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 specified in subsection (2).

(2) 5Those persons are—

(a) civil servants;

(b) the judiciary;

(c) local government workers for England, Wales and Scotland;

(d) teachers for England, Wales and Scotland;

(e) 10health service workers for England, Wales and Scotland;

(f) fire and rescue workers for England, Wales and Scotland;

(g) members of police forces for England, Wales and Scotland;

(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 specified in section 1(2) 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 retrospective provision (but see section 23);

(c) allow any person to exercise a discretion.

(4) 15The consequential provision referred to in subsection (2)(b) includes
consequential provision amending any primary legislation passed before or in
the same session as this Act (as well as consequential provision amending any
secondary legislation).

(5) Scheme regulations require the consent of the Treasury before being made,
20unless one of the following exceptions applies.

(6) The exceptions are—

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

(b) 25scheme regulations of the Welsh Ministers relating to fire and rescue
workers.

Governance

4 Scheme manager

(1) Scheme regulations for a scheme under section 1 must provide for a person to
30be 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
schemes).

(3) 35The 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
40administering 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) Scheme regulations may specify exceptions to subsection (6).

5 5Pension 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
(or each scheme manager) in relation to the following matters.

(2) Those matters are—

(a) 10securing 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
scheme and any connected scheme by the Pensions Regulator;

(c) 15such 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) The regulations must include provision—

(a) 20requiring 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
board has a conflict of interest;

(b) 25requiring 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);

(c) requiring the board to include employer representatives and member
30representatives in equal numbers.

(5) In 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
35connected scheme).

(6) In subsection (4)(c)—

(a) “employer representatives” means persons appointed to the board for
the purpose of representing employers for the scheme and any
connected scheme;

(b) 40“member representatives” means persons appointed to the board for
the purpose of representing members of the scheme and any connected
scheme.

(7) Where 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
45be the board for the purposes of this section.

(8) In 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
5scheme 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) 10the 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.

7 Scheme advisory board

(1) Scheme regulations for a scheme under section 1 which is a defined benefits
15scheme must provide for the establishment of a board with responsibility for
providing advice to the responsible authority, at the authority’s request, on the
desirability of changes to the scheme.

(2) Where, by virtue of section 4(5), there is more than one scheme manager for a
scheme mentioned in subsection (1) (and accordingly there is more than one
20pension board for the scheme), the regulations may also provide for the board
to provide advice (on request or otherwise) to the scheme managers or the
scheme’s pension boards in relation to the effective and efficient
administration and management of—

(a) the scheme and any statutory pension scheme that is connected with it,
25or

(b) any pension fund of the scheme and any connected scheme.

(3) A person to whom advice is given by virtue of subsection (1) or (2) must have
regard to the advice.

(4) The regulations must include provision—

(a) 30requiring the responsible authority—

(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
board has a conflict of interest;

(b) 35requiring a member of the board, or a person proposed to be appointed
as a member of the board, to provide the responsible authority with
such information as the authority reasonably requires for the purposes
of provision under paragraph (a).

(5) In subsection (4)(a) “conflict of interest”, in relation to a person, means a
40financial 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) In this Act, a board established under this section is called a “scheme advisory
45board”.

Design

8 Types of scheme

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

(a) a defined benefits scheme,

(b) 5a 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) a career average revalued earnings scheme, or

(b) a defined benefits scheme of such other description as Treasury
10regulations may specify.

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

(4) A 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
15the 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,
are under the scheme revalued each year until the person leaves
pensionable service.

(5) 20Treasury regulations under this section are subject to the negative Commons
procedure.

9 Revaluation

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

(a) requires a revaluation of pensionable earnings of a person, or a
25proportion 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
earnings (or both) in a given period.

(2) The change in prices or earnings to be applied for the purposes of such a
30revaluation 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
change 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
35appropriate.

(4) A Treasury order under this section—

(a) must be made in each year;

(b) may make different provision for different purposes.

(5) A Treasury order under this section is subject to the negative Commons
40procedure.

(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.

10 Pension 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) 5Subsection (1) does not apply in relation to—

(a) fire 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
10be 60.

(3) The 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) 15Where—

(a) a 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
20scheme apply in relation to all the benefits (including benefits already accrued
under 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
25earliest 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
30earliest 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) 35“state pension age”, in relation to a person, means the pensionable age
of the person as specified from time to time in Part 1 of Schedule 4 to
the Pensions Act 1995.

Cost control

11 Valuations

(1) 40Scheme regulations for a scheme under section 1 which is a defined benefits
scheme 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) how 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) 5the matters to be covered by a valuation;

(e) where a scheme under section 1 and another statutory pension scheme
are 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
10under a scheme under section 1 must take effect following a valuation.

(4) Treasury directions under subsection (2), and variations and revocations of
such 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
15scheme 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,
subsections (2) to (4) apply.

12 Employer cost cap

(1) Scheme regulations for a scheme under section 1 which is a defined benefits
20scheme 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
cost of the scheme.

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

(3) 25The employer cost cap is to be set in accordance with Treasury directions.

(4) Treasury directions may in particular specify—

(a) how the first valuation under section 11 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
30subsequent valuations of a scheme under section 1 for the purposes of
measuring changes in the cost of the scheme against the cap;

(c) the 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) 35Treasury regulations must make—

(a) provision requiring the cost of a scheme (and any connected scheme) to
remain 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
40of those margins, provision specifying a target cost within the margins.

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

(a) a procedure for the responsible authority, the scheme manager (if
different), employers and members (or representatives of employers
45and members) to reach agreement on the steps required to achieve the
target cost for the scheme, and

(b) the 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) 5Treasury regulations under this section may—

(a) include consequential or supplementary provision;

(b) make different provision for different schemes.

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

13 10Employer contributions in funded schemes

(1) This 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) 15the solvency of the pension fund, and

(b) the 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) 20Where 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) the valuation has been carried out in a way which is not inconsistent
25with 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) If a report under subsection (4) states that, in the view of the person making the
30report, 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
appropriate, and

(ii) 35publish 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) direct the scheme manager to take such remedial steps as the
40responsible authority considers appropriate.

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

Administration

14 Information about benefits

(1) Scheme regulations must require the scheme manager for a scheme under
section 1 which is a defined benefits scheme to provide benefit information
5statements to each person in pensionable service under the scheme in
accordance with this section.

(2) A benefit information statement must include—

(a) a description of the benefits earned by the person in respect of his or her
pensionable service, and

(b) 10such other information as Treasury directions may specify.

(3) The information included in a benefit information statement must comply with
such requirements as Treasury directions may specify.

(4) A benefit information statement must be provided—

(a) no later than the relevant date, and

(b) 15at least once in each year ending with the anniversary of that date.

(5) The relevant date is the last day of the period of 17 months beginning with the
day on which scheme regulations establishing the scheme come into force.

(6) A benefit information statement must be provided in such manner as Treasury
directions may specify.

15 20Information about schemes

(1) Treasury 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) 25In subsection (1), “scheme information” means information about the scheme
and 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) 30information about any scheme funding, assets and liabilities;

(c) information 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
35is 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.