Pension Schemes Bill (HC Bill 12)

20 In section 137FA (FCA general rules: disclosure of information about
20pension scheme transaction costs etc), in subsection (8)—

(a) at the appropriate place insert—

• ““money purchase benefit” has the meaning given by
  section 181(1) of the Pension Schemes Act 1993;”;

(b) omit the definition of “money purchase scheme”;

(c) 25in the definition of “relevant scheme” for “money purchase scheme”
substitute “scheme under which all the benefits that may be
provided are money purchase benefits and”.

21 (1) Section 142X (interpretation of provisions about ring-fencing) is amended as
follows.

(2) 30In subsection (2), for “money purchase scheme” substitute “scheme under
which all the benefits that may be provided are money purchase benefits”.

(3) In subsection (4), for “Money purchase scheme” substitute “Money purchase
benefits”.

Pensions Act 2004 (c. 35)Pensions Act 2004 (c. 35)

22 35The Pensions Act 2004 is amended as follows.

23 (1) Section 23 (freezing orders) is amended as follows.

(2) In subsection (1), for “which is not a money purchase scheme” substitute
“unless it is excluded by subsection (1A)”.

(3) After that subsection insert—

“(1A) 40A scheme is excluded if—

(a) all the benefits that may be provided under the scheme are
money purchase benefits, and

(b) the scheme does not provide for there to be a third party
promise about the rate or amount of any benefit at a time
5before the benefit comes into payment (see
subsection (10A)).”

(4) In subsection (2), for “such a scheme” substitute “a scheme to which this
section applies”.

(5) After subsection (10) insert—

“(10A) 10For the purposes of subsection (1A)(b), a scheme provides for there
to be a third party promise if the scheme—

(a) requires the promise to be obtained from a third party[, or

(b) provides for the member to be given the option of requiring
a promise to be obtained from a third party (whether or not
15the option is subject to conditions)].”

24 In section 38 (contribution notices where avoidance of employer debt), in
subsection (1), for paragraph (a) (but not the “or” at the end) substitute—

“(a) a scheme under which all the benefits that may be provided
are money purchase benefits,”.

25 20In section 43 (financial support directions), in subsection (1), for
paragraph (a) (but not the “or” at the end) substitute—

“(a) a scheme under which all the benefits that may be provided
are money purchase benefits,”.

26 In section 52 (restoration orders where transactions at an undervalue), in
25subsection (1), for paragraph (a) (but not the “or” at the end) substitute—

“(a) a scheme under which all the benefits that may be provided
are money purchase benefits,”.

27 In section 126 (schemes eligible for pension protection), in subsection (1), for
paragraph (a) and the “and” at the end substitute—

“(a) 30is not a scheme under which all the benefits that may be
provided are money purchase benefits,”.

28 In section 221 (application of scheme funding rules in Part 3), in subsection
(1), for paragraph (a) and the “or” at the end substitute—

“(a) a scheme under which all the benefits that may be provided
35are money purchase benefits,”.

29 In section 258 (pension protection on transfer of employment: form of
protection), in subsection (2)—

(a) in paragraph (b), for “money purchase scheme” substitute “scheme
under which all the benefits that may be provided are money
40purchase benefits”;

(b) in paragraph (c), for “money purchase scheme” substitute “scheme
under which all the benefits that may be provided are money
purchase benefits”.

30 In section 286 (financial assistance scheme for members of certain pension
45schemes), in subsection (2), for sub-paragraph (i) of paragraph (a) of the
definition of “qualifying pension scheme” (but not the “or” at the end)

substitute—

“(i) a scheme under which all the benefits that may be
provided are money purchase benefits,”.

31 In section 307 (modification of Pensions Act 2004 in relation to certain
5categories of schemes), in subsection (4), for paragraph (a) of the definition
of “hybrid scheme” (but not the “but” at the end) substitute—

“(a) which is not a scheme under which all the benefits that may
be provided are money purchase benefits,”.

32 In section 318 (interpretation), in subsection (1) omit the definition of
10“money purchase scheme”.

Pensions Act 2008 (c. 30)2008 (c. 30)

33 The Pensions Act 2008 is amended as follows.

34 (1) Section 20 (quality requirement: UK money purchase schemes) is amended
as follows.

(2) 15In subsection (1), for “A money purchase scheme” substitute “An
occupational defined contributions scheme”.

(3) In the heading, for “money purchase schemes” substitute “occupational
defined contributions schemes”.

35 In section 21 (quality requirement: UK defined benefits schemes) for “A
20defined benefits scheme” substitute “An occupational defined benefits
scheme”.

36 In section 23A (alternative quality requirements for UK defined benefits
schemes), in subsection (1), for “a defined benefits scheme” substitute “an
occupational defined benefits scheme”.

37 (1) 25Section 24 (quality requirement: UK hybrid schemes) is amended as follows.

(2) In subsection (1)—

(a) for “A hybrid scheme” substitute “A shared risk scheme”;

(b) in paragraph (a), for “a money purchase scheme” substitute “an
occupational defined contributions scheme”;

(c) 30in paragraph (b), for “a defined benefits scheme” substitute “an
occupational defined benefits scheme”;

(d) after paragraph (b) insert—

“(c) the requirements under section 26 for a personal
pension scheme that is a defined contributions
35scheme, subject to any prescribed modifications.”

(3) In subsection (2), for “hybrid scheme” substitute “shared risk scheme”.

(4) In the heading, for “hybrid schemes” substitute “shared risk schemes”.

38 (1) Section 26 (quality requirement: UK personal pension schemes) is amended
as follows.

(2) 40In subsection (1), after “personal pension scheme” insert “that is a defined
contributions scheme”.

(3) Omit subsection (3) (requirement for all benefits to be money purchase
benefits).

(4) In subsection (4), for “second condition” substitute “first condition”.

(5) In subsection (6), for “third condition” substitute “second condition”.

(6) In subsection (7), for “fourth condition” substitute “third condition”.

39 (1) Section 28 (certification that quality requirement or alternative requirement
5is satisfied) is amended as follows.

(2) In subsection (3)—

(a) in paragraph (a), for “a money purchase scheme” substitute “an
occupational defined contributions scheme”;

(b) in paragraph (b), after “a personal pension scheme” insert “that is a
10defined contributions scheme”;

(c) for paragraph (c) substitute—

“(c) a shared risk scheme, to the extent that requirements
within section 24(1)(a) or (c) apply.”

(3) In subsection (3A)—

(a) 15for paragraph (a) substitute—

“(a) an occupational defined contributions scheme that is
within section 18(b);”

(b) for paragraph (c) substitute—

“(c) an occupational shared risk scheme that is within
20section 18(b), to the extent prescribed;”.

(4) In subsection (3B), for “a defined benefits scheme” substitute “an
occupational defined benefits scheme”.

40 For the heading to section 29 substitute “Transitional periods for certain
schemes”.

41 (1) 25Section 30 (transitional period for defined benefits and hybrid schemes) is
amended as follows.

(2) In subsection (1), for “hybrid schemes” substitute “shared risk schemes”.

(3) In subsection (2)(b) and (c), for “a defined benefits scheme or a defined
benefits member of a hybrid scheme” substitute “an occupational defined
30benefits scheme or a defined benefits member of a shared risk scheme”.

(4) In subsection (3)—

(a) in the opening words, for “hybrid schemes” substitute “shared risk
schemes”;

(b) in the substituted subsection (2), for paragraphs (a) and (b)
35substitute—

“(a) an active member, with effect from the end of the
transitional period for defined benefits and shared
risk schemes, of an automatic enrolment scheme
which is an occupational defined benefits scheme, or

(b) 40a defined benefits member, with effect from the end
of that period, of an automatic enrolment scheme
which is a shared risk scheme.”

(5) In subsection (4), for “hybrid schemes” substitute “shared risk schemes”.

(6) In subsection (5)—

(a) in the substituted subsection (2)(a), for “a defined benefits scheme”
substitute “an occupational defined benefits scheme”;

(b) in the substituted subsection (2)(aa), for “hybrid scheme” substitute
“shared risk scheme”;

(c) 5in the substituted subsection (2), for paragraph (b) substitute—

“(b) becomes an active member, with effect from the
automatic enrolment date, of an automatic enrolment
scheme which is—

(i) a personal pension scheme other than a
10shared risk scheme, or

(ii) an occupational pension scheme under which
all the benefits that may be provided are
money purchase benefits or collective
benefits;”;

(d) 15in the substituted subsection (2)(c), for “hybrid scheme” substitute
“shared risk scheme”;

(e) in the substituted subsection (2)(d), for “a defined benefits scheme”
substitute “an occupational defined benefits scheme”;

(f) in the substituted subsection (2)(e), for “hybrid scheme” substitute
20“shared risk scheme”.

(7) In subsections (8) and (9), for “hybrid schemes” substitute “shared risk
schemes”.

(8) In subsection (10)(a) and (b), for “hybrid scheme” substitute “shared risk
scheme”.

(9) 25In subsection (11)—

(a) in paragraph (a), for “a defined benefits scheme” substitute “an
occupational defined benefits scheme”;

(b) in paragraph (b), for “hybrid scheme” substitute “shared risk
scheme”.

(10) 30In the heading, for “hybrid schemes” substitute “shared risk schemes”.

42 In section 35 (compliance notices), in subsection (5), for “a defined benefits
scheme or a hybrid scheme” substitute “an occupational defined benefits
scheme or a shared risk scheme”.

43 In section 38 (calculation and payment of contributions), in subsection (2)(e),
35for “a money purchase scheme, a hybrid scheme or a personal pension
scheme” substitute “a defined contributions scheme or a shared risk
scheme”.

44 (1) Section 99 (interpretation) is amended as follows.

(2) At the appropriate places insert—

• 40““defined benefits scheme” has the meaning given by section 2
  of the Pension Schemes Act 2014;”

• ““defined contributions scheme” has the meaning given by
  section 4 of the Pension Schemes Act 2014;”

• ““occupational”, in relation to a defined benefits scheme, shared
  45risk scheme or defined contributions scheme, means an
  occupational pension scheme of that description;”

Pension Schemes BillPage 25

• ““shared risk scheme” has the meaning given by section 3 of the
  Pension Schemes Act 2014;”.

(3) Omit the following definitions—

• “defined benefits”;

• 5“defined benefits scheme”;

• “hybrid scheme”;

• “money purchase scheme”.

Pensions Act 2014 (c.19)2014 (c.19)

45 (1) Schedule 17 to the Pensions Act 2014 (automatic transfer of pension benefits
10etc) is amended as follows.

(2) In paragraph 1(2)(a) and (5)(a), for “money purchase scheme” substitute
“scheme under which all the benefits that may be provided are money
purchase benefits”.

(3) In paragraph 15(1) omit the definition of “money purchase scheme”.

Section 12

15SCHEDULE 2 Early leavers: revaluation of accrued benefits

1 The Pension Schemes Act 1993 is amended as follows.

2 Before section 83 insert—

“82A Overview and meaning of “relevant commencement date”

(1) 20This Chapter is about the revaluation of benefits for early leavers.

(2) The table contains an overview of the contents of this Chapter.

(3) In this Chapter “the 2014 Act commencement date” means the date
on which paragraph 2 of Schedule 2 to the Pension Schemes Act 2014
35comes into force.”

3 In section 83, for subsection (1A) substitute—

“(1A) In subsection (1) “relevant benefits” means benefits that are—

(a) retirement benefits payable to a member, or

(b) benefits payable in respect of a member.

(1AA) 40This Chapter does not apply to any benefits payable by virtue of
pension credit rights except, in the case of a salary related
occupational pension scheme, to the extent that they involve the
member being credited by the scheme with notional pensionable
service.

(1AB) 45“Pension credit rights” means rights that are attributable (directly or
indirectly) to a pension credit.”

4 For section 84 substitute—

“84 Old basis of revaluation: occupational pension schemes

(1) A benefit of the kind mentioned in section 83(1)(a) must be revalued
50in accordance with this section if it is attributable to pensionable
service before the 2014 Act commencement date.

(2) The benefit must be revalued using the final salary method unless it
is—

(a) a money purchase benefit (see subsection (3)),

(b) 55an average salary benefit revalued in accordance with
subsection (4), or

(c) a flat rate benefit revalued in accordance with subsection (5).

(3) If the benefit is a money purchase benefit it must be revalued using
the money purchase method.

(4) 60If the benefit is an average salary benefit it must be revalued using
the average salary method if the trustees or managers of the scheme
consider the average salary method to be more appropriate than the
final salary method.

(5) If the benefit is a flat rate benefit it must be revalued using the default
65method if the trustees or managers of the scheme consider the
default method to be more appropriate than the final salary method.

84A Old basis of revaluation: personal pension schemes

(1) A benefit of the kind mentioned in section 83(1)(b) must be revalued
in accordance with this section if it is attributable to contributions
70received before the 2014 Act commencement date.

(2) The benefit must be revalued using the money purchase method.

84B New basis of revaluation: occupational pension schemes

(1) A benefit of the kind mentioned in section 83(1)(a) must be revalued
in accordance with this section if it is attributable to pensionable
75service on or after the 2014 Act commencement date.

(2) The benefit must be revalued using the default method unless it is—

(a) a money purchase benefit (see subsection (3)),

(b) a salary related benefit (see subsections (4) and (5)), or

(c) a flat rate benefit revalued in accordance with subsection (6).

(3) 5If the benefit is a money purchase benefit it must be revalued using
the money purchase method.

(4) If the benefit is a salary related benefit it must be revalued using the
final salary method unless it is revalued in accordance with
subsection (5).

(5) 10If the benefit is an average salary benefit it must be revalued using
the average salary method if the trustees or managers of the scheme
consider the average salary method to be more appropriate than the
final salary method.

(6) If the benefit is a flat rate benefit it must be revalued using the final
15salary method if the trustees or managers of the scheme consider the
final salary method to be more appropriate than the default method.

84C New basis of revaluation: personal pension schemes

(1) A benefit of the kind mentioned in section 83(1)(b) must be revalued
in accordance with this section if it is attributable to contributions
20received on or after the 2014 Act commencement date.

(2) The benefit must be revalued using the default method unless it is a
money purchase benefit.

(3) If the benefit is a money purchase benefit it must be revalued using
the money purchase method.

84D 25Hybrid benefits

(1) This section modifies the revaluation requirements in this Chapter in
relation to hybrid benefits.

(2) “Hybrid benefit” means a benefit the rate or amount of which
depends on which of two or more alternative methods of calculation
30produces the highest, or lowest, rate or amount.

(3) For hybrid benefits—

(a) first, calculate the benefit using each of those methods and
revalue in accordance with this Chapter, and

(b) then, determine which method of calculation produces the
35highest, or lowest, rate or amount.

84E Revaluation by other methods: general

The fact that an occupational pension scheme provides for the
amount of the pension or other benefit for a member or for any other
person in respect of the member to be increased during the pre-
40pension period—

(a) by the percentages specified during that period under
section 151(1) of the Social Security Administration Act 1992
(directions specifying percentage increases for up-rating
purposes), or

(b) under any arrangement which, 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 during that period,

5does not in itself result in conflict with section 84 or 84B, if the
increase falls to be determined by reference to an amount from which
the guaranteed minimum for a member or a member’s widow,
widower, surviving same sex spouse or surviving civil partner has
not been deducted.

84F 10Revaluation by other methods: transitional protection in certain cases

(1) This section applies to a scheme which, before the 2014 Act
commencement date, provided for any description of benefits to
which this Chapter applies to be revalued by a method that the
scheme was allowed to use under subsection (3A) or (3B) of old
15section 84.

(2) The scheme may continue to use that method of revaluation in
relation to that description of benefits for so long as it continues to
contain that provision.

(3) In subsection (1), “the old section 84” means section 84 as it had effect
20immediately before the substitution made by Schedule 2 to the
Pension Schemes Act 2014.”

5 After section 85 insert—

“85A Power to add revaluation methods for personal pension schemes

(1) Regulations may make provision enabling or requiring benefits of
25the kind mentioned in section 83(1)(b) to be revalued by the average
salary or final salary method in specified cases.

(2) Regulations under this section—

(a) may amend this Chapter (and may, in particular, amend the
average salary or final salary method as applied in relation to
30benefits of the kind mentioned in section 83(1)(b));

(b) may not change the revaluation method to be used for a
benefit the right to which has already accrued.”

6 After section 86 insert—

“86A The revaluation methods

35The revaluation methods referred to in this Chapter are defined by
the provisions listed in the table.

86B Definitions of benefits referred to in this Chapter

(1) In this Chapter—

• “average salary benefit” means a benefit under an occupational
  45pension scheme the rate or amount of which is calculated by
  reference to the member’s average salary over the period of
  service to which the benefit relates;

• “final salary benefit” means a benefit under an occupational
  pension scheme that is calculated by reference to the
  50member’s pensionable earnings, or highest, average or
  representative pensionable earnings, in a specified period
  ending at, or defined by reference to, the time when the
  member’s pensionable service in relation to that scheme
  ends;

• 55“flat rate benefit” means a benefit under an occupational
  pension scheme the rate or amount of which is calculated by
  reference solely to the member’s length of service;

• “salary related benefit” means a benefit under an occupational
  pension scheme the rate or amount of which is calculated by
  60reference to the salary of the member.

(2) In subsection (1) “pensionable earnings”, in relation to a pension
scheme and a member of it, means earnings by reference to which
benefits under the scheme are calculated.”

7 In section 186(3) (statutory instruments subject to affirmative procedure),
65after paragraph (b) insert—

“(ba) regulations under section 85A, or”.

8 In Schedule 3 to that Act (revaluation methods), before paragraph 1 insert—

“The default method

A1 (1) The default method is to revalue the benefits in any way in which
70they would have been revalued if—

(a) in the case of an occupational pension scheme, the
member’s pensionable service had not terminated, or

(b) in the case of a personal pension scheme, contributions in
respect of the member had not ceased to be paid.”

9 75Omit paragraphs 3A and 4 of that Schedule.

10 In paragraph 5(1) of that Schedule, for “if his pensionable service had not
terminated” substitute “if—

(a) in the case of an occupational pension scheme, the member’s
pensionable service had not terminated, or

(b) 80in the case of a personal pension scheme, contributions in respect of
the member had not ceased to be paid.”