Pension Schemes Bill (HL Bill 63)

provisions of this section if it is attributable to pensionable service on
or after the 2014 Act commencement date.

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

(a) a money purchase benefit (see subsection (4)),

(b) 5a salary related benefit (see subsections (5) and (6)), or

(c) a flat rate benefit revalued in accordance with subsection (7).

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

(5) If the benefit is a salary related benefit it must be revalued using the
10final salary method unless it is revalued in accordance with
subsection (6).

(6) If 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
15final salary method.

(7) If the benefit is a flat rate benefit it must be revalued using the final
salary 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) 20A benefit of the kind mentioned in section 83(1)(b) must be revalued
in accordance with this section if it is attributable to contributions
received 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) 25If the benefit is a money purchase benefit it must be revalued using
the money purchase method.

84D Hybrid benefits

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

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

(3) For hybrid benefits—

(a) first, calculate the benefit using each of those methods and
35revalue in accordance with this Chapter, and

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

84E Revaluation by other methods: general

The fact that an occupational pension scheme provides for the
40amount 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-
pension 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
5reference to the rise in the general level of prices in Great
Britain during that period,

does 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,
10widower, surviving same sex spouse or surviving civil partner has
not been deducted.

84F Revaluation 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
15which this Chapter applies to be revalued by a method that the
scheme was allowed to use under subsection (3A) or (3B) of old
section 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
20contain that provision.

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

5 After section 85 insert—

“85A 25Power to add revaluation methods for personal pension schemes

(1) Regulations may make provision enabling or requiring benefits of
the 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) 30may amend this Chapter (and may, in particular, amend the
average salary or final salary method as applied in relation to
benefits 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 35After section 86 insert—

“86A The revaluation methods

The 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—

• 5“average salary benefit” means a benefit under an occupational
  pension 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
  10pension scheme that is calculated by reference to the
  member’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
  15ends;

• “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
  20pension scheme the rate or amount of which is calculated by
  reference 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 25In section 186(3) (statutory instruments subject to affirmative procedure),
after 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 30The default method is to revalue the benefits in any way in which
they 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
35respect of the member had not ceased to be paid.”

9 Omit 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
40pensionable 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.”

11 Omit the following, which are no longer needed given the earlier provisions
of this Schedule—

(a) paragraph 31(3) of Schedule 12 to the Welfare Reform and Pensions
Act 1999;

(b) section 19(1) to (3) of the Pensions Act 2011.

Section 46

SCHEDULE 2 5Other amendments to do with Parts 1 and 2

Pension Schemes Act 1993 (c. 48)Pension Schemes Act 1993 (c. 48)

1 The Pension Schemes Act 1993 is amended as follows.

2 In section 83 (scope of provisions about revaluation of benefits excluding
guaranteed minimum pensions), in subsection (4), for paragraph (a) (but not
10the “and” at the end) substitute—

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

3 In section 113 (disclosure of information about schemes to members etc), in
subsection (10), for the definition of “relevant scheme” substitute—

• 15““relevant scheme” means an occupational pension scheme
  under which all the benefits that may be provided are money
  purchase benefits.”

4 In section 124 (duty of Secretary of State to pay unpaid contributions to
schemes), for subsection (3A) substitute—

“(3A) 20The sum payable under this section by virtue of subsection (3) shall
be the lesser of the amounts mentioned in paragraphs (a) and (c) of
that subsection in any case where the scheme is—

(a) a defined contributions scheme,

(b) a shared risk scheme under which all the benefits that may be
25provided are money purchase benefits, or

(c) a shared risk scheme under which all the benefits that may be
provided are money purchase benefits or collective benefits.”

5 (1) In section 181 (interpretation), subsection (1) is amended as follows.

(2) At the appropriate places insert—

• 30““collective benefit” has the meaning given by section 8 of the
  Pension Schemes Act 2014;”

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

• ““defined contributions scheme” has the meaning given by
  35section 4 of the Pension Schemes Act 2014;”

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

(3) Omit the definition of “money purchase scheme”.

Pensions Act 1995 (c. 26)Pensions Act 1995 (c. 26)

6 40The Pensions Act 1995 is amended as follows.

7 In section 37 (payment of surplus to employer), in subsection (1A)—

(a) after “does not apply in the case of” insert “—

(a)”;

(b) at the end insert—

“(b) 5any payments out of funds held for the purposes of
providing collective benefits under the scheme (but
see section 24 of the Pension Schemes Act 2014).”

8 In section 38 (power to defer winding up), in subsection (3), for
paragraph (a) (but not the “or” at the end) substitute—

“(a) 10a scheme under which all the benefits that may be provided
are money purchase benefits,”.

9 In section 51 (annual increase in rate of pension), in subsection (1)(a)(iii), for
“is not a money purchase scheme” substitute “is not a defined contributions
scheme”.

10 15In section 51A (restrictions on increase where annuity tied to investments),
in subsection (1), for “money purchase scheme” substitute “defined
contributions scheme”.

11 In section 73 (preferential liabilities on winding up), for subsection (2)
substitute—

“(2) 20This section applies to a pension scheme that is—

(a) an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme,

unless subsection (2A) provides for the scheme to be exempt.

(2A) 25A scheme is exempt from this section if it is—

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

(b) a prescribed scheme or a scheme of a prescribed description.”

12 In section 75 (employer debt where deficiency in assets on winding up etc),
30for subsection (1) substitute—

“(1) This section applies in relation to a pension scheme that is—

(a) an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme,

35unless subsection (1A) provides for the scheme to be exempt.

(1A) A scheme is exempt from this section if it is—

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

(b) a scheme under which all the benefits that may be provided
40are collective benefits,

(c) a scheme under which all the benefits that may be provided
are money purchase benefits or collective benefits, or

(d) a prescribed scheme or a scheme of a prescribed description.

(1B) Where—

(a) some of the benefits that may be provided under a scheme
are collective benefits and some are not, and

(b) the scheme does not fall within paragraph (c) or (d) of
subsection (1A),

5the scheme is to be treated for the purposes of this Part as two
separate schemes, one relating to the collective benefits and the other
relating to the other benefits.”

13 (1) Section 87 (schedules of payments to money purchase schemes) is amended
as follows.

(2) 10For subsection (1) substitute—

“(1) This section applies to an occupational pension scheme that is a
scheme under which —

(a) all the benefits that may be provided are money purchase
benefits, or

(b) 15all the benefits that may be provided are money purchase
benefits or collective benefits,

other than a scheme falling within a prescribed class or description.”

(3) In subsection (2)(a), after “members of the scheme” insert “in respect of
money purchase benefits”.

(4) 20In the heading, for “to money purchase schemes” substitute “in respect of
money purchase benefits under certain schemes”.

14 For the italic cross-heading above section 87 substitute “Schemes providing
money purchase benefits”.

15 In the heading to section 88 (schedules of payments to money purchase
25schemes: supplementary), for “to money purchase schemes” substitute “in
respect of money purchase benefits under certain schemes”.

16 (1) Section 89 (application of further provisions to money purchase schemes) is
amended as follows.

(2) In subsection (1), for “money purchase schemes” substitute “schemes under
30which all the benefits that may be provided are money purchase benefits
and that are schemes”.

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

17 In section 124 (interpretation), in subsection (1), at the appropriate places
35insert—

• ““collective benefit” has the meaning given by section 8 of the
  Pension Schemes Act 2014;”

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

• 40““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
  risk scheme or defined contributions scheme, means an
  occupational pension scheme of that description;”

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

18 (1) Section 125 (interpretation of Part 1: supplementary) is amended as follows.

(2) In subsection (1), for paragraph (a) (but not the “and” at the end)
substitute—

“(a) the scheme is not a scheme under which all the benefits that
5may be provided are money purchase benefits,”.

(3) In subsection (2), for paragraphs (a) and (b) substitute “under which some
but not all of the benefits that may be provided are money purchase
benefits”.

Welfare Reform and Pensions Act 1999 (c. 30)Welfare Reform and Pensions Act 1999 (c. 30)

19 10In section 38 of the Welfare Reform and Pensions Act 1999 (treatment in
winding up), in subsection (2A), 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,”.

15Financial Services and Markets Act 2000 (c. 8)Financial Services and Markets Act 2000 (c. 8)

20 The Financial Services and Markets Act 2000 is amended as follows.

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

(a) at the appropriate place insert—

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

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

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

(3) 30In subsection (4), for “Money purchase scheme” substitute “Money purchase
benefits”.

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

23 The Pensions Act 2004 is amended as follows.

24 In section 13 (improvement notices), in subsection (7)—

(a) 35omit the “or” at the end of paragraph (d);

(b) after paragraph (e) insert “, or

(f) the Pension Schemes Act 2014.”

25 In section 17 (power of the Regulator to recover unpaid contributions), in
subsection (3)—

(a) 40in paragraph (b) of the definition of “due date”, for “to money
purchase schemes” substitute “in respect of money purchase benefits
under certain schemes”;

(b) in paragraph (a) of the definition of “employer contribution”, for “to
money purchase schemes” substitute “in respect of money purchase
benefits under certain schemes”.

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

(2) 5In subsection (1), for “which is not a money purchase scheme” substitute
“unless it is excluded by subsection (1A)”.

(3) After that subsection insert—

“(1A) A scheme is excluded if—

(a) all the benefits that may be provided under the scheme are
10money 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
before the benefit comes into payment (see
subsection (10A)).”

(4) 15In subsection (2), for “such a scheme” substitute “a scheme to which this
section applies”.

(5) After subsection (10) insert—

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

(a) 20requires 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
the option is subject to conditions).”

27 In section 38 (contribution notices where avoidance of employer debt), for
25subsection (1) substitute—

“(1) This section applies in relation to a pension scheme that is—

(a) an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme,

30unless subsection (1A) provides for the scheme to be exempt.

(1A) A scheme is exempt from this section if it is—

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

(b) a scheme under which all the benefits that may be provided
35are collective benefits,

(c) a scheme under which all the benefits that may be provided
are money purchase benefits or collective benefits, or

(d) a prescribed scheme or a scheme of a prescribed description.

(1B) Where—

(a) 40some of the benefits that may be provided under a scheme
are collective benefits and some are not, and

(b) the scheme does not fall within paragraph (c) or (d) of
subsection (1A),

the scheme is to be treated for the purposes of this section and
sections 38A to 42 as two separate schemes, one relating to the
collective benefits and the other relating to the other benefits.”

28 (1) Section 43 (financial support directions) is amended as follows.

(2) 5For subsection (1) substitute—

“(1) This section applies in relation to a pension scheme that is—

(a) an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme,

10unless subsection (1A) provides for the scheme to be exempt.

(1A) A scheme is exempt from this section if it is—

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

(b) a scheme under which all the benefits that may be provided
15are collective benefits,

(c) a scheme under which all the benefits that may be provided
are money purchase benefits or collective benefits, or

(d) a prescribed scheme or a scheme of a prescribed description.

(1B) Where—

(a) 20some of the benefits that may be provided under a scheme
are collective benefits and some are not, and

(b) the scheme does not fall within paragraph (c) or (d) of
subsection (1A),

the scheme is to be treated for the purposes of this section and
25sections 43A to 51 as two separate schemes, one relating to the
collective benefits and the other relating to the other benefits.”

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

29 In section 52 (restoration orders where transactions at an undervalue), for
30subsection (1) substitute—

“(1) This section applies in relation to a pension scheme that is—

(a) an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme,

35unless subsection (1A) provides for the scheme to be exempt.

(1A) A scheme is exempt from this section if it is—

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

(b) a scheme under which all the benefits that may be provided
40are collective benefits,

(c) a scheme under which all the benefits that may be provided
are money purchase benefits or collective benefits, or

(d) a prescribed scheme or a scheme of a prescribed description.

(1B) Where—

(a) some of the benefits that may be provided under a scheme
are collective benefits and some are not, and

(b) the scheme does not fall within paragraph (c) or (d) of
subsection (1A),

5the scheme is to be treated for the purposes of this section and
sections 53 to 56 as two separate schemes, one relating to the
collective benefits and the other relating to the other benefits.”

30 (1) Section 90 (codes of practice) is amended as follows.

(2) In subsection (2)(i), for “money purchase schemes” substitute “certain
10schemes”.

(3) In subsection (6), in the definition of “the pensions legislation”—

(a) omit the “or” at the end of paragraph (c);

(b) after paragraph (d) insert—

“(e) Schedule 18 to the Pensions Act 2014, or

(f) 15the Pension Schemes Act 2014.”

31 In section 126 (schemes eligible for pension protection), for subsection (1)
substitute—

“(1) Subject to the following provisions of this section, in this Part
references to an “eligible scheme” are to a pension scheme that is—

(a) 20an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme.

(1A) A scheme is not an eligible scheme if it is—

(a) a scheme under which all the benefits that may be provided
25are money purchase benefits,

(b) a scheme under which all the benefits that may be provided
are collective benefits,

(c) a scheme under which all the benefits that may be provided
are money purchase benefits or collective benefits, or

(d) 30a prescribed scheme or a scheme of a prescribed description.

(1B) Where—

(a) some of the benefits that may be provided under a scheme
are collective benefits and some are not, and

(b) the scheme does not fall within paragraph (c) or (d) of
35subsection (1A),

the scheme is to be treated for the purposes of this Part as two
separate schemes, one relating to the collective benefits and the other
relating to the other benefits.”

32 For section 221 (application of scheme funding rules) substitute—

“221 40Pension schemes to which this Part applies

(1) The provisions of this Part apply to a pension scheme that is—

(a) an occupational defined benefits scheme,

(b) an occupational shared risk scheme, or

(c) an occupational defined contributions scheme,

45unless subsection (2) provides for the scheme to be exempt.