Source: http://www.legislation.gov.uk/ukpga/2008/30/notes/data.xht?view=snippet&wrap=true
Timestamp: 2018-08-16 20:54:35
Document Index: 170742311

Matched Legal Cases: ['art 1', 'art 1', 'art 1', 'art 2', 'art 2', 'art 2', 'art 2', 'art 3', 'art 3', 'art 3', 'art 4', 'art 4', 'art 4', 'art 5', 'art 5', 'art 1', 'art 1', 'art 4', 'art 1', 'art 1', 'art 1', 'art 1', 'art 2', 'art 3', 'art 4', 'art 1', 'art 1', 'art 1', 'art\n236', 'art 2', 'art 1', 'art 1', 'art 1', 'art 3', 'art 3', 'art 1', 'art 2', 'art 3', 'art 1', 'art 4', 'art 1', 'art 6']

Pensions Act 2008(c. 30) - Explanatory Notes
2008 CHAPTER 30
1.These explanatory notes relate to the Pensions Act which received Royal Assent on 26 November 2008. They have been prepared by the Department for Work and Pensions in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.
3.The Pensions Commission’s 2005 report A New Pension Settlement for the Twenty-First Century contained a series of recommendations regarding the UK pensions system. This Report formed the basis for the Government’s White Paper Security in Retirement: towards a new pensions system, published in May 2006 and the second White Paper, Personal accounts: a new way to save, published in December 2006.
4.The Pensions Act 2007 made provision for the first part of the reform of the UK pensions system.
5.The second White Paper contained further proposals, with an emphasis on private saving, and formed the basis for measures contained in this Act.
6.For ease of reference, please note the following abbreviations for legislation are used in these notes:
FA 2004 – Finance Act 2004 (c. 12)
MCA 1973 – Matrimonial Causes Act 1973 (c. 18)
PA 1995 – Pensions Act 1995 (c. 26)
PA 2004 – Pensions Act 2004 (c. 35)
PA 2007 – Pensions Act 2007 (c. 22)
PSA 1993 – Pension Schemes Act 1993 (c. 48)
SSCBA 1992 – Social Security Contributions and Benefits Act 1992 (c. 4)
7.This Act introduces two key requirements for employers:
To automatically enrol eligible jobholders who are not in a qualifying pension scheme into an automatic enrolment scheme. Jobholders will be enrolled by their employers from the first day they become eligible but retain the right to opt out of the scheme from this point. Employers may choose the pension scheme they provide, which must meet certain criteria. The Act gives the Secretary of State powers to establish a pension scheme in which employers can choose to participate. This scheme will be run by an independent trustee body.
To maintain the jobholder’s membership of a qualifying scheme, including making relevant contributions, so long as the jobholder chooses to be part of it.
8.The Act also requires employers to give the Pensions Regulator information about how they will meet their obligations. The Pensions Regulator will be able to use this information to assess compliance with the duties set out in this Act. The Pensions Regulator will be given powers to enforce these duties and the Act sets out sanctions, including criminal penalties, for failure to comply.
9.Provisions in the Act extend the functions of the Personal Accounts Delivery Authority, established in the PA 2007, enhancing its powers from advising on to overseeing the establishment of the infrastructure and processes relating to any scheme created under this Act. In carrying out these functions, the Authority will be required to have regard to a number of guiding principles set out in this Act.
10.Further reforms to the state pension system are contained in this Act. Due to previous changes in legislation, additional State Pension has been accrued on several different bases over previous years. People therefore retire with a number of different entitlements to additional State Pension, some of which are not calculable ahead of state pension age. The Act will consolidate those entitlements into a simple cash valuation.
11.The Act also removes, in most cases, the requirement for people aged 75 or over claiming state pension credit to provide information and evidence on their retirement provision at the end of their assessed income period (usually five years).
12.The Act makes a number of changes relating to the operation of the Pension Protection Fund (PPF) and the Pensions Regulator, including enabling Pension Protection Fund compensation to be shared on divorce or dissolution of a marriage or civil partnership as well as enabling individuals in the PPF with a terminal illness to commute their pension entitlement into a lump sum. It also provides for changes to the operation of the Financial Assistance Scheme.
13.The Act contains amendments to existing private pension legislation – some of which are based on recommendations made by the Deregulatory Review of Private Pensions (see http://www.dwp.gov.uk/pensionsreform/deregulatory­_review.asp).
14.The Act makes changes to the national insurance system and contains a number of measures to bring the existing body of pensions-related legislation up to date. For example, it will update provisions on re-marriage and war pensions in the PA 1995 to include civil partnerships.
15.Finally, the Act allows data to be shared between the Department for Work and Pensions and energy suppliers to enable the energy suppliers to provide targeted assistance to individuals receiving state pension credit.
The Act Overview
16.The Act has six Parts:
Part 1 sets out the new duties on employers to automatically enrol eligible jobholders into automatic enrolment schemes and to contribute to those arrangements. It defines jobholders, qualifying earnings and qualifying schemes. Part 1 also makes provision for a regime to ensure compliance with these duties, and for the protection of employment and pre-employment rights. Part 1 (which includes Schedule 1) makes provision for the establishment of a trust-based occupational pension scheme and for a trustee corporation. There are also provisions to broaden the functions of the Personal Accounts Delivery Authority so that it can take forward the implementation work necessary to establish a pension scheme.
Part 2 (which includes Schedules 2, 3 and 4) contains measures to simplify and amend existing private and state pensions legislation. Part 2 reduces burdens relating to private pensions schemes by simplifying the treatment of contracted-out rights for the purposes of pension sharing on divorce and by establishing new rules for the revaluation of accrued rights and removing the remaining rules on protected rights, the majority of which relate to survivor benefits. Part 2 also sets out a new method of assessing certain components of state pensions and fixes the Contracted-Out Deduction in relation to gross Additional Pension to provide a single consolidated additional pension. Finally, Part 2 introduces an extension to the state pension credit assessed income period for most individuals aged 75 or over.
Chapter 1 of Part 3 (which includes Schedules 5, 6 and 7) establishes arrangements for compensation paid by the Pension Protection Fund to be shared on divorce or dissolution of a marriage or civil partnership in England, Wales and Scotland. Chapter 2 of Part 3 (which includes Schedule 8) also makes changes to the compensation provisions of the Pension Protection Fund, to improve the Fund’s operation. Chapter 2 of Part 3 also enables individuals in the PPF with a terminal illness to commute their pension entitlement into a lump sum.
Part 4 contains a measure to enable the Financial Assistance Scheme (FAS) to make payments to qualifying members whose benefits would have been met in full by their pension schemes. Currently the FAS can only make payments to those qualifying members of qualifying schemes who will not receive their benefits in full from their under funded pension scheme. Part 4 also allows for the definition of a FAS qualifying scheme in the PA 2004 to be amended so that exceptions can be made through regulations to the condition that schemes need to have wound-up before 6th April 2005. The regulations could allow certain schemes, which are presently unable to qualify for either the FAS or the PPF, to qualify for the FAS. Finally, Part 4 extends the current restriction on the purchase of annuities by trustees of FAS qualifying pension schemes.
Part 5 (which includes Schedules 9 and 10) contains a variety of measures to update existing pensions legislation. This includes changes to the Pensions Regulator’s powers. Part 5 contains changes to the national insurance system to allow specific groups of people to increase their state pension entitlement. In addition it also contains a provision which will allow for data to be shared between the Department for Work and Pensions and energy suppliers to provide targeted assistance to individuals receiving state pension credit.
17.The provisions of this Act extend to England and Wales and Scotland. Certain provisions within this Act also extend to Northern Ireland.
Territorial extent: Wales
18.The Act’s effect in Wales is the same as in England. The Act contains no provisions which relate exclusively to Wales, or affect the National Assembly for Wales.
Part 1: Pension scheme membership for jobholders
22.The aim of Part 1 of the Act is to achieve increased overall participation of workers in employer facilitated pensions saving and implementation of a minimum standard of pension saving for the worker concerned.
Chapter 1: Employers’ duties
23.This section defines “jobholder” for the purpose of the employer duty as workers who ordinarily work in Great Britain, are aged between 16 and 75 and who earn qualifying earnings (see sections 13 and 15). This section also provides that where a jobholder has more than one employer, the employer duty provisions apply separately in relation to each employment.
25.Section 3 introduces the employer obligation to automatically enrol jobholders aged between 22 and state pension age into a scheme that fulfils the criteria for an “automatic enrolment scheme” (see section 17). Automatic enrolment must take place when the individual first meets the relevant criteria (i.e. is a jobholder and is over 22) in that employment. This is known as the “automatic enrolment date” (subsection (7)).
26.The section contains a power which allows the Secretary of State to set out in regulations the steps the employer must take to arrange for the jobholder to be automatically enrolled (subsection (2)).
27.This obligation does not apply if, within a prescribed period, the jobholder has been an active member of a qualifying scheme in that employment, but chose to end membership (subsection (4)). This is to prevent jobholders being automatically enrolled into a scheme soon after they decided to leave.
28.The employer may be required, as part of the automatic enrolment process set out in regulations, to provide prescribed information to any person, in particular the trustees or managers of an occupational pension scheme or the provider of a personal pension scheme (subsection (5)). This will enable the provision of information about a jobholder to the scheme to enable their enrolment.
29.There is a power which enables the Secretary of State to make regulations under subsection (2) to deem an agreement to exist between the jobholder and the provider where the employer fulfils their employer duty obligation by automatically enrolling the jobholder into a personal pension scheme that meets prescribed conditions (subsection (6)).
Section 5: Automatic re-enrolmentSection 6: Timing of automatic re-enrolment
33.These sections set out the duty and the timing for employers to periodically automatically re-enrol, into an automatic enrolment scheme, jobholders who are aged at least 22 and under pensionable age and who are not already members of qualifying schemes.
34.As with automatic enrolment, this obligation does not apply if the jobholder chose to end membership in the same employment, within a prescribed period before the re-enrolment date (section 5(4)) or gave notice to opt out under section 8. This enables the delay of re-enrolment if it falls soon after the jobholder has chosen to leave the scheme.
35.Section 6 requires regulations to determine that re-enrolment will not occur more frequently than once every three years. The three year interval may be by reference to the jobholder or the employer. The section then goes on to set out exceptions whereby regulations may be made to enable re-enrolment to take place more frequently than once in a three year period.
36.There may be jobholders who are not participating in workplace saving because they opted out or cancelled their active membership, or do not qualify for automatic enrolment because they are aged between 16 and 22 or between pensionable age and age 75.
37.Section 7 allows such jobholders to require their employer to make arrangements to enrol them into an automatic enrolment scheme by giving the employer notice. The jobholder can give notice to opt in under this section more than once in a 12 month period, although the employer is not obliged to accept more than one notice in 12 months. Therefore employers are not required to keep enrolling a jobholder who has opted out a number of times in the same year.
38.This process, the details of the notice required and the date from which membership must be effected are to be prescribed in regulations (subsection (4)).
46.This section requires the Secretary of State to set out in regulations the circumstances in which a prescribed person must give information to individuals about how the employer duty may affect them. This will include information about the effect of automatic enrolment, re-enrolment, postponement of automatic enrolment, giving notice to opt in and the right to opt out.
47.Section 11 gives the Secretary of State power to make regulations requiring employers to provide information to the Pensions Regulator about how they are complying, or intend to comply, with the employer duties, including information relating to the pension schemes that are to be used. This section will enable the process by which employers will be required to register with the Regulator. An example of information that may be required through that process is information identifying the scheme into which an employer has automatically enrolled jobholders.
48.This section works with the provisions in Chapters 2 and 4 of this Part, by enabling the Regulator to obtain the information needed to support the compliance regime.
49.This section provides a regulation-making power which, combined with the Secretary of State’s power to bring sections 2 to 9 into force under section 149(1), allows the Secretary of State to make provision requiring some employers to start discharging their duties under this Chapter (including those on continuity of scheme membership, automatic enrolment and re-enrolment, and allowing opt-in and opt-out) before other employers. This will allow the introduction of the employer duties to be staged over a period of time.
50.This section defines qualifying earnings. Subsection (1) defines them by reference to an earnings band, with lower and upper limits of £5,035 and £33,540 per annum (see section 14 for duties to review and if necessary amend these limits), on which pensions contributions will be calculated for money purchase schemes. Earning qualifying earnings (i.e. above £5,035) is a criterion of being a jobholder and so is a factor in determining whether a worker is to be automatically enrolled. Subsection (2) deals with cases where qualifying earnings are to be calculated otherwise than on an annual basis.
51.The section then defines “earnings” as sums comprising: wages/salary, commissions, bonuses, overtime and certain statutory benefits. The section enables the Secretary of State to set out (in regulations) other sums that can be considered as part of “earnings”.
52.This section provides that the Secretary of State must review annually the value of the “qualifying earnings” lower and upper limits annually against the general level of earnings and must amend the limits if they have not maintained their value measured against earnings.
53.The pay reference period is the period of earnings over which the calculation is made to work out (a) whether the jobholder should be automatically enrolled (i.e. with earnings more than £5,035 per annum) and (b) to calculate the level of contributions that the jobholder and employer need to pay for money purchase schemes. While the qualifying earnings band established in section 13(1) is expressed in annual terms this section allows the Secretary of State to prescribe other periods, where section 13(2) will apply. Because of the different types of workers and different pay periods used by employers, there is a need to enable the pay reference period to be tailored to specific worker and payment type. For example, agency workers might require a much shorter calculation period than salaried employees.
54.This section defines a qualifying scheme. Qualifying schemes are those that meet minimum standards and quality requirements, which can be used by employers in discharging their obligations under section 2.
55.A qualifying scheme can be either an occupational pension scheme or a personal pension scheme. Qualifying schemes must meet the quality requirement for the scheme type (see sections 20 to 27). They must also be registered under Chapter 2 of Part 4 of the FA 2004, which means that they are registered for tax relief.
56.Subsection (2) enables regulations to disapply the requirement to be tax registered for schemes based outside the UK if they meet further requirements to be prescribed in regulations. The further requirements are likely to refer to schemes operating outside the UK with members who will receive UK tax relief on their contributions.
57.The Secretary of State may in regulations set out the circumstances in which a scheme, that would otherwise qualify, is not a qualifying scheme. This can be where the payments and contributions – for example annual management charges - that must be made to the scheme exceed a prescribed amount (subsection (2)(a) and (b)); or the scheme provides average salary benefits and contains prescribed features (subsection (2)(c)).
58.There will be additional requirements on schemes that are used for the purposes of automatic enrolment, automatic re-enrolment and allowing opt in (as described at section 7). These schemes must be qualifying occupational pension schemes or qualifying personal pension schemes and must also enable automatic enrolment to take place. An automatic enrolment scheme must not require jobholders who are enrolled to express a choice, or provide information, in order to remain active members. For example, a jobholder will not be required to make a choice about the fund into which their contributions may be invested. Nor can the scheme refuse membership on the grounds that the jobholder does not provide information. An automatic enrolment scheme must also satisfy any further conditions that may be prescribed in secondary legislation.
60.Personal pension schemes are defined as those that fall outside the definition of an occupational pension scheme (see section 18).
61.In order to be deemed a qualifying scheme a UK occupational money purchase scheme must require an employer contribution equivalent to at least 3% of qualifying earnings and total contributions paid by the employer and jobholder equivalent to at least 8% (including tax relief).
62.The PA 2007 contains repeals of the contracting out arrangements for money purchase schemes currently provided for under the PSA 1993. However, in the event that those repeals have not yet been brought into force when the employer duties commence, subsection (2) enables regulations to be made to modify the contributions required for money purchase schemes with members whose employment is contracted-out of the State Second Pension Scheme.
63.Subsection (3) contains a regulation-making power that allows the Secretary of State to set an amount below which trustees and employers could choose to decline to accept contributions. This could be used, for example, to enable schemes to not have to deal with such minor amounts of contributions which are uneconomic to administer.
68.Hybrid schemes have a mix of defined benefit and money purchase elements. In order to qualify they will be required to satisfy the quality requirement for either money purchase schemes (section 20) or defined benefit schemes (section 21). The quality requirements set out in subsection (1)(a) and (b), which are those for money purchase schemes and defined benefits schemes, respectively, can be modified by regulations in their application to certain hybrid schemes
69.Employers will be directed to the quality requirement they should use for a hybrid scheme in rules made by the Secretary of State under subsections (2) to (4).
70.Section 25 enables the Secretary of State to make regulations about the quality criteria of non-UK based occupational pension schemes.
Section 26: Quality requirement: personal pension schemes
71.Section 26 provides the conditions which a personal pension scheme must meet in order to satisfy the quality requirement. In order to qualify, personal pension schemes must only provide money purchase benefits (subsection (3)). The employer must be required to contribute an amount equivalent to at least 3% of qualifying earnings (subsection (4)) and the jobholder must be required to make up any shortfall in contributions up to a contributions total of an amount equivalent to 8% of qualifying earnings in the pay reference period (subsections (5) and (6)). There will need to be agreements between the scheme and the employer and the jobholder confirming the contributions required. The employer must be required to pass over contributions to the scheme on the basis of direct payment arrangements as defined by the PSA 1993 (subsection (7)).
72.As with money purchase schemes (section 20) there is also a provision to alter contribution levels should the repeal of contracting-out not have occurred by the time these duties commence.
73.Subsection (9) contains a regulation-making power that allows the Secretary of State to set an amount below which trustees and employers could choose to decline to accept contributions. This could be used, for example, to enable schemes to not have to deal with such minor amounts of contributions which are uneconomic to administer.
74.This section allows the Secretary of State to prescribe in secondary legislation quality requirements for non-UK personal pension schemes.
80.This section sets out how employers operating qualifying occupational money purchase schemes and personal pension schemes will be able to phase in their contributions over two transitional periods.
81.This is achieved by setting lower contributions in the quality requirements over two transitional periods. Both transitional periods shall last at least 1 year and the exact duration of both will be prescribed in regulations.
82.In the first period, scheme rules must require employer contributions of at least 1% and a total contribution of at least 2% of the jobholder’s qualifying earnings in the pay reference period. For the second period, the minimum contributions will increase to 2% from the employer and 5% overall.
83.This section sets out the phasing arrangements for employers operating defined benefit or hybrid schemes. It enables those employers to delay automatic enrolment, for a specific group of jobholders for a transitional period that will be prescribed in regulations.
84.Subsection (2) defines the conditions which must be satisfied so as to be in this specific group of jobholders. They must be existing workers of the employer who have previously been and remain able to join a qualifying defined benefit or hybrid scheme.
85.The employer must automatically enrol such jobholders into a qualifying defined benefit or hybrid scheme by the end of the transitional period. If, before the transitional period ends, a jobholder ceases to be able to join a defined benefit or hybrid scheme or if the scheme they are eligible for ceases to qualify (subsection (4)), then the employer must automatically enrol the jobholder into alternative qualifying provision.
86.If the alternative scheme is another defined benefit or hybrid scheme, the employer must ensure membership is effective from the date on which the original scheme ceased to qualify or be available for the jobholder (i.e. the scheme closure date - subsection (5)). Subsection (6) provides that if the alternative scheme is a money purchase scheme then the employer must make membership effective from the original automatic enrolment date by paying backdated employer contributions.
88.Subsection (1)(a) enables trustees to make changes to a scheme necessary to comply with the conditions in section 17(2) (automatic enrolment schemes). For example, making a scheme suitable for automatic enrolment by removing any condition of membership which requires a choice of investment to be made.
89.Subsection (1)(b) allows changes specified in subsection (2) to be made to enable contributions payable to a scheme to be increased to comply with section 20 or with section 24(1)(a). The permitted changes are to increase the contribution rate, the basis on which it is calculated or the frequency of its payment. However, changes cannot be made without consent of the employer.
90.Subsection (3) makes separate provision for those schemes where there is more than one employer
91.Regulations may prevent certain schemes from using this provision to modify their rules to facilitate automatic enrolment.
92.An employer who automatically enrols, re-enrols or arranges opt in for a jobholder into a scheme is permitted to deduct the jobholder’s contributions from the jobholder’s pay from the date on which they are to become active members and give this to the scheme. This means that a deduction from earnings made by an employer in order to comply with the employer duty is not otherwise an unlawful deduction from earnings under the Employment Rights Act 1996, section 13.
93.Section 34 provides that no private right of action for breach of statutory duty arises against an employer who has failed to comply with requirements set out in the employer duty provisions (sections 2 to 11 or regulations under those sections). Under the Act the Pensions Regulator is the sole body responsible for taking action against such breaches.
94.Subsection (2) provides that nothing in Chapter 2, nor in the employer duty provisions, is intended to affect any right of action which might arise otherwise than under these provisions. This means for example that if contributions are set out in an employment contract, the individual would retain the right to pursue missing contributions as they would any other breach of contract.
Section 35: Compliance noticesSection 36: Third party compliance notices
95.This Act introduces powers for the Pensions Regulator to issue compliance notices. Where the Regulator is of the opinion that a contravention of the employer duties has occurred, a compliance notice will be the formal method of communicating the actions that should be taken to comply and the consequences of not doing so. Compliance notices would generally be the first step in the graduated compliance regime.
96.Section 35 gives the Pensions Regulator the power to issue a compliance notice to a person who has breached an employer duty. Employer duties are the duties under sections 2 to 11 which apply to employers but the duty to provide information under section 10 may also apply to other persons specified in regulations. A compliance notice would direct the recipient to put right their breach of the employer duty.
97.A compliance notice may require the recipient to take specific steps to place the jobholder in the same position, as nearly as possible, as if the breach had not occurred.
98.Section 36 provides that a “third party compliance notice” can be issued to a person (the “third party”) if the Regulator is of the opinion that person has contributed to a breach of the employer duties (by someone else who is subject to the duties). A third party compliance notice would direct the recipient to put right the action or inaction that had contributed to the breach of the duty.
99.An example of where a third party compliance notice might be issued is if a scheme or pension provider has failed to process the enrolment information it has received from the employer, and this prevents the employer from meeting the enrolment duty.
100.In addition to compliance notices, section 37 provides the Pensions Regulator with the power to issue an unpaid contributions notice to an employer if it is of the opinion that an employer has failed to pay the required contributions on time.
101.Section 37 makes provision for what an unpaid contributions notice is, to which contributions it is applicable and what information may be included in the notice.
102.Section 38 makes provision for the calculation of unpaid contributions. It provides that a compliance notice or an unpaid contributions notice may require the employer to calculate the amount of contributions that have not been paid into the scheme.
103.Where contributions are made within a prescribed period after a certain date, the unpaid contributions notice may require the employer to pay their own contributions with the worker having the option to pay their own but not being obliged to do so. However, where contributions are not made during that prescribed period of time, the employer will be required to pay all outstanding contributions.
104.Section 38 also enables the Regulator to estimate the amount of unpaid contributions using information other than that provided by the employer (for example, information held by HM Revenue and Customs or the employee’s scheme) and to require employers to pay interest on unpaid contributions.
Section 40: Fixed penalty noticesSection 41: Escalating penalty noticesSection 42: Penalty notices: recovery
106.Sections 40 to 42 provide the Regulator with powers to issue penalty notices where the Regulator is of the opinion that there has been a failure to comply with a compliance notice, a third party compliance notice, an unpaid contributions notice, a notice requiring certain information (section 72 of the PA 2004) or any of the provisions listed in section 40(2).
107.A fixed penalty notice (section 40) will require the person to whom it is issued to pay a penalty of up to £50,000 within a specified timeframe. Regulations will set out the actual penalty rate.
108.An escalating penalty notice (section 41) can be issued in cases where there is continuing failure to comply – such as where a fixed penalty notice has been ignored. The penalty will escalate at a rate prescribed in regulations but will not exceed £10,000 per day.
109.An escalating penalty notice cannot be issued if the Regulator is in the process of undertaking a review of a compliance notice, a third party compliance notice or an unpaid contributions notice, following an application for review by the person to whom such a notice was issued. The Regulator may not issue an escalating penalty notice if the person has exercised his right to make a referral (appeal) to the Pensions Regulator Tribunal against a fixed penalty notice and the referral has not yet been determined.
110.The Pensions Regulator can recover any outstanding fixed or escalating penalties. If the County Court (England and Wales) or Sheriff Court (Scotland) so orders, the money payable can be recovered by execution against goods. Any such penalties recovered by the Regulator must be paid into the Consolidated Fund.
111.Section 43 provides that the Regulator may review a notice issued under Chapter 2 if it is asked to do so by the person to whom the notice was issued, or if the Regulator considers it to be appropriate.
112.Regulations may prescribe the time period in which the person to whom the notice was issued can apply for review of a notice and the period in which the Regulator may otherwise review the notice.
113.Subsections (4) and (5) provide that the Regulator must suspend the effect of a notice until a review is completed, and must take into consideration any representations made by the person to whom the notice was issued.
114.Subsection (6) sets out the Regulator’s powers in reviewing a compliance notice. The Regulator may confirm, vary or revoke the notice, or it can choose to replace the notice with a different one.
Section 45: Offences of failing to complySection 46: Offences by bodies corporateSection 47: Offences by partnerships and unincorporated associations
118.Sections 45 to 47 make it a criminal offence for employers wilfully to fail to comply with specified duties.
119.These duties are automatic enrolment (section 3(2)), re-enrolment of eligible jobholders into an automatic enrolment scheme (section 5(2)) and the requirement to enrol jobholders into an automatic enrolment scheme at the jobholders’ request (section 7(3)).
120.Section 45 provides that a person who commits such an offence could face imprisonment for up to two years and/or a fine. If convicted in a magistrates’ court, the maximum penalty is a fine not exceeding the statutory maximum.
121.Sections 46 and 47 enable the following to be prosecuted for the section 45 offence:
partnerships and individual partners (section 47); and
unincorporated associations and officers within these (section 47).
122.Section 48 amends section 80(1)(a) of the PA 2004 to include the offence of providing the Regulator with false or misleading information about the actions taken by the employer for the purpose of complying with the employer duties (under regulations under section 11 of this Act).
123.Section 111A of the PSA 1993 makes provision about monitoring arrangements under which an employer pays contributions to personal pension schemes in respect of an employee. It also provides that fraudulent evasion of such arrangements is an offence. Section 49 extends that section to apply to arrangements in respect of jobholders, defined in this Act, who would not otherwise fall within the definition of “employee”, but who do fall under the definition of “workers”.
Chapter 3: Safeguards: Employment and pre-employment
124.Sections 50 to 59 represent a package of pre-employment and employment safeguards to ensure that individuals’ entitlements under this Act can be protected. This package contains three key elements. Sections 50 to 53 introduce a prohibition on employers attempting to screen out job applicants on the basis that they want to be a member of a pension scheme. Section 54 introduces a prohibition on employers acting (or attempting) to induce employees to opt out from, or cease, membership of a qualifying workplace pension scheme. Both these prohibitions will be enforced by the Regulator. Sections 55 to 59 provide employees with a range of employment rights to enable them to present a complaint to an employment tribunal if they feel they have been put at a disadvantage or dismissed as a result of their pension choices. The Regulator will not have a role in the enforcement of these.
132.Section 54 introduces a prohibition on employers attempting to induce their workers to opt out from, or cease, membership of a qualifying workplace pension scheme and gives the Regulator the power to take compliance action against a contravention. An employer contravenes this prohibition if they take any action for the sole or main purpose of inducing a worker or jobholder to give up membership of a relevant scheme, without becoming an active member of another relevant scheme within the prescribed period under section 2(3).
133.The section also provides a power for a time limit, within which (i) a complaint to the Regulator must be made about a contravention of the provision or (ii) the Regulator must inform the employer of an investigation of a contravention. This time limit will be set out in regulations.
Section 55: The right not to suffer detrimentSection 56: Enforcement of the right
134.Section 55 provides a statutory right for workers not to be subjected to any detriment by an act done on specified grounds. For example, this right would protect a worker who might have been denied promotion or training opportunities because of their decision not to opt out of pension scheme membership
135.Subsection (4) provides that if the detriment in question amounts to dismissal, this section does not apply.
136.Section 56 provides that workers have a right to bring claims that they have been subjected to a detriment to an employment tribunal. If the tribunal upholds a claim, it can make an award of compensation to be paid by the employer to the worker.
137.Section 57 inserts a new provision (section 104D) into the Employment Rights Act 1996, which protects an employee from being dismissed on grounds mirroring those specified in the right not to suffer detriment (section 55), for example, where an employee is dismissed for refusing to opt out of pension scheme membership.
138.As with the right not to suffer detriment, an employee who is dismissed on these specified grounds shall be regarded as having been unfairly dismissed, regardless of whether the employee concerned actually meets the eligibility criteria for the employer duty.
Chapter 4: Supplementary provision about compliance and information sharing
Section 60: Requirement to keep records
143.Section 60 permits the Secretary of State, by regulations, to make provision requiring any person to keep records in a prescribed form for a period prescribed by regulations, not exceeding 6 years. Regulations may require the provision of such records, on request, to the Regulator.
144.These regulations can make provision for the Regulator to apply penalties under section 10 of the PA 1995 where a person fails to comply with this requirement.
Section 61: Powers to require information and to enter premises
145.This gives the Regulator, in pursuance of its new objective, powers to require information and to enter premises. It amends section 72 of the PA 2004 so as to permit the Pensions Regulator to require any person who holds or is likely to hold information relevant to the exercise of the Regulator’s functions to provide an explanation of a document requested, at a specified time and place.
146.The Regulator will not be able to require anyone to answer any question or provide any information that might incriminate themselves or their partner or spouse.
147.This section also allows an inspector, appointed by the Pensions Regulator, to enter premises liable to inspection to investigate whether an employer is complying with requirements under Chapter 1, or sections 50 or 54 of Part 1.
Section 62: Disclosure of tax information etc
148.This section substitutes a new section 88 of the PA 2004. It allows HM Revenue and Customs (HMRC) to disclose information on specified matters to the Regulator to enable the Regulator to discharge its functions. The section allows HMRC to share any information it holds in relation to:
tax or duty (including income tax);
149.The section also places controls on the Regulator's ability to disclose this information. Any information the Regulator receives from HMRC under this section must be treated as restricted information, and can only be disclosed if one of the following exceptions applies:
HMRC has authorised the disclosure (or the disclosure is back to HMRC);
150.Information received by the Regulator from HMRC under this section is specifically excluded from some of the grounds on which the Regulator can normally disclose information it holds. These are set out in sections 82, 83, 85-87, and 235 of the PA 2004. This includes, for example, disclosure with the consent of the person to whom the information relates, or where necessary to help other specified regulatory bodies exercise their functions, or to the Secretary of State for the purposes of private pensions and retirement planning policy.
Section 63: Information for private pensions policy and retirement planning
151.Section 63 amends Schedule 10 to the PA 2004. Schedule 10 allows the Secretary of State (or the Northern Ireland Department) to make use of information collected in the course of carrying out a wide variety of functions (social security, child support, war pensions, employment or training, private pensions policy, retirement planning). This section adds private pensions policy and retirement planning to that list of functions.
152.This section also allows the Pensions Regulator to supply the Secretary of State with information in the first place, so that the latter (and the Northern Ireland Department) can use this information to help perform functions relating to private pensions policy or retirement. The section also utilises a definition of “private pensions policy” so as to incorporate the definition of pension schemes introduced in Part 1 of the Act.
Section 64: Penalty for disclosure
153.Section 64 increases the maximum sentence on summary conviction for officials, contractors or any other people who directly or indirectly receive restricted information from the Pensions Regulator and who disclose such information without authorisation. Such unauthorised disclosure is already a criminal offence under section 82(5) of the PA 2004. This section makes anyone who is convicted of this offence in a magistrates’ court liable to a prison term of up to a year (rather than a fine not exceeding the statutory maximum, which was the previous extent of a magistrates’ court’s powers for this offence). This may be imposed together with, or instead of, a fine up to the statutory maximum.
Section 65: Objectives of the Regulator
154.Section 65provides a new statutory objective for the Pensions Regulator. In addition to those listed at section 5(1) of the PA 2004, the Regulator’s objectives will now include maximising compliance with the new duties being placed on employers under Chapter 1 of Part 1, and the safeguards in sections 50 (prohibited recruitment conduct) and 54 (inducements).
Section 66: Functions of the Pensions Ombudsman
155.Section 66 gives the Pensions Ombudsman a new function, in addition to those under section 146 of the PSA 1993, to investigate complaints relating to a jobholder opting out of a pension scheme.
Chapter 5: Duty to establish a pension scheme
Section 69: Consultation of members and employers
161.Section 69 provides that the scheme order must require the trustees of the scheme to make arrangements for consulting the scheme members and participating employers about the ongoing operation, development and amendment of the scheme. These arrangements must include the establishment of members’ and employers’ panels to represent the interests of members of the scheme and participating employers.
162.The trustees will have decisions to make about the operation of the scheme. These will include decisions on how the scheme should be developed and whether it should be amended. The trustees will have to consult the scheme members and employers about these decisions. To help with the consultation, the trustees will have to create panels to represent the members and employers. The make-up and functions of these panels could be set out in the Order or under it (e.g., in Rules). The members’ panel could be allowed to propose people for appointment as members of the trustee corporation. The panel could use those proposals to help ensure that their interests are represented. (This would be in the spirit of the provisions for member nominated trustees and directors in the PA 2004.)
163.The Order will also be able to allow for payments to be made to panel members from scheme funds. This could include payment for their time and expenses.
164.A scheme created under section 67 could potentially cover a very wide and diverse range of employers and employees, making it difficult for the trustees to keep in touch with all their opinions. The members’ and employers’ panels will act as representative bodies to keep the trustees informed and provide feedback about how the scheme is working. The trustees will consult both panels before any changes are made to the scheme.
Section 70: Contribution limits
165.This section requires the Secretary of State to set out in the Order the maximum amount a member of the scheme established under section 67 can contribute (including the employer contribution and tax relief) in a tax year. This allows the Order to set a contribution limit of £3,600 (by reference to the level of earnings in 2005). It would also allow the Order to provide, for example, a higher limit in the first year of the scheme and for the contribution limit to be uprated in line with earnings.
166.The power will enable the Secretary of State to include in the Order:
what a contribution is;
when a contribution is to be treated as made;
how contributions are treated where the maximum is exceeded;
the value of any amount to be repaid in respect of excess contributions (whether the same or more or less than the contribution, because of investment or otherwise), and;
who makes the refund payments and to whom.
167.Subsection (3) allows the Secretary of State to set out in an Order more than one contribution limit. The Order could allow, for example, a lump sum contribution limit over the member’s lifetime.
168.Subsection (4) enables the Secretary of State to remove the requirement to have a contribution limit in the scheme established under section 67. This allows section 70 to be repealed if, for example, a review is carried out which concludes that a contribution limit is not appropriate for a scheme under section 67.
Section 71: Procedure for scheme orders
169.Section 71 sets out the procedure for consulting on and seeking consent to changes to the scheme Order (see the note to section 67). When a trustee is in place (i.e., once the scheme has been established), subsequent changes to the Order may be made by the Secretary of State only if he has the consent of the trustee. Trustees must consult the members’ and employers’ panels before giving consent.
170.Examples of what could be included in the Order are: the structure of members’ charges; access to the scheme for the self employed; the way that members will be able to access their savings; the provision of payments to members’ and employers’ panel members; a default fund for members who do not wish to choose where their contributions are invested.
Section 73: Application of enactments
175.Section 73 sets out how the scheme should be treated within current legislation to ensure that the scheme is established and can run as intended. It ensures that the scheme will not be treated as a public service scheme under the PSA 1993 and FA 2004. It also sets out that the Interpretation Act 1978 will apply to rules as if they were in a deed (which would be appropriate to other occupational schemes) rather than made under an enactment (provisions of the personal accounts scheme order).
Section 74: Review
176.This section requires the Secretary of State to appoint a person to carry out a review of two aspects of the scheme established under section 67 that are designed to focus it on the target market specifically: namely the policy on contribution limits and restricting pension fund transfers to and from the scheme. It also allows the Secretary of State to bring other topics within the review’s scope.
177.Subsection (2) requires the Secretary of State to appoint the person on or after (i) 1st of January 2017 or (ii) at the end of five years beginning with the first day on which contributions are paid to the scheme by or on behalf of members, whichever is the later.
178.The section also requires the person to prepare a report of the review and send a copy of it to the Secretary of State, and the Secretary of State is under an obligation to lay before Parliament a copy of that report (subsections (3) and (4)).
Schedule 1: The trustee corporation
182.Schedule 1 sets out rules concerning the governance of the trustee corporation established by section 75.
183.Part 1 details the rules relating to the appointment, conduct, remuneration and staffing of the corporation.
184.The chair and members of the corporation will initially be selected by the Secretary of State. Later appointments will be made by the corporation. The Secretary of State must consult the chair, if there is one, before making other appointments. The aim must be for the trustee corporation to have no fewer than nine and no more than fifteen members. The scheme Order (see section 67) may provide for the corporation to be subject to existing rules for member nominated directors, suitably modified to make them work in this context.
185.The Secretary of State and the corporation should satisfy themselves on appointment, and on an ongoing basis, that no member of the corporation has a conflict of interest – as defined in paragraph 2(5) and (6).
186.Paragraphs 3, 4 and 5 set out the reasons why a member will be disqualified or may be removed from the corporation. A person will be disqualified from being or continuing as a member if they are already prohibited or suspended from being a trustee under existing legislation – unless, in specific circumstances, the Pensions Regulator waives the existing suspension or disqualification.
187.A member cannot be appointed for a period of more than five years and, although they may be reappointed at the end of this period, cannot be reappointed more than once. Therefore, the maximum period anyone will be able to serve as a member will be ten years. This is within the maximum period for a public appointment as set out in the Office of the Commissioner for Public Appointments (OCPA) guidance. Members may resign by giving written notice to the Chair and the Chair by giving such notice to the Secretary of State.
188.The corporation may pay remuneration and allowances and gratuities to members and, where there are special circumstances as determined by the Secretary of State, compensation to a person who ceases to hold office as a member or chair.
189.Paragraph 8 allows the corporation to employ staff and to determine terms and conditions, including remuneration, of their employment. It must also pay pensions and allowances, as well as provide such pension schemes, as it determines.
190.Part 2 of the Schedule concerns the day-to-day proceedings of the trustee corporation, including that of any committees.
191.The corporation may establish committees to discharge its functions or to provide advice in order to do so. Committees may include people who are not members or employees of the corporation (though they must not form the entire committee) and such people may be paid remuneration and expenses. This ensures that the corporation can obtain specific skills or expertise but will always have member interest in the committee. Such committees may establish sub-committees whose members must be members of the committee which established it.
192.The corporation is normally allowed to regulate its own procedure and that of its committees and sub-committees and to allow committees and sub-committees to regulate their own procedure. Procedures must be published.
193.Paragraph 13 sets out procedure for declaring an interest in any matter to be discussed at a meeting of the corporation or its committees. Such declarations must be recorded in the minutes. Interests can be disregarded if certain specified conditions are met.
194.The corporation can delegate any of its functions to members, employees or other members of staff and committees, unless anything in the Order or Rules does not allow that function to be delegated.
195.The validity of proceedings of the corporation will be protected where there is a vacancy among members or defect in an appointment.
196.Paragraph 16 specifies that application of the corporation’s seal must be authenticated by the signature of a member, or someone authorised by the corporation to do so. The seal is used in the case of some documents to signify that the corporation has formally agreed to them (e.g., certain documents in relation to property transactions).
197.Paragraph 17 requires the corporation to prepare an annual report which includes a report of the corporation’s proceedings during the year and anything relating to the financial position or other matter that the Secretary of State requires. Such reports must be sent to the Secretary of State as soon as possible following the end of the financial year and must be laid before Parliament.
198.Part 3 sets out the corporation’s procedures relating to the receipt of money and accounting.
199.It also allows the Secretary of State to provide financial assistance to the trustee corporation, for example, through a grant or loan with the consent of HM Treasury. The interest rate associated with any loan must be approved by the Treasury and meet the conditions that would apply under section 5 of the National Loans Act 1968 (and so, as a minimum, cover the cost of Government borrowing). It also allows the corporation to charge for its services.
200.As a non-departmental public body (NDPB) the corporation, like all other NDPBs, must keep proper accounts and prepare an annual statement for each financial year which must be audited by the Comptroller and Auditor General (the head of the National Audit Office) and the statement and Auditor’s report must be laid before Parliament by the Secretary of State.
201.Part 4 amends current legislation on disqualification, records and freedom of information and equality to ensure that the corporation conforms to these provisions. For example, a member may not be a member of the House of Commons or the Northern Ireland Assembly. It also lists the meanings of a number of terms used in this Schedule.
Section 77: Application of pension trustee legislation
204.Section 77 allows the Secretary of State, by regulations, to apply existing law which applies to trustees of pension schemes or directors of trustee companies to the trustee corporation created by section 75, with any appropriate modifications.
Section 78: Interpretation of Chapter
205.Section 78 sets out the meanings of members’ and employers’ panels, and trustees for this Chapter.
Chapter 7: Stakeholder pension schemes
Section 87: Stakeholder pension schemes
224.Section 87 amends the Welfare Reform and Pensions Act 1999 to remove the statutory duty on employers to have a designated stakeholder pension scheme, and all but one of the detailed related requirements (consultation, provision of information etc).
225.From the date these changes come into effect the payroll deduction requirement (section 3(5) of the Welfare Reform and Pensions Act 1999) will continue as a transitional provision. Under this provision, those employees (“relevant employees” as defined in new subsections (1A), (1B) and (1C) of section 3) who are making regular contributions into their stakeholder pension through their employer’s payroll, will continue to be able to do so until they stop making these contributions or leave the employer’s employment.
226.This recognises that in making their decision to contribute into a stakeholder pension, employees did so in the knowledge that they could make their contributions via their employer’s payroll. This transitional provision only applies if the request to deduct these contributions from the employee’s pay was made prior to the date when these changes take effect, and the employee is making regular contributions into their stakeholder pension.
Chapter 8: Application and interpretation
Section 88: “Employer”, “worker” and related expressions
227.This section defines the terms “employer”, “worker” and other related expressions for Part 1 of this Act.
Section 89: Agency workers
228.Under this section, agency workers, who would not otherwise fall within the definition of “worker”, are treated as workers for the purposes of the employer duty (automatic enrolment, automatic re-enrolment and opting in). The agency or the principal for whom the worker works will be the relevant “employer” depending on which is responsible for paying the worker, or if that cannot be determined, on whichever one actually pays the worker.
Section 90: Directors
229.This section provides that a director with a contract of employment is included as a worker for the purposes of the employer duty and a director with any other contract or letter is not included.
Section 91: Crown employmentSection 92: Armed ForcesSection 93: House of Lords staffSection 94: House of Commons staffSection 95: Police
230.These sections make provision about how Part 1 of this Act applies in relation to some specific types of worker or employer.
231.Sections 91, 93, 94 and 95 set out specific classes of people who fall to be treated as workers for the purposes of these provisions. As such, the employer duty will apply to these specific groups in the same way as it applies in relation to other employment and other workers. The only exception is for employment by or under the Crown where there is no criminal liability placed on the Crown. However, the Regulator is enabled to apply to the High Court for a declaration that there has been a failure by the Crown to comply with duties referred to in section 45(1) which, though not giving rise to criminal liability, is unlawful.
232.Section 92 sets out the specific exclusion of the armed forces from these provisions.
Section 97: Persons in offshore employment
234.Section 97 provides an affirmative power to make Orders in Council to set out those persons engaged in offshore employment to whom the provisions of Part 1 will apply.
Section 98: Extension of definition of worker
235.This section provides that the definition of “worker” may be extended to include individuals who are not currently captured if a new definition arose within policy parameters which did not fall within the existing employer duty obligation. Such individuals would be deemed to be subject to a worker’s contract of a prescribed kind, working for a person of a prescribed description, who would be deemed to be the employer for the purposes of automatic enrolment.
Section 99: Interpretation of Part
236.This section sets out the meaning of particular words and phrases used throughout this Part.
Schedule 2: Revaluation of accrued benefits etc.
240.Paragraphs 2 and 3 of Schedule 2 amend the provisions in the PSA 1993 for revaluing deferred members' benefits in final salary occupational pension schemes.
241.The overall effect of the amendments is to provide that accrued benefit attributable to pensionable service on or after the commencement day is to be revalued by the rate of inflation over the relevant revaluation period, capped at 2.5% per annum. Accrued benefit attributable to service before the commencement day is to be unaffected by the amendments and a cap of 5% per annum is to continue to be applied to accrued benefits for service between 1985 and the commencement day. Where the time period between the end of pensionable service and the beginning of pension payments is longer than a year, the caps are applied to the rate of inflation as averaged over that time, and are calculated on a compound basis.
242."Accrued benefit" is defined as the amount of benefit accrued at the date pensionable service was terminated, excluding any guaranteed minimum pension rights (to which separate provisions apply) – see the inserted paragraph 1(1E) of Schedule 3 to PSA 1993, which reproduces the existing text. "Pensionable service" continues to include any notional pensionable service which is credited to the member by the scheme.
243.Part 2 ensures Pension Protection Fund compensation is paid based on revised revaluation rates as set out in section 101 and Part 1 of this Schedule.
244.Paragraph 7 makes a consequential amendment to the provision allowing the Board of the Pension Protection Fund to alter the maximum revaluation rate.
245.Paragraph 8 makes consequential amendments to section 51ZA of the PA 1995, which defines “the appropriate percentage” for the purposes of section 51 of the same Act (limited price indexation of pensions in payment). The amendments insert a reference to the new revaluation rate cap of 2.5% for accrued benefits attributable to post commencement day service as introduced by Part 1 of this Schedule.
253.Paragraph 1 of the inserted Schedule 4C specifies that the consolidation date will be a fixed date, the first day of the Flat Rate Introduction Year, regardless of the date when the person reaches state pension age.
254.Paragraphs 2 and 3 stipulate that a person’s consolidated amount must be calculated before they reach state pension age.
255.Paragraph 4 ensures that the existing appeals process under Chapter 2 of Part 1 of the Social Security Act 1998 is applied to the consolidated amount.
256.Paragraph 5 defines the consolidated amount as the sum of the person’s GRB and Additional Pension accruals.
257.Paragraphs 6 to 8 specify that GRB and Additional Pension will be calculated using legislation in force at the time consolidation takes place.
258.Paragraph 9 provides that the consolidated amount, including GRB, will be revalued annually by earnings.
Section 103: Effect of entitlement to guaranteed minimum pension
259.Section 103 amends PSA 1993 to cater for those who have been in contracted-out employment for all or part of the period up until 5 April 1997 and are entitled to one or more Guaranteed Minimum Pensions. It introduces a method for calculating the reduction to be made from Additional Pension in respect of the years before the Flat Rate Introduction Year for those who reach State Pension age after 5 April 2020.
260.Subsection (2) amends PSA 1993, section 46, inserting new subsections (1A) and (1B), so that the method of calculating a reduction under the provisions in section 46(1), do not apply where someone reaches State Pension age after 5 April 2020.
261.Subsection (3) inserts a new section 46A into PSA 1993.
262.Subsection (1) in new section 46A provides for the method of calculating the reduction from Additional Pension where someone reaches State pension age after 5 April 2020 and is entitled to one or more Guaranteed Minimum Pensions.
263.Subsection (2) in new section 46A provides that the calculation should be made in accordance with regulations.
264.Subsection (3) specifies that the reduction calculated under the regulations should not exceed the amount of the Additional Pension attributable to periods before the principal appointed day (for the PA 1995: 6 April 1997).
265.Subsection (4) provides that the effect of the reduction made under the regulations should be actuarially equivalent to the effect of the reduction that would have been made under PSA 1993 section 46(1) had section 46(1A) not been inserted.
266.Subsection (5) requires that the Secretary of State must commission a report from the Government Actuary or the Deputy Government Actuary to advise on how actuarial equivalence should be determined.
267.Subsection (6) requires that, in preparing that report, the Actuary must consult such persons as the Actuary considers appropriate.
268.Subsection (7) requires that the report must be laid before Parliament.
269.Subsection (8) requires that the Secretary of State, having considered the report, must make regulations determining actuarial equivalence for the purpose of this section.
270.Subsection (9) requires that if any recommendation in the report is not followed, the Secretary of State must lay a report before Parliament explaining why.
Section 104: Additional pensions etc: minor and consequential amendments
271.Section 104 introduces Schedule 4 which contains minor and consequential amendments relating to the additional pension.
Schedule 4: additional pension etc: minor and consequential amendments
272.Paragraph 2 amends section 21(5A)(c) SSCBA 1992 to correct an omission from the PA 2007. It provides for all earnings below the upper earnings limit for National Insurance to be taken into account for basic pension purposes where a person reaches State Pension age on or after 6 April 2010, maintaining parity with the current position;
273.Paragraphs 3 and 4 make minor technical amendments to sections 39 and 39C SSCBA 1992 to make provision for tidying up and inserting cross references consequential to the introduction of new section 45AA (by paragraph 5 of the Schedule) and the consolidated amount as set out in new Schedule 4C (which is inserted by Schedule 3)
274.Paragraph 5 inserts new section 45AA in the SSCBA 1992 to restore the rules that allow a person’s working families and disabled person’s tax credit entitlement and the predecessors to these benefits to count for SERPS purposes, which had been erroneously repealed as part of the tax credit changes.
275.Paragraph 6 amends section 46 of the SSCBA 1992 to update cross references consequential to the introduction of the consolidated amount. In addition, the amendment allows for the consolidated amount to be disapplied in specific cases to be defined in regulations, for example, where a person dies before State Pension age and the inherited additional pension calculation needs to be modified to reflect that fact.
276.Paragraphs 7 to 11 amend respectively sections 48A, 48B, 48BB, 48C and 51 of the SSCBA 1992 to insert the necessary references to the consolidated amount and ensure that the inherited additional pension is calculated correctly where the late spouse’s or civil partner’s entitlement had been adjusted as part of a financial settlement on divorce.
277.Paragraph 12 amends paragraphs 2 to 12 of Schedule 4B to the SSCBA 1992 sto clarify provision in respect of the level of earnings, following the introduction of the flat rate amount, on which the residual earnings-related element of the state second pension would accrue.
278.Paragraph 13 amends paragraph 3(3) of Schedule 7 to the SSCBA 1992 to insert the necessary reference to new section 46A to ensure the consolidated contracted-out deduction is taken into account.
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.
Section 106: Contracting out: Abolition of all protected rights
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.
Part 3: Pension compensation
Chapter 1: Pension compensation on divorce etc.
Section 107: Scope of mechanism
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.
Section 110: Activation of pension compensation sharing: supplementary (Scotland)
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.
Section 111: Creation of pension compensation debits and credits
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.
Section 112: Cash equivalents
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.
Section 113: Reduction of compensation
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.
Section 114: Time for discharge of liabilitySection 115: “Implementation period”
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 information required (for example addresses, ages, National Insurances numbers)
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.
Section 116: Discharge of liability
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.
Section 117: Charges in respect of compensation sharing costs
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).
Section 118: Supply of information about compensation in relation to divorce etc.Section 119: Supply of information about compensation sharing
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.
Schedule 6: Pension compensation sharing and attachment on divorce etc: England and Wales
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.
Schedule 7: Pension compensation on divorce etc: Scotland
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.
Schedule 8: Amendments of Schedule 7 to the Pension Act 2004
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.
Section 123: Consequential amendments
354.This section makes a consequential amendment to the PA 2004 following from the creation of pension compensation sharing.
Part 4: Financial Assistance Scheme
Section 124: Financial Assistance Scheme
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.
Schedule 9 – contribution notices and financial support directions under Pensions Act 2004
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.
38A Section 38 contribution notice: meaning of “material detriment test”
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.
372.Subsection (4) provides that the Regulator must have regard to such matters as it considers relevant in considering whether the material detriment test is met; this includes certain specified matters where relevant.
373.Subsection (5) defines “scheme obligation”, which includes actual or contingent obligations towards the scheme or relevant transferee scheme.
374.Subsection (6)(a) defines “relevant transferee scheme”, and subsection 6(b) provides that references to the assets or liabilities of any relevant transferee scheme relate to those assets or liabilities only in relation to persons who were members of the scheme before the relevant time.
375.Subsection (7) provides that for the purposes of subsection 6(a) a transfer of accrued rights of members of a scheme to another pension scheme includes a reference to the extinguishing of those accrued rights as a result of an obligation to make a payment or asset transfer to the other scheme.
376.Subsection (8) defines “work-based pension scheme” and provides that any reference to rights which have accrued be read in accordance with section 67(A)(6) and (7) of the PA 1995.
377.Subsection (9) provides that certain provisions of the PA 2004 (relating to the Pension Protection Fund and the Financial Assistance Scheme) are to be disregarded for the purposes of deciding whether an act or failure has had a detrimental effect under this section.
378.Subsection (10) provides the Secretary of State with a regulation-making power to amend any provision of subsections (4) to (8).
Contribution notices: acting or failing to act otherwise in good faith
398.Paragraph 6 removes the words “otherwise in good faith” from section 38(5)(a)(ii) of the PA 2004.
Contribution notices: series of acts or failures
403.Paragraph 8 makes a clarificatory amendment section 38 to enable the Pensions Regulator to issue a contribution notice in relation to a series of acts or failures to act. For the purposes of section 39 of the Act the relevant time in relation to such a series is determined by reference to whichever of the acts or failures in the series that the Regulator considers most appropriate.
39B Section 39A: supplemental
412.Section 39B makes provision supplemental to section 39A.
413.Subsections (1) and (2) define the “transferee scheme” and provide that for the purposes of section 39A(1) and 39B(1) it does not matter whether the transfer into the transferee scheme was directly from the initial scheme or whether it was as a result of one or more.
414.Subsection (3) provides that in sections 39A and 39B, any references to the transfer of accrued rights include references to the extinguishing of those accrued rights as a result of the obligation to make a payment, or transfer an asset, to the transferee scheme.
415.Subsection (4) provides definitions that are relevant to this section.
416.Subsection (5) provides that this section applies even if the initial scheme has been wound up as a result of the transfer or otherwise ceases to exist. Subsection (6) sets out the application of references to a scheme in section 39A(1) in a case to which subsection (5) applies.
417.Subsection (7) provides that nothing in this section prevents the Regulator from issuing a contribution notice in relation to the initial scheme, that is, the transferor scheme.
418.Subsections (8) and (9) permit the Secretary of State to make regulations in order to apply sections 39A and 39B to a scheme or other arrangement in any case where the accrued rights of pension scheme members are transferred or extinguished in connection with certain specified events.
419.Subsection (10) provides that regulations made under subsection (8) may have effect from the date of any announcement by the Secretary of States of the intention to legislate. Paragraph 16 of the Schedule provides that the first set of regulations made section 39B(8) would have effect from 20 October 2008.
43A Financial support directions: transfer of members of the scheme.
420.Section 43A and 43B provide that where some or all of the members of a pension scheme to which section 43 of the PA 2004 (financial support directions) applies have been transferred to one or more other work-based schemes the Regulator may issue a financial support direction in relation to any scheme that contains the affected members. These sections set out parallel provisions in respect of financial support directions to those at sections 39A and 39B.
421.Paragraph 11 of the Schedule amends section 306 of the PA 2004 to provide that any direction issued by the Regulator under either section 39A(6) or 43A(3) overrides the scheme rules to the extent that there would otherwise be a conflict. Paragraph 13 provides that the powers to issue a direction under those sections are reserved regulatory functions of the Regulator.
428.Paragraph 16 (1) provides that for the first set of regulations made under this power, the regulation-making power at 39B(8) would have retrospective effect to 20 October 2008.
429.Paragraph 16 (2) provides that for the first set of regulations made under this power, the regulation-making power at 43B(10) would have retrospective effect to 20 October 2008.
Section 127 “Review of the initial operation of sections 38A and 38B of the Pensions Act 2004
430.Section 127 requires the Secretary of State to undertake a review of the operation of sections 38A and 38B of the Act during the period of 4 years from the date these provisions come into force. The Secretary of State must set out the resulting conclusions in a report to be laid before Parliament no later than 5 years from that date.
Section 128: Pension sharing: power of Court of Session to extend time limits
431.For a pension sharing order (or a corresponding order) made under Scottish matrimonial law to come into effect, it must be received by the person responsible for the pension arrangement, together with certain matrimonial documents, within two months of the date of the order. If that period has already expired, one of the persons with an interest in the order may apply to the sheriff for an extension of time. Similarly, such an application may be made to the sheriff when such an order is made under Scottish matrimonial law in respect of shareable state pension rights.
432.In Scotland most divorces are heard by the sheriff but some divorces are heard in the Court of Session. However, there are currently no powers to enable the Court of Session to extend the two month period on application if it has already expired.
433.Section 128 gives the Court of Session the same powers as the sheriff in relation to extending the two month period. This will allow one of the parties with an interest in a pension sharing order or a corresponding order made either by the Court of Session or the sheriff to apply to either jurisdiction for an extension of the two month period.
Section 129: Interest on late payment of levies
434.This section gives effect to Schedule 10.
Schedule 10: Interest on late payment of levies
435.Schedule 10 provides the Secretary of State with a discretionary power to make regulations allowing for a prescribed rate of interest to be charged on late payment of: the general levy (paragraph 1) (charged to cover the costs of running, amongst other things, the Pensions Regulator and the Pensions Ombudsman); the Pension Protection Fund administration levy (paragraph 3); the pension protection levy (paragraph 5); the fraud compensation levy (paragraph 7); and the Pension Protection Fund Ombudsman levy (paragraph 8).
436.Interest will be due to the creditor of the debt, which is the Secretary of State except in the cases of the pension protection levy and the fraud compensation levy, where the debts payable in relation to these levies are debts to the Board of the Pension Protection Fund.
437.There is provision for the Regulator to collect interest in respect of all of the levies in the Schedule, on behalf of the Secretary of State or the Board of the Pension Protection Fund.
438.There may be circumstances in which it would be inappropriate to charge interest on late payment of levies. For example, a scheme may have been incorrectly billed and the review of its invoice might lead to a delay. This Schedule therefore includes a power to prescribe in regulations circumstances in which interest may be waived (new section 175A(5)(b) of the PSA 1993, 117A(5)(b), 181A(5)(b) and 189A(5)(b) of the PA 2004).
Section 130: Payments to employers
439.This section amends section 37 of the PA 1995, which imposes conditions which must be satisfied before trustees can authorise a payment to the sponsoring employer from the funds of a trust-based occupational pension scheme. Section 37 was amended by the PA 2004, but that amendment inadvertently did not carry forward an exemption from the strict conditions of section 37 which previously existed for certain administrative and other payments.
440.Section 37 is primarily intended to ensure that funds cannot be removed from a defined benefit scheme unless it is sufficiently well funded, and the trustees are satisfied that a payment is in the interests of the scheme’s members. The exemption introduced by this section broadly replicates the payments which were previously exempt from section 37 before it was revised by the PA 2004. The exemption covers payments which are exempt from the tax charge which normally applies to authorised surplus payments to an employer from the funds of a scheme (for example, the payment of wages to the people who administer the scheme).
Section 131: Appointment of trustees
441.Section 7 of the PA 1995 allows the Pensions Regulator to take action to appoint trustees where it is satisfied that this is necessary and only in certain specific circumstances. Where appropriate these trustees can be independent, that is, professional trustees that are fully independent of the employer or any other interest in the scheme. Examples of the circumstances in which this can be done are if the Regulator is of the opinion that the existing trustees of a scheme do not have the necessary knowledge for proper administration or if there isn’t a sufficient number of trustees.
442.The section extends this power to allow the Pensions Regulator to appoint trustees in certain circumstances where it is reasonable to do so, instead of necessary. The “necessary test” means that the Regulator may only appoint a trustee if it is satisfied that there is no other option available and it must act almost as a last resort. A “reasonable test” would enable the Regulator to appoint a trustee where there are a range of options available but the appointment is the most appropriate action for the scheme.
443.It also amends section 7(3) of the PA 1995 to extend the circumstances in which this power may be exercised, to enable the Regulator to appoint trustees in order to protect the interest of the generality of scheme members. It also makes a change consequential on the addition of a further subsection to section 7(3).
Section 134: Exclusion of transfers out in certain cases
448.This section will enable the Secretary of State to make regulations preventing individuals, in prescribed circumstances, from taking advantage of a right under existing legislation to transfer funds from a prescribed pension scheme to another scheme.
449.The power in this section can be used in particular to prevent transfers out of the scheme established under section 67. Certain transfers out of the scheme may be allowed (because the Regulations do not have to ban all transfers out). For example, where someone wants to aggregate all of their pension pots in different schemes into one pension fund in order to purchase an annuity.
Section 135: Additional Class 3 contributions
450.Section 135 enables individuals who reach State Pension age between 6 April 2008 and 5 April 2015 to buy up to an additional 6 years of voluntary Class 3 National Insurance contributions for tax years from 1975-76, providing they already have 20 existing qualifying years. A qualifying year for these purposes is one in which a person has paid, or been credited with, National Insurance contributions of a relevant class; it includes any years during which a person was precluded from regular employment by responsibilities at home. The amendments made by this section will come into force on 6th April 2009.
Section 136: Additional Class 3 contributions (Northern Ireland)
451.Section 136 makes the same amendments for Northern Ireland.
Section 138: War pensions: effect of later marriage or civil partnership
456.Section 138 amends section 168 of the PA 1995. Section 168 provides for the effect of remarriage on receipt of war pensions to widows. It refers only to remarriage and to widows, but the same rules are applied in relation to widowers, and in relation to civil partnership. The Ministry of Defence’s war pensions instruments have already been amended to this effect. The section makes corresponding amendments to section 168.
Section 139: Polish Resettlement Act 1947: effect of residence in Poland
457.This section amends section 1(3) of the Polish Resettlement Act 1947 (c.19) to remove the provision preventing payments being made under the Pensions (Polish Forces) Scheme 1964 (S.I. 1964/2007) to or in respect of beneficiaries who are resident in Poland. This will enable pensions to continue to be paid to beneficiaries who become resident in Poland from 1 May 2004. The section also enables the Scheme’s residency restriction to be retained for beneficiaries who became resident in Poland before that date.
458.This section also provides a power to make provision in the Scheme for backdated payments to be made to or in respect of those who became resident in Poland from 1 May 2004 to the date the amended section 1(3) comes into force in relation to any part of that period.
Section 142: Disclosure of information relating to state pension credit recipients
461.This section enables the Secretary of State to make regulations to supply social security information about state pension credit recipients to energy suppliers, or persons providing services to the energy suppliers or Secretary of State.
462.The regulations may authorise energy suppliers to share their customer information with the Secretary of State or a service provider. This is intended to enable either the Secretary of State or a third-party to match DWP and energy supplier data to identify the relevant state pension credit recipients.
463.The regulations may also set out a number of matters including the purposes for which information may be supplied and used, and provide for a criminal offence to penalise the unauthorised disclosure of this information.
464.The regulations will be subject to the draft affirmative resolution procedure.
478.The provisions of this Act will be brought into force by an order or orders to be made by the Secretary of State with the following exceptions:
In Part 1, sections 67 to 73 and 78 to 86 (power to establish a pension scheme, and provisions relating to the Personal Accounts Delivery Authority) come into force on Royal Assent.
Section 105 (extension of assessed income period for those aged 75 or over) comes into force on 6 April 2009.
Section 124 (1), (3) and (7) to (10) (Financial Assistance Scheme) come into force on Royal Assent
The amendment made by section 125(1) (restriction on purchase of annuities) must be taken to have had effect from 26 June 2008.
Section 131(appointment of trustees) comes into force 2 months after Royal Assent
Section 133 (delegation of powers by the regulator) comes into force on Royal Assent.
Section 134 (exclusion of transfers out in certain cases) comes into force on Royal Assent
Section 135 and 136 (additional class 3 contributions) come into force on 9 April 2009
Sections 140 and 141(Pre 1968 Insurance) come into force on Royal Assent.
Section 142 (Disclosure of information) comes into force on Royal Assent
Part 6 (except repeals) comes into force on Royal Assent.
479.The following table sets out the dates and Hansard references for each stage of the Act’s passage through Parliament.
Introduction 5 December 2007 Vol. 468 Col. 853
Second Reading 7 January 2008 Vol. 470 Col. 54
Committee 15 January 2008 - 21 January 2008 Pensions Bill Committee
Report 22 April 2008 Vol 474. Col. 1190
Third Reading 22 April 2008 Vol 474 Col.1275
Commons consideration of Lords amendments 25 November 2008 Vol 483 Col 651
Introduction 23 April 2008 Vol. 700 Col. 1507
Second Reading 3 June 2008 Vol. 80 Col 702
Committee 17 June 2008 Vol 702. Col 920
30 June 2008 Vol 702 Col 1230
2 July 2008 Vol. 703 Col. 11
10 July 2008 Vol 703 Col.900
14 July 2008 Vol 703 Col 977
16 July 2008 Vol 703 Col 1253
17 July 2008 Vol 703. Col 1354
Report 7 October 2008 Vol 704 Col. 121
27 October 2008 Vol 704 Col.1357
29 October 2008 Vol 704 Col 1577
Third Reading 19 November 2008 Vol 705 Col 1139
Royal Assent – 26 November 2008 House of Commons Vol 483 Col 855
House of Lords Vol 705 Col 1477