Pensions Bill (HC Bill 222)

(4) After subsection (1) insert—

“(1A) In this section—

(a) “relevant jobholder” means a jobholder to whom the certificate
in question applies;

(b) 5a reference to a scheme includes a reference to part of a scheme.”

(5) In subsection (2)—

(a) for “state that” substitute “state—

(a) that”;

(b) for “the jobholders” substitute “relevant jobholders”;

(c) 10at the end insert “, or

(b) that, in relation to those jobholders, the scheme is in that
person’s opinion able to satisfy a prescribed alternative
requirement throughout the certification period.”

(6) After subsection (2) insert—

“(2A) 15Alternative requirements must be such that, assuming all jobholders to
be active members of schemes to which this section applies, for at least
90% of jobholders—

(a) employer contributions, and

(b) total contributions,

20would be likely to be no less if every scheme satisfied an alternative
requirement applicable to it than if every scheme satisfied the relevant
quality requirement.

(2B) In subsection (2A)—

• “alternative requirement” means a requirement prescribed under
  25subsection (2)(b);

• “employer contributions”, in relation to an active member of a
  scheme, means the amount of contributions that have to be paid
  under the scheme in respect of the member by the employer;

• “total contributions”, in relation to an active member of a scheme,
  30means the total amount of contributions that have to be paid
  under the scheme in respect of the member by the employer and
  by the member.

(2C) The Secretary of State—

(a) must apply the test in subsection (2A) when regulations under
35subsection (2)(b) are first made, and

(b) must carry out subsequent reviews of whether the test
continues to be satisfied.

A review under paragraph (b) must be carried out during 2017, and
after that each review must be completed no more than three years after
40the completion of the previous one.”

(7) In subsection (6)—

(a) in paragraph (e) for “any jobholder” substitute “any relevant
jobholder”;

(b) in paragraph (f) for “jobholders” substitute “relevant jobholders”.

(8) 45In section 32 of the 2008 Act (power to modify by resolution) in subsection
(1)(b) for the words after “the scheme” substitute “to satisfy—

(i) the requirements contained in section 20(1),

(ii) those requirements as modified under section 24(1)(a),
or

(iii) a requirement prescribed under section 28(2)(b).”

12 Certification for non-UK schemes

(1) 5Section 28 of the 2008 Act is amended as follows.

(2) After subsection (3) insert—

“(3A) This section also applies to—

(a) a money purchase scheme that is an occupational pension
scheme within section 18(b);

(b) 10a personal pension scheme of a prescribed description for which
provision is made under section 27;

(c) a hybrid scheme that is an occupational pension scheme within
section 18(b), to the extent prescribed.”

(3) In subsection (4) at the end insert—

“(d) 15for a scheme within subsection (3A), means a prescribed
requirement.”

(4) In paragraphs (e) and (f) of subsection (6) for “section 26 agreements”
substitute “contribution agreements”.

(5) In subsection (8)—

(a) 20for ““section 26 agreements” means the agreement” substitute
““contribution agreements” means—

“(a) the agreement”;

(b) at the end insert “, or

(b) any agreement of the same or a similar kind that is
25required, in the case of a scheme within subsection
(3A)(b), by regulations under section 27.”

13 Transitional period for defined benefits and hybrid schemes to be optional

(1) Section 30 of the 2008 Act (transitional period for defined benefits and hybrid
schemes) is amended as follows.

(2) 30In subsection (3) for “Where this subsection applies” substitute “If by the end
of the prescribed period the employer has given the jobholder notice that the
employer intends to defer automatic enrolment until the end of the transitional
period for defined benefits and hybrid schemes”.

(3) In subsection (4) for “at any time” substitute “a notice is given under subsection
35(3) and at any later time”.

(4) After subsection (7) insert—

“(7A) The Secretary of State may by regulations make provision about the
form and content of a notice under subsection (3).”

14 Arrangements where transitional conditions cease to be satisfied

40In section 30(5) of the 2008 Act after “money purchase scheme” insert “or
personal pension scheme”.

15 Power of managers to modify by resolution

In section 32 of the 2008 Act (power of trustees to modify by resolution) in
subsection (1) and in the heading after “trustees” insert “or managers”.

16 No indemnification for civil penalties

5In section 256 of the Pensions Act 2004 (no indemnification for fines or civil
penalties) in subsection (1)(b)—

(a) for “or section” substitute “, section”;

(b) after “1993 (c. 48)1993 (c. 48)” insert “or section 40 or 41 of the Pensions Act 2008”.

17 Power to exempt certain cross-border employment from enrolment duty

10In Part 7 of the Pensions Act 2004 (cross-border activities within European
Union) after section 292 insert—

“292A Exemption from enrolment duty under Part 1 of Pensions Act 2008

Regulations may provide for section 2(1), 3(2), 5(2), 7(3), 9(2) or 54 of the
Pensions Act 2008 (employer’s obligations regarding membership of a
15qualifying scheme) not to apply in relation to a person’s employment
of—

(a) an individual in relation to whom the person is a European
employer, or

(b) someone whom the person reasonably believes to be such an
20individual.”

Part 3 Occupational pension schemes

Indexation and revaluation

18 Indexation and revaluation

(1) 25Section 84 of the Pension Schemes Act 1993 (basis of revaluation of accrued
benefits) is amended as follows.

(2) In subsection (5)(b) for the words from “maintains” to “index” substitute “, in
the opinion of the Secretary of State, maintains the value of the pension or other
benefit by reference to the rise in the general level of prices in Great Britain”.

(3) 30Omit subsection (6).

(4) Schedule 3 to the 1993 Act (which sets out methods for revaluing accrued
benefits for the purposes of section 84 of the 1993 Act) is amended as follows.

(5) After paragraph 1(4) insert—

“(5) The sub-paragraphs above are subject to sub-paragraph (6).

(6) 35If paragraph 2A applies to the pension or other benefit, the final
salary method is to apply the requirement of the rules of the scheme
mentioned in paragraph 2A(1).”

(6) After paragraph 2 insert—

“2A (1) This paragraph applies to the pension or other benefit if the rules of
the scheme under which it is payable contain a requirement that the
accrued benefit be revalued by adding to the accrued benefit an
5amount of at least the relevant amount.

(2) “The accrued benefit” has the same meaning as in paragraph 1.

(3) “The relevant amount” means the amount which, ignoring
paragraph 1(5) and (6), would be the additional amount specified in
paragraph 1(1A), (1B), (1C) or (1D) (as the case may be) were the
10appropriate higher revaluation percentage and the appropriate
lower revaluation percentage to be determined on the following
basis.

(4) The higher revaluation percentage and the lower revaluation
percentage for the revaluation period mentioned in paragraph 2(7)
15are to be taken to be the percentages which would have been
specified in the Secretary of State’s order—

(a) had the following been substituted for paragraph 2(3)(a)—

“(a) the percentage increase in the retail prices index for
the reference period in relation to the revaluation
20period (“the inflation percentage”), and”,

(b) had, in paragraph 2(3A)(a), the words “the percentage which
appears to the Secretary of State to be” been omitted,

(c) had paragraph 2(4) been omitted,

(d) had, in paragraph 2(5), the words “sub-paragraph (3)(a)”
25been substituted for “that sub-paragraph”,

(e) had, in paragraph (b) of the definitions of “the higher
maximum rate” and “the lower maximum rate” in paragraph
2(6), the words “retail prices index” been substituted for
“general level of prices”, and

(f) 30had the following been inserted after paragraph 2(6)—

“(6A) In this paragraph “retail prices index” means—

(a) the general index of retail prices (for all items)
published by the Statistics Board (or any
predecessor), or

(b) 35where that index is not published for a month, any
substituted index or figures published by the Board
(or any predecessor).””

(7) Section 51 of the Pensions Act 1995 (annual increase in rate of certain pensions)
is amended as follows.

(8) 40For subsections (3) and (4) substitute—

“(3) Subsection (2) does not apply to the annual rate of a pension under an
occupational pension scheme, or to a part of that rate, if under the rules
of the scheme the rate or part is for the time being being increased at
intervals of not more than twelve months by at least the relevant
45percentage.

(4) For the purposes of subsection (3) the relevant percentage is—

(a) the percentage increase in the consumer prices index for the
reference period, being a period determined, in relation to each
periodic increase, under the rules, or

(b) if lower, the default percentage for that period.

(4ZA) 5Subsection (2) does not apply to the annual rate of a pension under an
occupational pension scheme, or to a part of that rate, if subsection
(4ZB) applies to the rate or part.

(4ZB) Subject to subsection (4ZD), this subsection applies to the rate or part if,
under the rules of the scheme, the rate or part is for the time being being
10increased, and since the relevant time has always been increased, at
intervals of not more than twelve months by at least—

(a) the percentage increase in the retail prices index for the
reference period, being a period determined, in relation to each
periodic increase, under the rules, or

(b) 15if lower, the default percentage for that period.

(4ZC) In subsection (4ZB) “the relevant time” means—

(a) the beginning of 2011 or, if later, the time when the pension
became a pension in payment, or

(b) if the pension was transferred to the scheme from another
20occupational pension scheme as a pension in payment after the
beginning of 2011, the time of the transfer.

(4ZD) If the pension was transferred to the scheme as mentioned in subsection
(4ZC)(b), subsection (4ZB) does not apply to the rate or part unless,
immediately before the transfer, subsection (4ZB) (read with this
25subsection if relevant) applied to the rate or part by reference to the
scheme from which the pension was transferred (or would have
applied had subsection (4ZB) been in force immediately before the
transfer).

(4ZE) If only part of the pension is attributable to pensionable service or, as
30the case may be, to payments in respect of employment carried on on
or after the appointed day, in subsections (3) to (4ZD) references to the
annual rate of the pension are references to so much of that rate as is
attributable to that part.

(4ZF) For the purposes of subsections (4) and (4ZB) the default percentage for
35a period is the percentage for that period which corresponds to—

(a) in the case of a category X pension, 5% per annum, and

(b) in the case of a category Y pension, 2.5% per annum.

(4ZG) In subsections (4) and (4ZB)—

• “consumer prices index” means—

  (a)

  40the general index of consumer prices (for all items)
  published by the Statistics Board, or

  (b)

  where that index is not published for a month, any
  substituted index or figures published by the Board;

• “retail prices index” means—

  (a)

  45the general index of retail prices (for all items) published
  by the Statistics Board, or

  (b)

  where that index is not published for a month, any
  substituted index or figures published by the Board.”

(9) Section 40 of the Welfare Reform and Pensions Act 1999 (indexation of certain
pensions giving effect to pension credit rights) is amended as follows.

(10) In subsection (1) for “increases in the retail prices index” substitute “relevant
percentage increases”.

(11) 5After subsection (2A) insert—

“(2AA) In subsection (1) “relevant percentage increases” means percentage
increases estimated by the Secretary of State from time to time for the
purposes of paragraph 2(3)(a) of Schedule 3 to the Pension Schemes Act
1993 for revaluation periods of 12 months.”

19 10Pension compensation: annual increases in periodic compensation

(1) In Schedule 7 to the Pensions Act 2004 (pension compensation provisions)
paragraph 28 (annual increase in periodic compensation) is amended as
follows.

(2) In sub-paragraph (3) in paragraph (a) of the definition of “appropriate
15percentage” for “retail prices index” substitute “general level of prices in Great
Britain”.

(3) After sub-paragraph (3) insert—

“(3A) For the purposes of paragraph (a) of the definition of “appropriate
percentage” in sub-paragraph (3), the Secretary of State may (from
20time to time) decide, as the Secretary of State thinks fit, the manner
in which percentage increases in the general level of prices in Great
Britain are to be determined.

(3B) The Secretary of State must publish any decision made under sub-
paragraph (3A).”

(4) 25In paragraph 37(1) of that Schedule (definitions) omit the definition of “retail
prices index”.

(5) In Schedule 5 to the Pensions Act 2008 (pension compensation payable on
discharge of pension compensation credit) paragraph 17 (annual increase in
periodic compensation) is amended as follows.

(6) 30In sub-paragraph (4) in paragraph (a) of the definition of “the appropriate
percentage” for “retail prices index” substitute “general level of prices in Great
Britain”.

(7) After sub-paragraph (4) insert—

“(4A) For the purposes of paragraph (a) of the definition of “the
35appropriate percentage” in sub-paragraph (4), the Secretary of State
may (from time to time) decide, as the Secretary of State thinks fit, the
manner in which percentage increases in the general level of prices
in Great Britain are to be determined.

(4B) The Secretary of State must publish any decision made under sub-
40paragraph (4A).”

20 Indexation requirements for cash balance benefits

(1) Section 51 of the Pensions Act 1995 (annual increase in rate of certain pensions)
is amended as follows.

(2) In subsection (1) for “subsection (6)” substitute “subsections (6) and (7)”.

(3) 5After subsection (6) insert—

“(7) This section does not apply to any pension (or part of a pension) under
a relevant occupational pension scheme which—

(a) is a cash balance benefit (see section 51ZB), and

(b) first comes into payment on or after the day on which section 20
10of the Pensions Act 2011 comes into force.

(8) An occupational pension scheme is a “relevant occupational pension
scheme” if—

(a) it has not, on or after the appointed day, been contracted-out by
virtue of satisfying section 9(2) of the Pension Schemes Act 1993,
15or

(b) it has, on or after the appointed day, been so contracted-out, but
no person is entitled to receive, or has accrued rights to, benefits
under the scheme attributable to the period on or after that day
when it was so contracted-out.”

(4) 20After section 51ZA of the Pensions Act 1995 insert—

“51ZB Meaning of “cash balance benefit”

(1) For the purposes of section 51(7)(a), a pension provided to or in respect
of a member of an occupational pension scheme is a “cash balance
benefit” if conditions 1 and 2 are met.

(2) 25Condition 1 is that the rate of the pension is calculated by reference to
a sum of money (“the available sum”) which is available under the
scheme for the provision of benefits to or in respect of the member.

(3) Condition 2 is that under the scheme—

(a) there is a promise about the amount of the available sum, but

(b) 30there is no promise about the rate or amount of the benefits to
be provided.

(4) The promise mentioned in subsection (3)(a) includes in particular a
promise about the change in the value of, or the return from, payments
made under the scheme by the member or by any other person in
35respect of the member.

(5) The promise mentioned in subsection (3)(b) includes a promise that—

(a) the amount of the available sum will be sufficient to provide
benefits of a particular rate or amount;

(b) the rate or amount of a benefit will represent a particular
40proportion of the available sum.

(6) But a pension is not prevented from being a cash balance benefit merely
because under the scheme there is a promise that—

(a) the rate or amount of a benefit payable in respect of a deceased
member will be a particular proportion of the rate or amount of

a benefit which was (or would have been) payable to the
member;

(b) the amount of a lump sum payable to a member, or in respect of
a deceased member, will represent a particular proportion of
5the available sum.”

Pension Protection Fund

21 Pension Protection Fund

Schedule 4 (which makes provision relating to the Pension Protection Fund)
has effect.

10Financial assistance scheme

22 Financial assistance scheme: amount of payments

(1) In section 286 of the Pensions Act 2004 (financial assistance scheme) after
subsection (1B) insert—

“(1C) Regulations under subsection (1) may prescribe circumstances in which
15subsection (1A) does not apply.”

(2) In section 18 of the Pensions Act 2007 (financial assistance scheme: increased
levels of payments) after subsection (9) insert—

“(9A) The Secretary of State may by regulations—

(a) prescribe circumstances in which subsections (5) and (6) do not
20apply where the scheme manager has made a determination as
specified in subsection (4), and

(b) make alternative provision for the amount of any initial
payment payable to the member or the survivor of the member
in those circumstances,

25and, accordingly, subsection (8) does not apply in those
circumstances.”

(3) In that section in subsection (10) (affirmative resolution procedure) after
“subsection (9)” insert “or (9A)”.

23 Financial assistance scheme: transfer of assets

30In section 286 of the Pensions Act 2004 (financial assistance scheme) in
subsection (3)(c) (power to make provision for property, rights and liabilities
of qualifying pension schemes to be transferred to the scheme manager) for
“the scheme manager” substitute “a prescribed person”.

Miscellaneous

24 35Payment of surplus to employer: transitional power to amend scheme

(1) Section 251 of the Pensions Act 2004 (payment of surplus to employer:
transitional power to amend scheme) is amended as follows.

(2) In subsection (1) after “scheme” insert—

“(a) which is one to which section 37 of the Pensions Act 1995
applies, and

(b)”.

(3) 5After subsection (2) insert—

“(2A) But subsection (2) does not apply in the case of any of the payments
listed in paragraphs (c) to (f) of section 175 of the Finance Act 2004
(authorised employer payments other than public service scheme
payments or authorised surplus payments).”

(4) 10In subsection (3) for “then applied” substitute “applied immediately before the
commencement of section 250”.

(5) In subsection (6)—

(a) after paragraph (a) insert—

“(aa) may be exercised even if the payments to which it relates
15are, to any extent, payments to which subsection (2)
does not apply,”;

(b) in paragraph (b) for “only be exercised once” substitute “be exercised,
after the commencement of section 24 of the Pensions Act 2011, only
once (whether or not also exercised before 6 April 2011)”;

(c) 20in paragraph (c) for “five years after the commencement of this section”
substitute “on 6 April 2016”.

(6) After subsection (6) insert—

“(6A) A resolution passed under this section after the commencement of
section 24 of the Pensions Act 2011 may amend or revoke a resolution
25passed under this section before 6 April 2011.”

(7) The amendments made by this section do not affect the continued operation of
any resolution passed under section 251(3) or (4) of the 2004 Act before
6 April 2011.

25 Contribution notices and financial support directions

(1) 30Section 38 of the Pensions Act 2004 (contribution notices where avoidance of
employer debt) is amended as follows.

(2) In subsections (5)(c)(i) and (6)(b)(ii) for “determination by the Regulator to
exercise the power to issue” substitute “giving of a warning notice in respect
of”.

(3) 35After subsection (13) insert—

“(14) In this section “a warning notice” means a notice given as mentioned in
section 96(2)(a).”

(4) Section 43 of the Pensions Act 2004 (financial support directions) is amended
as follows.

(5) 40In subsection (9) for “determination by the Regulator to exercise the power to
issue” substitute “giving of a warning notice in respect of”.

(6) After subsection (11) insert—

“(12) In this section “a warning notice” means a notice given as mentioned in
section 96(2)(a).”

(7) In section 96 of the Pensions Act 2004 (exercise of regulatory functions:
5standard procedure) after subsection (6) insert—

“(6A) Subsection (6B) applies in relation to a warning notice given to a
person—

(a) in respect of a contribution notice under section 38, or

(b) in respect of a financial support direction under section 43.

(6B) 10Regulations may provide that no determination notice in respect of the
contribution notice or the financial support direction may be given after
the end of the prescribed period beginning with the day on which the
warning notice is given.”

26 Technical amendment to Schedule 4 to the Pensions Act 2007

15In Schedule 4 to the Pensions Act 2007 (abolition of contracting-out for defined
contribution pension schemes) in paragraph 60(4) for paragraphs (b) and (c)
substitute—

“(b) in the definition of “the percentage for contributing
earners”—

(i) 20omit the words “(a) in relation to a salary related
contracted-out scheme,”;

(ii) omit paragraph (b) and the preceding “and”;

(c) in the definition of “the percentage for non-contributing
earners”—

(i) 25omit the words “(a) in relation to a salary related
contracted-out scheme,”;

(ii) omit paragraph (b) and the preceding “and”.”

27 Technical amendment to section 42(6) of the Pension Schemes Act 1993

(1) In section 42 of the Pension Schemes Act 1993 (review and alteration of rates of
30contributions applicable under section 41) in subsection (6) for “paragraph
2(3)” substitute “the definition of “the percentage for contributing earners” or
“the percentage for non-contributing earners” in paragraph 2(5)”.

(2) After that subsection insert—

“(7) Until paragraph 60(4) of Schedule 4 to the Pensions Act 2007 comes into
35force, subsection (6) has effect as if the reference to the definition of “the
percentage for contributing earners” or “the percentage for non-
contributing earners” were a reference to paragraph (a) of either of
those definitions.”