Pension Schemes Bill (HL Bill 90)

(a) contains amendments to do with Parts 1 and 2, and

(b) replaces references to “money purchase scheme” so as to limit the
number of different ways of categorising pension schemes.

Part 4 5Pensions flexibilities

CHAPTER 1 Pensions guidance

47 Pensions guidance

Schedule 3 contains amendments of the Financial Services and Markets Act
2000, and of other legislation, that are about the giving of pensions guidance to
10pension scheme members, and survivors of pension scheme members, with a
right or entitlement to flexible benefits.

CHAPTER 2 Independent advice

Great Britain

48 Independent advice in respect of conversions and transfers: Great Britain

(1) 15Where a member of a pension scheme has subsisting rights in respect of any
safeguarded benefits, or a survivor of a member has subsisting rights in respect
of any safeguarded benefits, the trustees or managers must check that the
member or survivor has received appropriate independent advice before—

(a) converting any of the benefits into different benefits that are flexible
20benefits under the scheme;

(b) making a transfer payment in respect of any of the benefits with a view
to acquiring a right or entitlement to flexible benefits for the member or
survivor under another pension scheme;

(c) paying a lump sum that would be an uncrystallised funds pension
25lump sum in respect of any of the benefits.

(2) The Secretary of State may by regulations make provision about—

(a) what the trustees or managers must do to check that a member or
survivor has received appropriate independent advice for the purposes
of subsection (1), and

(b) 30when the check must be carried out for the purposes of that subsection.

(3) The Secretary of State may by regulations—

(a) create an exception to subsection (1) in the case of a member or survivor
whose subsisting rights in respect of safeguarded benefits under the
scheme, or safeguarded benefits under the scheme and any other
35schemes, are worth less than a specified amount;

(b) create other exceptions to subsection (1).

(4) Regulations under subsection (3)(a) may, in particular, make provision
about—

(a) the valuation of the subsisting rights;

(b) the process for determining whether the exception applies.

(5) 5In subsection (1)(b) the reference to another pension scheme includes a scheme
established in a country or territory outside Great Britain.

(6) Where the trustees or managers fail to carry out a check required by this
section, section 10 of the Pensions Act 1995 (civil penalties) applies to any
trustee or manager who failed to take reasonable steps to ensure that the check
10was carried out.

(7) Failure to carry out a check required by this section does not affect the validity
of any transaction.

(8) In this section—

• “appropriate independent advice” means advice that—

  (a)

  15is given by an authorised independent adviser, and

  (b)

  meets any other requirements specified in regulations made by
  the Secretary of State;

• “authorised independent adviser” means a person who—

  (a)

  has permission under Part 4A of the Financial Services and
  20Markets Act 2000, or resulting from any other provision of that
  Act, to carry on a regulated activity specified in regulations
  made by the Secretary of State, and

  (b)

  meets such other requirements as may be specified in
  regulations made by the Secretary of State for the purpose of
  25ensuring that the person is independent;

• “safeguarded benefits” means benefits other than—

  (a)

  money purchase benefits, and

  (b)

  cash balance benefits.

49 Power to require employer to arrange advice for purposes of section 48

(1) 30The Secretary of State may by regulations specify circumstances in which an
employer must arrange or pay for a member of a pension scheme, or a survivor
of a member of a pension scheme, to receive appropriate independent advice
for the purpose of satisfying a requirement imposed by section 48.

(2) Regulations under subsection (1) may, in particular—

(a) 35impose limitations on the amount that an employer may be required to
pay;

(b) prohibit an employer from seeking in any way to recover, from a
member or survivor, costs incurred by the employer in complying with
the regulations;

(c) 40provide for section 10 of the Pensions Act 1995 (civil penalties) to apply
to a failure by an employer to comply with the regulations.

(3) In this section “employer” has the meaning given by regulations made by the
Secretary of State.

50 Independent advice: consequential amendments: Great Britain

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

(2) In section 99 (trustees’ duties after exercise of option), after subsection (2)
insert—

“(2A) 5Subsection (2) does not apply if—

(a) the trustees or managers have been unable to carry out the
check required by section 48 of the Pension Schemes Act 2015 by
reason of factors outside their control, or

(b) the trustees or managers have carried out the check required by
10section 48 of the Pension Schemes Act 2015 but the check did not
confirm that the member had received appropriate
independent advice.”

(3) In section 101J (time for compliance with transfer notice in respect of pension
credit benefits), after subsection (2) insert—

“(2A) 15Subsection (1) does not apply if—

(a) the trustees or managers have been unable to carry out the
check required by section 48 of the Pension Schemes Act 2015 by
reason of factors outside their control, or

(b) the trustees or managers have carried out the check required by
20section 48 of the Pension Schemes Act 2015 but the check did not
confirm that the member had received appropriate
independent advice.”

Northern Ireland

51 Independent advice in respect of conversions and transfers: Northern Ireland

(1) 25Where a member of a pension scheme has subsisting rights in respect of any
safeguarded benefits, or a survivor of a member has subsisting rights in respect
of any safeguarded benefits, the trustees or managers must check that the
member or survivor has received appropriate independent advice before—

(a) converting any of the benefits into different benefits that are flexible
30benefits under the scheme;

(b) making a transfer payment in respect of any of the benefits with a view
to acquiring a right or entitlement to flexible benefits for the member or
survivor under another pension scheme;

(c) paying a lump sum that would be an uncrystallised funds pension
35lump sum in respect of any of the benefits.

(2) The Department for Social Development in Northern Ireland may by
regulations make provision about—

(a) what the trustees or managers must do to check that a member or
survivor has received appropriate independent advice for the purposes
40of subsection (1), and

(b) when the check must be carried out for the purposes of that subsection.

(3) The Department for Social Development in Northern Ireland may by
regulations—

(a) create an exception to subsection (1) in the case of a member or survivor
45whose subsisting rights in respect of safeguarded benefits under the

scheme, or safeguarded benefits under the scheme and any other
schemes, are worth less than a specified amount;

(b) create other exceptions to subsection (1).

(4) Regulations under subsection (3)(a) may, in particular, make provision
5about—

(a) the valuation of the subsisting rights;

(b) the process for determining whether the exception applies.

(5) In subsection (1)(b) the reference to another pension scheme includes a scheme
established in a country or territory outside Northern Ireland.

(6) 10Where the trustees or managers fail to carry out a check required by this
section, Article 10 of the Pensions (Northern Ireland) Order 1995 (S.I. 1995/
3213 (N.I. 22)) (civil penalties) applies to any trustee or manager who failed to
take reasonable steps to ensure that the check was carried out.

(7) Failure to carry out a check required by this section does not affect the validity
15of any transaction.

(8) In this section—

• “appropriate independent advice” means advice that—

  (a)

  is given by an authorised independent adviser, and

  (b)

  meets any other requirements specified in regulations made by
  20the Department for Social Development in Northern Ireland;

• “authorised independent adviser” means a person who—

  (a)

  has permission under Part 4A of the Financial Services and
  Markets Act 2000, or resulting from any other provision of that
  Act, to carry on a regulated activity specified in regulations
  25made by the Department for Social Development in Northern
  Ireland, and

  (b)

  meets such other requirements as may be specified in
  regulations made by the Department for Social Development in
  Northern Ireland for the purpose of ensuring that the person is
  30independent;

• “safeguarded benefits” means benefits other than—

  (a)

  money purchase benefits, and

  (b)

  cash balance benefits.

52 Power to require employer to arrange advice for purposes of section 51

(1) 35The Department for Social Development in Northern Ireland may by
regulations specify circumstances in which an employer must arrange or pay
for a member of a pension scheme, or a survivor of a member of a pension
scheme, to receive appropriate independent advice for the purpose of
satisfying a requirement imposed by section 51.

(2) 40Regulations under subsection (1) may, in particular—

(a) impose limitations on the amount that an employer may be required to
pay;

(b) prohibit an employer from seeking in any way to recover, from a
member or survivor, costs incurred by the employer in complying with
45the regulations;

(c) provide for Article 10 of the Pensions (Northern Ireland) Order 1995
(S.I. 1995/3213 (N.I. 22)S.I. 1995/3213 (N.I. 22)) (civil penalties) to apply to a failure by an
employer to comply with the regulations.

(3) In this section “employer” has the meaning given by regulations made by the
5Department for Social Development in Northern Ireland.

53 Independent advice: consequential amendments: Northern Ireland

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

(2) In section 95 (trustees’ duties after exercise of option), after subsection (2)
insert—

“(2A) 10Subsection (2) does not apply if—

(a) the trustees or managers have been unable to carry out the
check required by section 51 of the Pension Schemes Act 2015 by
reason of factors outside their control, or

(b) the trustees or managers have carried out the check required by
15section 51 of the Pension Schemes Act 2015 but the check did not
confirm that the member had received appropriate
independent advice.”

(3) In section 97J (time for compliance with transfer notice in respect of pension
credit benefits), after subsection (2) insert—

“(2A) 20Subsection (1) does not apply if—

(a) the trustees or managers have been unable to carry out the
check required by section 51 of the Pension Schemes Act 2015 by
reason of factors outside their control, or

(b) the trustees or managers have carried out the check required by
25section 51 of the Pension Schemes Act 2015 but the check did not
confirm that the member had received appropriate
independent advice.”

Income tax exemption

54 Independent advice: income tax exemption

(1) 30In Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (employment
income: exemptions), in Chapter 9 (exemptions: pension provision), after
section 308A insert—

“308B Independent advice in respect of conversions and transfers of pension
scheme benefits

(1) 35No liability to income tax arises in respect of—

(a) the provision to an employee or former employee of
appropriate independent advice, or

(b) the payment or reimbursement, to or in respect of an employee
or former employee, of the cost of such advice,

40if conditions A to C are met.

(2) Condition A is that the provision, payment or reimbursement is
required by regulations under section 49 or 52 of the Pension Schemes

Act 2015 (power to require employer to arrange independent advice in
respect of conversions and transfers).

(3) If condition A is met only as respects part of the payment or
reimbursement because the amount of the payment or reimbursement
5exceeds the amount required to be paid or reimbursed, subsection (1)
applies in respect of that part.

(4) Condition B is that the provision, payment or reimbursement is not
pursuant to relevant salary sacrifice arrangements.

(5) Condition C is that such other requirements as may be specified in
10regulations made by the Treasury are satisfied in relation to the
provision, payment or reimbursement.

(6) In this section—

• “appropriate independent advice”—

  (a)

  in relation to England and Wales and Scotland, has the
  15meaning given by regulations under section 48 of the
  Pension Schemes Act 2015;

  (b)

  in relation to Northern Ireland, has the meaning given
  by regulations under section 51 of that Act;

• “relevant salary sacrifice arrangements” means arrangements
  20(whenever made, whether before or after the employment
  began) under which an employee gives up the right to receive
  an amount of general earnings or specific employment income
  in return for the provision of appropriate independent advice or
  the payment or reimbursement of the cost of such advice.”

(2) 25In that Part of that Act, in section 228 (effect of exemptions on liability under
provisions outside Part 2), in subsection (2), after paragraph (d) insert—

“(da) section 308B (independent advice in respect of conversions and
transfers of pension scheme benefits),”.

(3) The amendments made by this section have effect for the tax year 2015-16 and
30subsequent tax years.

CHAPTER 3 Drawdown, conversion of benefits and lump sums

Great Britain

55 Sums or assets that may be designated as available for drawdown: Great
Britain

(1) 35In the case of a member of an occupational pension scheme the only sums or
assets that may be designated as available for the payment of drawdown
pension for the member under the scheme are sums or assets held for the
purposes of providing money purchase benefits to or in respect of the member.

(2) In the case of a survivor of a member of an occupational pension scheme the
40only sums or assets that may be designated as available for the payment of
dependants’ drawdown pension, nominees’ drawdown pension or
successors’ drawdown pension for the survivor under the scheme are sums or

assets held for the purposes of providing money purchase benefits to the
survivor.

(3) This section overrides any provision of an occupational pension scheme to the
extent that there is a conflict.

(4) 5This section does not apply in relation to sums or assets designated before 6
April 2015.

56 Provision about conversion of certain benefits for drawdown: Great Britain

(1) The Secretary of State may by regulations make provision about the conversion
of benefits under an occupational pension scheme in circumstances where—

(a) 10a member of the scheme, or a survivor of a member of the scheme, has
subsisting rights in respect of any flexible benefits other than money
purchase benefits under the scheme, and

(b) the member or survivor exercises an option to convert any of the
benefits into money purchase benefits for the purposes of enabling
15sums or assets to be designated as available for the payment of
drawdown pension, dependants’ drawdown pension, nominees’
drawdown pension or successors’ drawdown pension.

(2) Regulations under subsection (1) may, in particular, make provision about
how the rate or amount of any benefits not converted are to be calculated in
20future.

(3) In relation to a conversion that takes place before the member or survivor
reaches normal pension age, regulations under subsection (1) may in particular
make provision about—

(a) the manner in which benefits are to be calculated for the purpose of
25converting them into money purchase benefits;

(b) the use of any power to reduce benefits.

(4) Regulations made under this section may include provision for them to
override the provisions of a pension scheme to the extent that there is a conflict.

57 Provision about calculation of lump sums: Great Britain

(1) 30The Secretary of State may by regulations make provision about the calculation
of lump sums in circumstances where—

(a) a member of an occupational pension scheme, or a survivor of a
member of the scheme, has subsisting rights in respect of any flexible
benefits other than money purchase benefits under the scheme, and

(b) 35the member or survivor exercises an option to be paid a lump sum in
respect of any of those benefits.

(2) Regulations under subsection (1) may, in particular, make provision about
how the rate or amount of any remaining benefits are to be calculated in future.

(3) In a case where a member or survivor exercises an option to be paid a lump
40sum before reaching normal pension age, regulations under subsection (1) may
in particular make provision about—

(a) the manner in which benefits are to be calculated for the purpose of
determining the amount available for the payment of the lump sum;

(b) the use of any power to reduce the amount of the lump sum.

(4) Regulations made under this section may include provision for them to
override the provisions of a pension scheme to the extent that there is a conflict.

58 Restrictions on conversion of benefits during winding up etc: Great Britain

(1) In section 73A of the Pensions Act 1995 (operation of scheme during winding
5up period), after subsection (6) insert—

“(6A) During the winding up period no right or entitlement of any member,
or of any other person in respect of a member, to a benefit that is not a
money purchase benefit is to be converted into, or replaced with, a right
or entitlement to a money purchase benefit under the scheme rules.”

(2) 10In section 73B of that Act (sections 73 and 73A: supplementary), in subsections
(1) and (3), after “section 73A(3)” insert “or (6A)”.

(3) In section 135 of the Pensions Act 2004 (restrictions on winding up, discharge
of liabilities etc during assessment period), in subsection (4), before paragraph
(a) insert—

“(za) 15no right or entitlement of any member, or of any other person in
respect of a member, to a benefit that is not a money purchase
benefit is to be converted into, or replaced with, a right or
entitlement to a money purchase benefit under the scheme
rules,”.

59 20Restriction on payment of lump sums during PPF assessment period: Great
Britain

(1) Section 138 of the Pensions Act 2004 (payment of scheme benefits during
assessment period) is amended as follows.

(2) In subsection (1), after “Subsections (2)” insert “, (2A)”.

(3) 25After subsection (2) insert—

“(2A) Benefits in the form of a lump sum may be paid to or in respect of a
member under the scheme rules during the assessment period only in
the circumstances in which, and to the extent to which, lump sum
compensation would be payable to or in respect of the member in
30accordance with this Chapter if—

(a) the Board assumed responsibility for the scheme in accordance
with this Chapter, and

(b) the assessment date referred to in Schedule 7 were the date on
which the assessment period began.”

(4) 35In subsection (3), omit “But”.

(5) In subsection (5), for “subsection (2)” substitute “subsections (2) and (2A)”.

(6) In subsection (6), for “subsection (3)” substitute “subsections (2A) and (3)”.

(7) In subsection (7), after “Subsections (2),” insert “(2A),”.

(8) In subsection (8), after “subsections (2)” insert “, (2A)”.

(9) 40In subsection (9), for “subsections (2) and (3)” substitute “subsections (2) to (3)”.

(10) After subsection (9) insert—

“(9A) Regulations may make provision as to circumstances in which benefits
in the form of a lump sum are to be treated for the purposes of
subsection (2A) as being paid in the circumstances in which lump sum
5compensation would be payable in accordance with this Chapter.

(9B) Regulations may create exceptions to subsection (2A).”

(11) In subsection (12), for “subsection (2)” substitute “subsections (2) and (2A)”.

(12) In subsection (13), after “subsection (2)” insert “, (2A)”.

60 Sections 55 to 57: consequential amendments

(1) 10In section 101AI of the Pension Schemes Act 1993 (early leavers: cash transfer
sums and contribution refunds - further provisions), in subsection (8)—

(a) in paragraph (a), after sub-paragraph (ix) insert—

“(x) section 55 of the Pension Schemes Act 2015;

(xi) regulations made under section 56 or 57 of the
15Pension Schemes Act 2015;”;

(b) in paragraph (b), after sub-paragraph (vii) insert—

“(viii) section 55(3) of the Pension Schemes Act 2015;

(ix) regulations made under section 56(4) or 57(4) of
the Pension Schemes Act 2015.”

(2) 20In section 67A of the Pensions Act 1995 (the subsisting rights provisions:
interpretation), in subsection (9)—

(a) in paragraph (a), after sub-paragraph (x) (inserted by section 45 of this
Act) insert—

“(xi) section 55 of the Pension Schemes Act 2015;

(xii) 25regulations made under section 56 or 57 of the
Pension Schemes Act 2015;”;

(b) in paragraph (b), after sub-paragraph (viii) (inserted by section 45 of
this Act) insert—

“(ix) section 55(3) of the Pension Schemes Act 2015;

(x) 30regulations made under section 56(4) or 57(4) of
the Pension Schemes Act 2015.”

(3) In section 318 of the Pensions Act 2004 (interpretation), in subsection (3)—

(a) in paragraph (a), after sub-paragraph (x) (inserted by Schedule 2 to this
Act) insert—

“(xi) 35section 55 of the Pension Schemes Act 2015;

(xii) regulations made under section 56 or 57 of the
Pension Schemes Act 2015;”;

(b) in paragraph (b), after sub-paragraph (viii) (inserted by Schedule 2 to
this Act) insert—

“(ix) 40section 55(3) of the Pension Schemes Act 2015;

(x) regulations made under section 56(4) or 57(4) of
the Pension Schemes Act 2015.”

Northern Ireland

61 Sums or assets that may be designated as available for drawdown: Northern
Ireland

(1) In the case of a member of an occupational pension scheme the only sums or
5assets that may be designated as available for the payment of drawdown
pension for the member under the scheme are sums or assets held for the
purposes of providing money purchase benefits to or in respect of the member.

(2) In the case of a survivor of a member of an occupational pension scheme the
only sums or assets that may be designated as available for the payment of
10dependants’ drawdown pension, nominees’ drawdown pension or
successors’ drawdown pension for the survivor under the scheme are sums or
assets held for the purposes of providing money purchase benefits to the
survivor.

(3) This section overrides any provision of an occupational pension scheme to the
15extent that there is a conflict.

(4) This section does not apply in relation to sums or assets designated before 6
April 2015.

62 Provision about conversion of certain benefits for drawdown: Northern
Ireland

(1) 20The Department for Social Development in Northern Ireland may by
regulations make provision about the conversion of benefits under an
occupational pension scheme in circumstances where—

(a) a member of the scheme, or a survivor of a member of the scheme, has
subsisting rights in respect of any flexible benefits other than money
25purchase benefits under the scheme, and

(b) the member or survivor exercises an option to convert any of the
benefits into money purchase benefits for the purposes of enabling
sums or assets to be designated as available for the payment of
drawdown pension, dependants’ drawdown pension, nominees’
30drawdown pension or successors’ drawdown pension.

(2) Regulations under subsection (1) may, in particular, make provision about
how the rate or amount of any benefits not converted are to be calculated in
future.

(3) In relation to a conversion that takes place before the member or survivor
35reaches normal pension age, regulations under subsection (1) may in particular
make provision about—

(a) the manner in which benefits are to be calculated for the purpose of
converting them into money purchase benefits;

(b) the use of any power to reduce benefits.

(4) 40Regulations made under this section may include provision for them to
override the provisions of a pension scheme to the extent that there is a conflict.