(b) in paragraph (b), after “personal pension scheme” insert “or becomes a
money purchase member, with effect from that date, of an automatic
enrolment scheme which is a hybrid scheme.”

(5) After subsection (9) insert—

“(10) 5For the purposes of this section—

(a) a person is a “money purchase member” of a hybrid scheme if—

(i) the person is an active member of the scheme, and

(ii) all the benefits accruing in respect of his or her
membership are money purchase benefits, and

(b) 10a person is a “defined benefits member” of a hybrid scheme if
the person is an active member of the scheme other than a
money purchase member.”

(6) Subsection (7) applies if—

(a) an employer whose first enrolment date is before the date on which the
15amendments made by this section come into force (“the
commencement date”) has given a jobholder notice under section 30(3)
of the 2008 Act,

(b) the conditions in section 30(2) of that Act have continued to be satisfied
during the period beginning with the employer’s first enrolment date
20and ending with the day before the commencement date, and

(c) had the amendments made by this section come into force on
19 December 2012, the condition in section 30(2)(c) of that Act would
not have been satisfied at a time during that period.

(7) Section 30(5) to (7) of the 2008 Act (as amended by this section) applies in
25relation to the jobholder with the following modifications—

(a) references in section 30(5) and (6) of that Act to the closure date are to
be read as references to the commencement date, and

(b) references in section 30(5) and (6) of that Act to the automatic
enrolment date are to be read as references to—

(i) 3019 December 2012, or

(ii) if later, the employer’s first enrolment date;

and section 30(3) and (4) of that Act does not apply.

(8) Expressions used in this section and in section 30 of the 2008 Act have the same
meaning in this section as in that section.

39 35Penalty notices under sections 40 and 41 of the Pensions Act 2008 etc

(1) In sections 40(1)(d) and 41(1)(d) of the Pensions Act 2008 (fixed and escalating
penalty notices), at the end insert “, so far as relevant to the exercise of any of
its functions under or by virtue of this Part”.

(2) In section 72 of the Pensions Act 2004 (powers to require information), in
40subsection (1A), for “Chapter 2 of Part 1 of the Pensions Act 2008 or section 51
of that Act” substitute “or by virtue of Part 1 of the Pensions Act 2008”.

40 Unpaid scheme contributions

(1) The Pension Schemes Act 1993 is amended as follows.

(2) In section 123 (payment by Secretary of State of unpaid scheme contributions
on employer insolvency: interpretation)—

(a) in subsection (3), for the definition of “contract of employment” and
related expressions substitute—

• 5““employer”, “employment”, “worker” and “worker’s
  contract” and other expressions which are defined in the
  Employment Rights Act 1996 have the same meaning as
  in that Act (see further subsections (3A) and (3B));”;

(b) in subsection (3), in paragraph (b) of the definition of “holiday pay”, for
10“the employee’s contract of employment” substitute “the worker’s
contract”;

(c) after subsection (3) insert—

“(3A) Section 89 of the Pensions Act 2008 (agency workers) applies for
the purposes of this Chapter as it applies for the purposes of
15Part 1 of that Act.

(3B) References in this Chapter to a worker include references to an
individual to whom Part 1 of the Pensions Act 2008 applies as if
the individual were a worker because of regulations made
under section 98 of that Act; and related expressions are to be
20read accordingly.”

(3) In section 124 (Secretary of State’s duty to pay unpaid contributions)—

(a) for “an employee”, in each place, substitute “a worker”;

(b) for “the employee”, in each place, substitute “the worker”;

(c) for “the employee’s” substitute “the worker’s”;

(d) 25for “employees”, in each place, substitute “workers”.

(4) In section 161, for “contract of employment” substitute “worker’s contract”.

(5) In section 165(7)—

(a) in paragraph (a), for “contract of employment the employee” substitute
“worker’s contract the worker”;

(b) 30in paragraph (b), for “employee” substitute “worker”.

Other

41 Work-based schemes: power to restrict charges or impose requirements

Schedule 17 permits the Secretary of State to make regulations—

(a) restricting the charges that may be imposed on members of certain
35work-based pension schemes;

(b) imposing requirements relating to administration or governance that
must be satisfied in relation to certain work-based pension schemes.

42 Power to require pension levies to be paid in respect of past periods

(1) The Secretary of State may by regulations provide for the Pensions Act 2004,
40and regulations made under it, to have effect, so far as relating to the
requirement to pay pension levy, as if the amendments made by the 2010
regulations had always had effect.

(2) Regulations under this section may in particular—

(a) modify the application of the Pensions Act 2004, or regulations made
under it, in relation to amounts of pension levy required to be paid
because of regulations under this section;

(b) provide for interest to be charged at a specified rate on such amounts
5(including in respect of periods before the coming into force of
regulations under this section).

(3) In this section—

• “the 2010 regulations” means—

  (a)

  regulations 2, 3 and 8 of the Pension Protection Fund and
  10Occupational Pension Schemes (Miscellaneous Amendments)
  Regulations 2010 (S.I. 2010/196S.I. 2010/196), and

  (b)

  regulation 2 of the Occupational Pension Schemes (Levies)
  (Amendment) Regulations 2010 (S.I. 2010/1930S.I. 2010/1930);

• “pension levy” means—

  (a)

  15a levy under regulations made under section 117 of the
  Pensions Act 2004 (administration levy),

  (b)

  a levy under regulations made under section 174 of that Act
  (initial levy), or

  (c)

  a levy under section 175 of that Act (pension protection levies).

43 20Prohibition and suspension orders: directors of corporate trustees

(1) The Pensions Act 1995 is amended as follows.

(2) After section 3 insert—

“3A Prohibition orders: directors of corporate trustees etc

(1) A company or Scottish partnership is prohibited from being a trustee of
25a trust scheme at any time when an individual who is a director of the
company or a partner in the partnership is prohibited from being a
trustee of the scheme by an order under section 3.

(2) Where a company or partnership which is a trustee of a trust scheme
becomes prohibited under subsection (1) in relation to the scheme, that
30subsection has the effect of removing the company or partnership as a
trustee.

(3) The Authority may, on the application of a company or Scottish
partnership, give notice in writing to the applicant waiving the
prohibition under subsection (1)—

(a) 35in relation to an individual against whom an order under
section 3 has been made, and

(b) either generally or in relation to a particular scheme or
particular description of schemes.

(4) A notice may be given under subsection (3) only if the Authority is
40satisfied that the applicant would be a fit and proper person to be a
trustee of the scheme or schemes to which the notice relates despite the
individual being, or even if the individual were to become, a director of
or partner in the applicant.

(5) A notice given at any time under subsection (3) cannot affect anything
45done before that time.

(6) An application under subsection (3) may not be made—

(a) during the period within which the determination to exercise
the power to make the order against the individual may be
referred to the Tribunal under section 96(3) or 99(7) of the
5Pensions Act 2004 (whether by a company or partnership which
became prohibited under subsection (1) on the making of the
order or by another person), and

(b) if the determination is so referred, until the reference, and any
appeal against the Tribunal’s determination, has been finally
10disposed of.

(7) The Authority must prepare and publish a statement of the policies
they intend to adopt in relation to the exercise of their powers under
this section.

(8) The Authority may revise any statement published under subsection
15(7) and must publish any revised statement.

(9) References in this section to an order under section 3 are to an order
under that section made on or after the date on which section 43(2) of
the Pensions Act 2013 comes fully into force.”

(3) Section 4 (Pensions Regulator’s power to suspend trustee of occupational
20pension scheme) is amended as follows.

(4) In subsection (1)(f), after “paragraph” insert “(aa),”.

(5) In subsection (2)(a), after “or (aa)” insert “or, in a case where the Authority
would have power to suspend a director or partner under paragraph (aa), by
virtue of paragraph (f)”.

(6) 25Schedule 18 contains consequential amendments.

44 Preparation of guidance for pensions illustrations

In section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (grants to bodies concerned with accounting standards
etc), in subsection (2), after paragraph (o) insert—

“(oa) 30exercising functions under regulations made under section
113(3A) of the Pension Schemes Act 1993 or section 109(3A) of
the Pension Schemes (Northern Ireland) Act 1993 (preparing
guidance for pensions illustrations);”.

45 Pensions Regulator’s objectives

35In section 5(1) of the Pensions Act 2004, after paragraph (c) insert—

“(cza) in relation to the exercise of its functions under Part 3 only, to
minimise any adverse impact on the sustainable growth of an
employer,”.

46 Maximum period between scheme returns to be 5 years for micro schemes

(1) 40Section 63 of the Pensions Act 2004 is amended as follows.

(2) After subsection (3) insert—

“(3A) But subsection (3)(a) has effect as if the reference to three years were a
reference to five years if—

(a) the trustees or managers have complied with paragraph (b) of
5section 62(2),

(b) the information they provided under that paragraph included
the number of members of the scheme, and

(c) that number was no more than 4.”

(3) After subsection (4) insert—

“(4A) 10But subsection (4)(a) has effect as if the reference to three years were a
reference to five years if—

(a) on the date on which the previous scheme return notice was
issued, the number of members of the scheme was recorded in
the register, and

(b) 15that number was no more than 4.”

47 Pension Protection Fund: increased compensation cap for long service

See Schedule 19 for amendments increasing the Pension Protection Fund
compensation cap for people with long pensionable service.

Part 6 20Final provisions

48 Power to make consequential amendments etc

(1) The Secretary of State or the Treasury may by order make consequential,
incidental or supplementary provision in connection with any provision made
by this Act.

(2) 25An order under this section may amend, repeal, revoke or otherwise modify
any enactment (whenever passed or made).

(3) “Enactment” includes an enactment contained in subordinate legislation
within the meaning of the Interpretation Act 1978.

49 Regulations and orders

(1) 30Regulations and orders under this Act are to be made by statutory instrument.

(2) A statutory instrument containing (whether alone or with other provisions)—

(a) regulations under section 3, 18(5) or 29,

(b) the first regulations under section 10 or 20,

(c) an order under section 48 that amends or repeals a provision of an Act,

(d) 35regulations under Schedule 16,

(e) regulations under paragraph 2 of Schedule 17 or regulations under
paragraph 7 of that Schedule that amend a provision of an Act, or

(f) the first regulations under paragraph 3 of that Schedule,

may not be made unless a draft of the instrument has been laid before and
40approved by a resolution of each House of Parliament.

(3) Any other statutory instrument containing regulations or an order under this
Act is subject to annulment in pursuance of a resolution of either House of
Parliament.

(4) Subsection (3) does not apply to a statutory instrument containing an order
5under section 51(1) or (7) only.

(5) A power to make regulations or an order under this Act may be used—

(a) to make different provision for different purposes;

(b) in relation to all or only some of the purposes for which it may be used.

(6) Regulations or orders under this Act may include incidental, supplementary,
10consequential, transitional, transitory or saving provision.

50 Extent

(1) This Act extends to England and Wales and Scotland only, subject to the
following provisions of this section.

(2) Any amendment or repeal made by this Act has the same extent as the
15enactment to which it relates.

(3) This Part extends also to Northern Ireland.

51 Commencement

(1) This Act comes into force on such day or days as the Secretary of State may by
order appoint, subject as follows.

(2) 20An order under subsection (1) may appoint different days for different
purposes.

(3) Section 28 and this Part come into force on the day on which this Act is passed.

(4) The following come into force at the end of the period of 2 months beginning
with the day on which this Act is passed—

(a) 25Part 2;

(b) sections 33 and 34;

(c) section 39;

(d) sections 44 and 45;

(e) paragraph 30(2) of Schedule 13.

(5) 30Part 1 comes into force on 6 April 2016, so far as not brought into force earlier
by an order under subsection (1).

(6) The Secretary of State may by order—

(a) amend subsection (5) so as to replace the reference to 6 April 2016 with
a later date, and

(b) 35make corresponding amendments in Part 1 or any enactment amended
by it.

(7) The Secretary of State may by order make transitional, transitory or saving
provision in connection with the coming into force of any provision of this Act.

52 Short title

40This Act may be cited as the Pensions Act 2013.

SCHEDULES

Section 5

SCHEDULE 1 Transitional rate of state pension: calculating the amount

Part 1 5Introduction

1 (1) This Schedule sets out how to calculate the amounts used to work out the
transitional rate of a person’s state pension.

(2) Part 2 of the Schedule sets out how to calculate the amount for a person’s
pre-commencement qualifying years.

(3) 10Part 3 of the Schedule sets out how to calculate the amount for a person’s
post-commencement qualifying years (if any).

Part 2 Amount for pre-commencement qualifying years

How to calculate the amount for pre-commencement qualifying years

2 15A person’s amount for pre-commencement qualifying years is calculated as
follows.

Step 1 - calculate the person’s pension under the old system

Calculate the weekly rate based on the old state pension and graduated
retirement benefit (see paragraph 3 for more about this).

20Step 2 - calculate a pension based on the new system

Calculate the weekly rate based on the new state pension (see paragraph 4
for more about this).

Step 3 - take whichever rate is higher (the foundation amount)

Take whichever of the rates found under Steps 1 and 2 is higher.

25Step 4 - revalue to date when the person reached pensionable age

Revalue the amount of that rate in accordance with paragraph 6.

Step 1: calculation of the person’s pension under the old system

3 (1) For the purposes of Step 1 of the calculation in paragraph 2, the weekly rate
based on the old state pension and graduated retirement benefit is—

(a) the rate of any Category A retirement pension and graduated
5retirement benefit to which the person would have been entitled if
the person had reached pensionable age on 6 April 2016, or

(b) the rate of any graduated retirement benefit to which the person
would have been entitled under section 36(7) of the National
Insurance Act 1965 (persons not entitled to retirement pension) if the
10person had reached pensionable age on that date.

(2) The following rules apply for the purposes of calculating that rate.

(3) Calculate the rate that would have had effect on 6 April 2016 (but see sub-
paragraph (6)).

(4) Ignore—

(a) 15the amendments made by paragraphs 49 and 51 of Schedule 12
(which limit Category A retirement pensions and graduated
retirement benefit to people who reach pensionable age before 6
April 2016);

(b) any requirement to make a claim;

(c) 20any provision suspending payment of, or disqualifying a person
from receiving, any amount;

(d) section 45B of the Contributions and Benefits Act (reduction of
additional pension because of pension sharing);

(e) section 37 of the National Insurance Act 1965 (graduated retirement
25benefit for widows etc).

(5) Read the reference in section 45(4)(b) of the Contributions and Benefits Act
(additional pension) to a person’s working life as a reference to the period—

(a) beginning with the tax year in which the person reached 16, and

(b) ending with the tax year before the one in which the person actually
30reached pensionable age.

(6) If an order under section 150 or 150A of the Administration Act (up-rating)
is made before 6 April 2016 and it provides for an increase to come into force
after that date, it is to be treated for the purposes of calculating the rate under
this paragraph as having already come into force.

(7) 35A determination under section 48A(2) of the Pension Schemes Act 1993
(contracting-out: reinstatement in state scheme following payment of
contributions equivalent premium) made on or after 6 April 2016 is to be
treated for the purposes of calculating the rate under this paragraph as
having been made before 6 April 2016.

40Step 2: calculation of a pension based on the new system

4 (1) For the purposes of Step 2 of the calculation in paragraph 2, the weekly rate
based on the new state pension is as follows.

(2) If the person has 35 or more pre-commencement qualifying years, the rate is
equal to—

(a) 45the full rate of the state pension on 6 April 2016, less

(b) any amount to reflect contracting out under the old system (see
paragraph 5).

(3) If the person has fewer than 35 pre-commencement qualifying years, the rate
is equal to—

(a) 5the appropriate proportion of the full rate of the state pension on 6
April 2016, less

(b) any amount to reflect contracting out under the old system (see
paragraph 5).

(4) The “appropriate proportion”, in relation to a person, is—

10

5 (1) In paragraph 4(2) and (3) references to an “amount to reflect contracting out
under the old system” are to an amount equal to any difference between—

(a) the amount of any additional pension included in the Category A
retirement pension calculated for the purposes of Step 1 of the
15calculation in paragraph 2, and

(b) the amount of any additional pension that would have been included
if—

(i) sections 46 and 48A of the Pension Schemes Act 1993 were
ignored, and

(ii) 20for the purposes of calculating the amounts referred to in
section 45(2)(c) and (d) of the Contributions and Benefits Act
any earnings paid to or for the benefit of the person in respect
of contracted-out employment were treated as if they were
not in respect of contracted-out employment.

(2) 25“Contracted-out employment” means employment qualifying a person for a
pension provided by a salary related contracted-out scheme, a money
purchase contracted-out scheme or an appropriate personal pension scheme
(and expressions used in this definition have the same meaning as in the
Pension Schemes Act 1993).

30Step 4: revaluation

6 (1) This paragraph determines how the amount mentioned in Step 4 of the
calculation in paragraph 2 is to be revalued for the purposes of that Step.

(2) If the amount is equal to or less than the full rate of the state pension on 6
April 2016, the amount is to be revalued in accordance with increases in the
35full rate of the state pension (see sub-paragraph (4)).

(3) If the amount is greater than the full rate of the state pension on 6 April
2016—

(a) so much of the amount as is equal to the full rate of the state pension
on 6 April 2016 is to be revalued in accordance with increases in the
40full rate of the state pension (see sub-paragraph (4)), and

(b) so much of the amount as exceeds the full rate of the state pension on
that date is to be revalued in accordance with increases in the general
level of prices (see sub-paragraph (5)).

(4) For the purposes of sub-paragraphs (2) and (3)(a), an amount is revalued in
45accordance with increases in the full rate of the state pension by increasing

it by the same percentage as any increase in the full rate of the state pension
in the period—

(a) beginning with 6 April 2016, and

(b) ending with the day on which the person reached pensionable age.

(5) 5For the purposes of sub-paragraph (3)(b), an amount is revalued in
accordance with increases in the general level of prices by adding—

(a) the amount, and

(b) the amount multiplied by the revaluing percentage specified in the
last order under section 148AC(3) of the Administration Act to come
10into force before the person reached pensionable age.

Part 3 Amount for post-commencement qualifying years

7 (1) A person’s amount for post-commencement qualifying years (if any) is
calculated as follows.

(2) 15If the person has 35 or more post-commencement qualifying years, the
amount is equal to the full rate of the state pension on the day on which the
person reached pensionable age.

(3) If the person has fewer than 35 post-commencement qualifying years, the
amount is equal to the following proportion of the full rate of the state
20pension on the day on which the person reached pensionable age—

Section 5

SCHEDULE 2 Transitional rate of state pension: up-rating

1 This Schedule sets out how to up-rate the transitional rate of a person’s state
25pension.

2 In this Schedule a reference to the transitional rate of a person’s state pension
is to the rate—

(a) taking into account any reduction under section 14, but

(b) ignoring any increase under section 17.

3 (1) 30The transitional rate of a person’s state pension is to be increased under this
paragraph if it is equal to or less than the full rate.

(2) If at any time the full rate of the state pension is increased, the person’s
transitional rate is increased (at that time) by the same percentage as the
increase in the full rate.

4 (1) 35The transitional rate of a person’s state pension is to be increased under this
paragraph if it exceeds the full rate.

(2) If at any time the full rate of the state pension is increased, the person’s
transitional rate is increased (at that time) by the same amount as the amount
by which the full rate is increased.