rates in respect of the member.

(5) The trustees must determine the assumptions under this regulation with the aim that, taken as a whole, they should lead to the best estimate of the initial cash equivalent.

Manner of calculation of initial cash equivalents for money purchase benefits

7C.—(1) For money purchase benefits, the initial cash equivalent is to be calculated in accordance with this regulation.

(2) The initial cash equivalent is the realisable value of any benefits to which the member is entitled.

(3) The trustees must calculate that realisable value—

(a) in accordance with the scheme rules; and

(b) in a manner which is—

(i) approved by the trustees; and

(ii) consistent with Chapter IV of Part IV of the 1993 Act.

(4) The realisable value must include any increases to the benefits resulting from a payment of interest made in accordance with the scheme rules.

Reductions to initial cash equivalents

7D.—(1) An initial cash equivalent may, or as the case may be must, be reduced in accordance with Schedule 1A (reductions in initial cash equivalents).

(2) The trustees may request an insufficiency report from the actuary in accordance with Schedule 1B.

(3) The trustees may treat the actuary’s last relevant GN11(13) report as an insufficiency report.

Alternative manner of calculating and verifying cash equivalents

7E.—(1) This regulation applies where the trustees have decided to calculate and verify the cash equivalent in accordance with regulation 7(1)(b).

(2) The cash equivalent is to be calculated and verified in such manner as may be approved by the trustees.

(3) The cash equivalent must be higher than it would be if it was calculated and verified in accordance with regulation 7(1)(a).

(4) For the purposes of calculating and verifying the cash equivalent, the trustees may request an insufficiency report from the actuary in accordance with Schedule 1B.

(5) The trustees may treat the actuary’s last relevant GN11 report as an insufficiency report.”.

Amendment of regulation 11 of the principal Regulations

5.  Regulation 11 of the principal Regulations (disclosure)(14) is amended as follows—

(a) for paragraph (1), substitute—

“(1) Subject to paragraphs (1A) and (1B), an active member of any scheme, and a deferred member of a money purchase scheme, is entitled to receive from the trustees, on request, the information mentioned in Schedule 1 in writing.

(1A) Paragraph (1) does not apply where the request is made within 12 months of the last occasion that such information was provided to the member.

(1B) Information provided under paragraph (1) is to be provided by the trustees as soon as reasonably practicable, and in any event within three months after the date that the member makes the request.”;

(b) omit paragraph (2);

(c) in paragraph (3) for “paragraphs (1) and (2)”, substitute “paragraph (1)”;

(d) in paragraph (4)(b)(ii)—

(i) for “regulation 8” in both places where it appears, substitute “Schedule 1A”; and

(ii) before “cash equivalent” in the first place where it appears, insert “initial”;

(e) omit paragraphs (4)(b)(i) and (4)(b)(vi)(cc);

(f) at the end of paragraph (4)(b)(vi)(aa), insert “and”; and

(g) after paragraph (4)(b), insert—

“(c) the information mentioned in paragraph 3 of Schedule 1.”.

Amendment of regulation 12 of the principal Regulations

6.  Regulation 12 of the principal Regulations (requirements to be met by receiving schemes, annuities and arrangements)(15) is amended as follows—

(a) in paragraph (2)(a), for “a policy of insurance” substitute “an insurance policy”; and

(b) in paragraph (5)(c), for “or” substitute “,”.

Amendment of Schedule 1 to the principal Regulations

7.  Schedule 1 to the principal Regulations (information to be made available to members), is amended as follows—

(a) in paragraph 1—

(i) for sub-paragraph (a), substitute—

“(a) an estimate of its amount, calculated and verified in accordance with regulations 7 to 7E on the basis that the member’s pensionable service terminated or will terminate on a particular date;”;

(ii) at the end of sub-paragraph (c), insert “and”;

(iii) omit sub-paragraph (d); and

(iv) in sub-paragraph (e)—

(aa) for “has been reduced by reference to regulation 8”, substitute “included a reduction of the initial cash equivalent under Schedule 1A”; and

(bb) for paragraph (i), substitute—

“(i) a statement of that fact, a statement of the amount by which the initial cash equivalent has been reduced and an explanation of the reason for the reduction, which must refer to the paragraph of Schedule 1A relied upon,”; and

(b) after paragraph 2, insert—

“3.  Where information is made available under paragraph 1 or 2 to a member of a salary related scheme, the information to be made available to such a member also includes—

(a) a statement that the Financial Services Authority(16), the Regulatory Authority(17) and the Pensions Advisory Service(18) provide information about transfers that may assist the member in deciding whether to transfer;

(b) if the scheme is an eligible scheme as defined in section 126 of the 2004 Act (eligible schemes), confirmation that the scheme is so eligible and that the Board of the Pension Protection Fund(19) exists;

(c) a recommendation that the member should take financial advice before making decisions about transfers.”.

Schedules

8.  The Schedules to these Regulations have effect (Schedule 1 inserts Schedules 1A and 1B into the principal Regulations and Schedule 2 makes consequential amendments).