Public Service Pensions Bill (HC Bill 95)

Establishment of new schemes

1 Schemes for persons in public service

(1) Regulations may establish schemes for the payment of pensions and other
benefits to or in respect of persons in public service.

(2) 5In this Act, “persons in public service” means—

(a) civil servants;

(b) the judiciary;

(c) local government workers;

(d) teachers;

(e) 10health service workers;

(f) fire and rescue workers;

(g) members of police forces;

(h) the armed forces.

(3) These terms are defined in Schedule 1.

(4) 15In this Act, regulations under this section are called “scheme regulations”.

2 Responsible authority for schemes

(1) The persons who may make scheme regulations are set out in Schedule 2.

(2) In this Act, the person who may make scheme regulations for any description
of persons in public service is called the “responsible authority” for the scheme
for those persons.

3 Scheme regulations

(1) 5Scheme regulations may, subject to this Act, make such provision in relation to
a scheme under section 1 as the responsible authority considers appropriate.

(2) That includes in particular—

(a) provision as to any of the matters specified in Schedule 3;

(b) consequential, supplementary, incidental or transitional provision.

(3) 10Scheme regulations may—

(a) make different provision for different purposes or cases (including
different provision for different descriptions of persons);

(b) make provision by amending any legislation (whenever passed or
made);

(c) 15make retrospective provision;

(d) allow any person to exercise a discretion.

(4) Scheme regulations require the consent of the Treasury before being made,
unless one of the following exceptions applies.

(5) The exceptions are—

(a) 20scheme regulations of the Scottish Ministers relating to local
government workers, fire and rescue workers and members of a police
force;

(b) scheme regulations of the Welsh Ministers relating to fire and rescue
workers;

(c) 25scheme regulations of a Northern Ireland department.

(6) Scheme regulations of a Northern Ireland department require the consent of
the Department of Finance and Personnel in Northern Ireland before being
made if they relate to—

(a) teachers,

(b) 30health service workers,

(c) fire and rescue workers, or

(d) members of a police force.

Governance

4 Scheme manager

(1) 35Scheme regulations for a scheme under section 1 must provide for a person to
be responsible for managing or administering—

(a) the scheme, and

(b) any statutory pension scheme that is connected with it.

(2) In this Act, that person is called the “scheme manager” for the scheme (or
40schemes).

(3) The scheme manager may in particular be the responsible authority.

(4) Subsection (1) does not apply to a scheme under section 1 which is an injury or
compensation scheme.

(5) Scheme regulations may comply with the requirement in subsection (1)(a) or
(b) by providing for different persons to be responsible for managing or
5administering different parts of a scheme (and references in this Act to the
“scheme manager”, in such a case, are to be construed accordingly).

(6) For the purposes of this Act, a scheme under section 1 and another statutory
pension scheme are connected if and to the extent that the schemes make
provision in relation to persons of the same description.

(7) 10Scheme regulations may specify exceptions to subsection (6).

5 Pension board

(1) Scheme regulations for a scheme under section 1 must provide for the
establishment of a board with responsibility for assisting the scheme manager
in relation to the following matters.

(2) 15Those matters are—

(a) securing compliance with the scheme regulations and other legislation
relating to the governance and administration of the scheme and any
statutory pension scheme that is connected with it;

(b) securing compliance with requirements imposed in relation to the
20scheme and any connected scheme by the Pensions Regulator;

(c) such other matters as the scheme regulations may specify.

(3) In making the regulations the responsible authority must have regard to the
desirability of securing the effective and efficient governance and
administration of the scheme and any connected scheme.

(4) 25The regulations must include provision—

(a) requiring the scheme manager—

(i) to be satisfied that a person to be appointed as a member of the
board does not have a conflict of interest, and

(ii) to be satisfied from time to time that none of the members of the
30board has a conflict of interest;

(b) requiring a member of the board, or a person proposed to be appointed
as a member of the board, to provide the scheme manager with such
information as the scheme manager reasonably requires for the
purposes of provision under paragraph (a).

(5) 35In subsection (4)(a) “conflict of interest”, in relation to a person, means a
financial or other interest which is likely to prejudice the person’s exercise of
functions as a member of the board (but does not include a financial or other
interest arising merely by virtue of membership of the scheme or any
connected scheme).

(6) 40Where the scheme manager of a scheme under section 1 is a committee of a
local authority, the scheme regulations may provide for that committee also to
be the board for the purposes of this section.

(7) In subsection (6) “local authority” means—

(a) a local authority in England and Wales within the meaning of Part 1 of
45the Local Government and Housing Act 1989;

(b) a council constituted under section 2 of the Local Government etc.
(Scotland) Act 1994;

(c) a district council constituted under section 1 of the Local Government
Act (Northern Ireland) 1972 (c. 9 (N.I.)).

(8) 5In this Act, a board established under this section is called a “pension board”.

(9) This section does not apply to a scheme under section 1 which is an injury or
compensation scheme.

6 Pension board: information

(1) The scheme manager for a scheme under section 1 and any statutory pension
10scheme that is connected with it must publish information about the pension
board for the scheme or schemes (and keep that information up-to-date).

(2) That information must include information about—

(a) who the members of the board are,

(b) representation on the board of members of the scheme or schemes, and

(c) 15the matters falling within the board’s responsibility.

(3) This section does not apply to a scheme under section 1 which is an injury or
compensation scheme.

Design

7 Types of scheme

(1) 20Scheme regulations may establish a scheme under section 1 as—

(a) a defined benefits scheme,

(b) a defined contributions scheme, or

(c) a scheme of any other description.

(2) A scheme under section 1 which is a defined benefits scheme must be—

(a) 25a career average revalued earnings scheme, or

(b) a defined benefits scheme of such other description as Treasury
regulations may specify.

(3) Treasury regulations may not specify a final salary scheme under subsection
(2)(b).

(4) 30A scheme under section 1 is a “career average revalued earnings scheme” if—

(a) the pension payable to or in respect of a person, so far as it is based on
the person’s pensionable service, is determined by reference to the
person’s pensionable earnings in each year of pensionable service, and

(b) those earnings, or a proportion of those earnings accrued as a pension,
35are under the scheme revalued each year until the person leaves
pensionable service.

(5) Treasury regulations under this section are subject to the negative Commons
procedure.

8 Revaluation

(1) 40This section applies in relation to a scheme under section 1 which—

(a) requires a revaluation of pensionable earnings of a person, or a
proportion of those earnings accrued as a pension, until the person
leaves pensionable service, and

(b) requires such a revaluation to be by reference to a change in prices or
5earnings (or both) in a given period.

(2) The change in prices or earnings to be applied for the purposes of such a
revaluation is to be such percentage increase or decrease as a Treasury order
may specify in relation to the period.

(3) For the purposes of making such an order the Treasury may determine the
10change in prices or earnings in any period by reference to the general level of
prices or earnings estimated in such manner as the Treasury consider
appropriate.

(4) A Treasury order under this section—

(a) must be made in each year;

(b) 15may make different provision for different purposes.

(5) A Treasury order under this section is subject to the negative Commons
procedure.

(6) For the purposes of subsection (1) any gap in the person’s pensionable service
which does not exceed five years is to be disregarded.

9 20Pension age

(1) The normal pension age of a person under a scheme under section 1 must be—

(a) the same as the person’s state pension age, or

(b) 65, if that is higher.

(2) Subsection (1) does not apply in relation to—

(a) 25fire and rescue workers who are firefighters,

(b) members of a police force, and

(c) members of the armed forces.

The normal pension age of such persons under a scheme under section 1 must
be 60.

(3) 30The deferred pension age of a person under a scheme under section 1 must
be—

(a) the same as the person’s state pension age, or

(b) 65, if that is higher.

(4) Where—

(a) 35a person’s state pension age changes, and

(b) the person’s normal or deferred pension age under a scheme under
section 1 changes as a result of subsection (1) or (3),

the change to the person’s normal or deferred pension age must under the
scheme apply in relation to all the benefits (including benefits already accrued
40under the scheme) which may be paid to or in respect of the person under the
scheme and to which the normal or deferred pension age is relevant.

(5) In this Act—

(a) “normal pension age”, in relation to a person and a scheme, means the
earliest age at which the person is entitled to receive benefits under the

scheme (without actuarial adjustment) on leaving the service to which
the scheme relates (and disregarding any special provision as to early
payment of benefits on the grounds of ill-health or otherwise);

(b) “deferred pension age”, in relation to a person and a scheme, means the
5earliest age at which the person is entitled to receive benefits under the
scheme (without actuarial adjustment) after leaving the service to
which the scheme relates at a time before normal pension age (and
disregarding any special provision as to early payment of benefits on
the grounds of ill-health or otherwise);

(c) 10“state pension age”, in relation to a person, means the pensionable age
of the person as specified from time to time in—

(i) Part 1 of Schedule 4 to the Pensions Act 1995, or

(ii) in the case of a scheme for which the responsible authority is a
Northern Ireland department, Part 1 of Schedule 2 to the
15Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213S.I. 1995/3213 (N.I.
22)).

Cost control

10 Valuations

(1) Scheme regulations for a scheme under section 1 which is a defined benefits
20scheme must provide for actuarial valuations to be made of—

(a) the scheme, and

(b) any statutory pension scheme that is connected with it.

(2) Such a valuation is to be carried out in accordance with Treasury directions.

(3) Treasury directions under subsection (2) may in particular specify—

(a) 25how and when a valuation is to be carried out;

(b) the time in relation to which a valuation is to be carried out;

(c) the data, methodology and assumptions to be used in a valuation;

(d) the matters to be covered by a valuation;

(e) where a scheme under section 1 and another statutory pension scheme
30are connected, whether the schemes are to be valued separately or
together (and if together, how);

(f) the period within which any changes to the employer contribution rate
under a scheme under section 1 must take effect following a valuation.

(4) Treasury directions under subsection (2), and variations and revocations of
35such directions, may only be made after the Treasury has consulted the
Government Actuary.

(5) Scheme regulations for a scheme under section 1 which is not a defined benefits
scheme may provide for actuarial valuations to be made of the scheme and any
statutory pension scheme which is connected with it; and if they do,
40subsections (2) to (4) apply.

11 Employer cost cap

(1) Scheme regulations for a scheme under section 1 which is a defined benefits
scheme must set a rate, expressed as a percentage of pensionable earnings of
members of the scheme, to be used for the purpose of measuring changes in the
45cost of the scheme.

(2) In this section, the rate set under subsection (1) is called the “employer cost
cap”.

(3) The employer cost cap is to be set in accordance with Treasury directions.

(4) Treasury directions may in particular specify—

(a) 5how the first valuation under section 10 of a scheme under section 1 is
to be taken into account in setting the cap;

(b) the costs, or changes in costs, that are to be taken into account on
subsequent valuations of a scheme under section 1 for the purposes of
measuring changes in the cost of the scheme against the cap;

(c) 10the extent to which costs or changes in the costs of any statutory
pension scheme which is connected with a scheme under section 1 are
to be taken into account for the purposes of this section.

(5) Treasury regulations must make—

(a) provision requiring the cost of a scheme (and any connected scheme) to
15remain within specified margins either side of the employer cost cap,
and

(b) for cases where the cost of a scheme would otherwise go beyond either
of those margins, provision specifying a target cost within the margins.

(6) For cases where the cost of the scheme would otherwise go beyond the
20margins, scheme regulations may provide for—

(a) a procedure for the responsible authority, the scheme manager (if
different), employers and members (or representatives of employers
and members) to reach agreement on the steps required to achieve the
target cost for the scheme, and

(b) 25the steps to be taken for that purpose if agreement is not reached under
that procedure.

(7) The steps referred to in subsection (6) may include the increase or decrease of
members’ benefits or contributions.

(8) Treasury regulations under this section may—

(a) 30include consequential or supplementary provision;

(b) make different provision for different schemes.

(9) Treasury regulations under this section are subject to the negative Commons
procedure.

12 Employer contributions in funded schemes

(1) 35This section applies in relation to a scheme under section 1 which is a defined
benefits scheme with a pension fund.

(2) Scheme regulations must provide for the rate of employer contributions to be
set at an appropriate level to ensure—

(a) the solvency of the pension fund, and

(b) 40the long-term cost-efficiency of the scheme, so far as relating to the
pension fund.

(3) For that purpose, scheme regulations must require actuarial valuations of the
pension fund.

(4) Where an actuarial valuation under subsection (3) has taken place, a person
appointed by the responsible authority is to report on whether the following
aims are achieved—

(a) the valuation is in accordance with the scheme regulations;

(b) 5the valuation has been carried out in a way which is not inconsistent
with other valuations under subsection (3);

(c) the rate of employer contributions is set as specified in subsection (2).

(5) A report under subsection (4) must be published; and a copy must be sent to
the scheme manager and (if different) the responsible authority.

(6) 10If a report under subsection (4) states that, in the view of the person making the
report, any of the aims in that subsection has not been achieved—

(a) the report may recommend remedial steps;

(b) the scheme manager must—

(i) take such remedial steps as the scheme manager considers
15appropriate, and

(ii) publish details of those steps and the reasons for taking them;

(c)
the responsible authority may—

(i) require the scheme manager to report on progress in taking
remedial steps;

(ii) 20direct the scheme manager to take such remedial steps as the
responsible authority considers appropriate.

(7) The person appointed under subsection (4) must, in the view of the responsible
authority, be appropriately qualified.

(8) References in this section to the responsible authority are to be read, in relation
25to a scheme under section 1 for which the responsible authority is a Northern
Ireland department other than the Department of Finance and Personnel in
Northern Ireland, as a reference to that Department.

Administration

13 Information

(1) 30Treasury directions may require the scheme manager or responsible authority
of a scheme under section 1 to—

(a) publish scheme information, or

(b) provide scheme information to the Treasury.

(2) In subsection (1), “scheme information” means information about the scheme
35and any statutory pension scheme that is connected with it.

(3) The information to which Treasury directions under this section may relate
includes in particular—

(a) scheme accounts;

(b) information about any scheme funding, assets and liabilities;

(c) 40information about scheme membership;

(d) information about employer and member contributions;

(e) information about scheme administration and governance.

(4) Treasury directions under this section may specify how and when information
is to be published or provided.

(5) Treasury directions under this section may not require publication or
provision of anything that the scheme manager or responsible authority could
not otherwise lawfully publish or provide.

14 Records

(1) 5The scheme manager for a scheme under section 1 and any statutory pension
scheme that is connected with it must keep such records as may be specified in
regulations made by—

(a) the Secretary of State, or

(b) in relation to a scheme for which the responsible authority is a
10Northern Ireland department, the Department of Finance and
Personnel in Northern Ireland.

(2) Regulations under this section are subject to the negative procedure.

15 Regulatory oversight

(1) Schedule 4 (regulatory oversight) contains provision relating to the regulation
15of schemes under section 1, new public body pension schemes and connected
schemes.

(2) The Secretary of State may by order make—

(a) provision consequential on Part 1 of Schedule 4, and

(b) further provision for, or in connection with, the regulation of public
20service pension schemes within the meaning of the Pensions Act 2004
(as amended by that Part of that Schedule).

(3) A Northern Ireland department may by order make—

(a) provision consequential on Part 2 of Schedule 4, and

(b) further provision for, or in connection with, the regulation of public
25service pension schemes within the meaning of the Pensions (Northern
Ireland) Order 2005 (S.I. 2005/255 (N.I. 1)S.I. 2005/255 (N.I. 1)) (as amended by that Part of
that Schedule).

(4) The provision referred to in subsections (2) and (3) includes provision made by
amending any legislation (including this Act).

(5) 30An order under this section may make different provision for different
purposes.

(6) An order under this section is subject to—

(a) the affirmative procedure, if it amends primary legislation, and

(b) the negative procedure, in any other case.

35Transitional

16 Closure of existing pension schemes

(1) No benefits are to be provided under an existing scheme to or in respect of a
person in relation to the person’s service after the closing date.

(2) In this Act “existing scheme” means a scheme listed in Schedule 5 (whether
40made before or after this section comes into force).