Pensions Bill

House of Commons

Session 2003 - 04
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Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 3 — Scheme funding
113

(2)
The winding up of the scheme is to be taken as beginning immediately before
that qualifying insolvency event if—
(a)
the winding up is in pursuance of an order of the Regulator under
section 11 of the Pensions Act 1995 (c. 26) directing the winding up of
the scheme, or
5
(b)
in any other case, the trustees or managers of the scheme so determine.
(3)
For the purposes of this section “qualifying insolvency event” has the same
meaning as in section 99.
(4)
This section is to be read subject to section 107 (which restricts the winding up
of an eligible scheme during an assessment period).
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Part 3
Scheme funding
Introductory
178
Pension schemes to which this Part applies
(1)
The provisions of this Part apply to every occupational pension scheme other
15
than—
(a)
a money purchase scheme, or
(b)
a prescribed scheme or a scheme of a prescribed description.
(2)
Regulations under subsection (1)(b) may provide for exemptions from all or
any of the provisions of this Part.
20
Scheme funding
179
The statutory funding objective
(1)
Every scheme is subject to a requirement (“the statutory funding objective”)
that it must have sufficient and appropriate assets to cover its technical
provisions.
25
(2)
A scheme’s “technical provisions” means the amount required, on an actuarial
calculation, to make provision for the scheme’s liabilities.
(3)
For the purposes of this Part—
(a)
the assets to be taken into account and their value shall be determined,
calculated and verified in a prescribed manner, and
30
(b)
the liabilities to be taken into account shall be determined in a
prescribed manner and the scheme’s technical provisions shall be
calculated in accordance with any prescribed methods and
assumptions.
(4)
Regulations may—
35
(a)
provide for alternative prescribed methods and assumptions,
(b)
provide that it is for the trustees or managers to determine which
methods and assumptions are to be used in calculating a scheme’s
technical provisions, and

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(c)
require the trustees or managers, in making their determination, to take
into account prescribed matters and follow prescribed principles.
(5)
Any provision of the scheme that limits the amount of its liabilities by reference
to the value of its assets shall be disregarded.
180
Statement of funding principles
5
(1)
The trustees or managers must prepare, and from time to time review and if
necessary revise, a written statement of—
(a)
their policy for securing that the statutory funding objective is met, and
(b)
such other matters as may be prescribed.

This is referred to in this Part as a “statement of funding principles”.
10
(2)
The statement must, in particular, record any decisions by the trustees or
managers as to—
(a)
the methods and assumptions to be used in calculating the scheme’s
technical provisions, and
(b)
the period within which, and manner in which, any failure to meet the
15
statutory funding objective is to be remedied.
(3)
Provision may be made by regulations—
(a)
as to the period within which a statement of funding principles must be
prepared, and
(b)
requiring it to be reviewed at such intervals, and on such occasions, as
20
may be prescribed.
(4)
Where any requirement of this section is not complied with section 10 of the
Pensions Act 1995 (c. 26) (civil penalties) applies to a trustee or manager who
has failed to take all reasonable steps to secure compliance.
181
Actuarial valuations and reports
25
(1)
The trustees or managers must obtain actuarial valuations—
(a)
at intervals of not more than one year or, if they obtain actuarial reports
for the intervening years, at intervals of not more than three years, and
(b)
in such circumstances and on such other occasions as may be
prescribed.
30
(2)
In this Part—
(a)
an “actuarial valuation” means a written report, prepared and signed
by the actuary, valuing the scheme’s assets and calculating its technical
provisions,
(b)
the effective date of an actuarial valuation is the date by reference to
35
which the assets are valued and the technical provisions calculated,
(c)
an “actuarial report” means a written report, prepared and signed by
the actuary, on developments affecting the scheme’s technical
provisions since the last actuarial valuation was prepared, and
(d)
the effective date of an actuarial report is the date by reference to which
40
the information in the report is stated.
(3)
The intervals referred to in subsection (1)(a) are between effective dates of the
valuations, and the effective date of the first actuarial valuation must be not
more than one year after the establishment of the scheme.

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(4)
The trustees or managers must ensure that a valuation or report obtained by
them is received by them within the prescribed period after its effective date.
(5)
Nothing in this section affects any power or duty of the trustees or managers
to obtain actuarial valuations or reports at more frequent intervals or in other
circumstances or on other occasions.
5
(6)
An actuarial valuation or report (whether obtained under this section or in
pursuance of any other power or duty) must be prepared in such a manner,
give such information, contain such statements and satisfy such other
requirements as may be prescribed.
(7)
The trustees or managers must secure that any actuarial valuation or report
10
obtained by them (whether obtained under this section or in pursuance of any
other power or duty) is made available to the employer within seven days of
their receiving it.
(8)
Where subsection (1), (4) or (7) is not complied with section 10 of the Pensions
Act 1995 (c. 26) (civil penalties) applies to a trustee or manager who has failed
15
to take all reasonable steps to secure compliance.
182
Certification of technical provisions
(1)
When an actuarial valuation is carried out, the calculation of the technical
provisions must be certified by the actuary.
(2)
The certificate must state that in the opinion of the actuary the calculation—
20
(a)
is made in accordance with prescribed methods and assumptions that
have been determined in accordance with prescribed principles,
(b)
is consistent with any prescribed guidance, and
(c)
complies with any other prescribed requirements.

“Prescribed guidance” means guidance that is prepared and from time to time
25
revised by a prescribed body and, if the regulations so provide, is approved by
the Secretary of State.
(3)
The certificate must contain such other statements and comply with such other
requirements as may be prescribed.
(4)
If the actuary cannot give the certificate required by subsection (2) he must
30
report the matter in writing to the Regulator as soon as reasonably practicable.

Section 10 of the Pensions Act 1995 (civil penalties) applies to the actuary if he
fails without reasonable excuse to comply with this subsection.
183
Recovery plan
(1)
If having obtained an actuarial valuation it appears to the trustees or managers
35
of a scheme that the statutory funding objective was not met on the effective
date of the valuation, they must prepare a recovery plan within the prescribed
time.
(2)
A recovery plan must set out—
(a)
the steps to be taken to meet the statutory funding objective, and
40
(b)
the period within which that is to be achieved.
(3)
A recovery plan must comply with any prescribed requirements and must be
appropriate having regard to the nature and circumstances of the scheme.

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Part 3 — Scheme funding
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(4)
In preparing a recovery plan the trustees or managers must take account of
prescribed matters.
(5)
Provision may be made by regulations as to the circumstances in which a
recovery plan may or must—
(a)
be reviewed and if necessary revised, or
5
(b)
be replaced by a recovery plan prepared as a result of a subsequent
actuarial valuation.
(6)
The trustees or managers must send a copy of any recovery plan to the
Regulator as soon as reasonably practicable.

If the recovery plan replaces an earlier recovery plan, it must be accompanied
10
by the prescribed information.
(7)
Where any requirement of this section is not complied with section 10 of the
Pensions Act 1995 (c. 26) (civil penalties) applies to a trustee or manager who
has failed to take all reasonable steps to secure compliance.
184
Schedule of contributions
15
(1)
The trustees or managers must prepare, and from time to time review and if
necessary revise, a schedule of contributions.
(2)
A “schedule of contributions” means a statement showing—
(a)
the rates of contributions payable towards the scheme by or on behalf
of the employer and the active members of the scheme, and
20
(b)
the dates on or before which such contributions are to be paid.
(3)
Provision may be made by regulations—
(a)
as to the period within which, after the establishment of a scheme, a
schedule of contributions must be prepared,
(b)
requiring the schedule of contributions to be reviewed at such
25
intervals, and on such occasions, as may be prescribed, and
(c)
as to the period for which a schedule of contributions is to be in force.
(4)
The schedule of contributions must satisfy prescribed requirements.
(5)
The schedule of contributions, as prepared or from time to time revised, must
be certified by the actuary.
30
(6)
The certificate must state that, in the opinion of the actuary—
(a)
the schedule of contributions is consistent with the statement of
funding principles, and
(b)
the rates shown in the schedule are such that—
(i)
where the statutory funding objective was not met on the
35
prescribed date, the statutory funding objective can be expected
to be met by the end of the period specified in the recovery plan,
or
(ii)
where the statutory funding objective was met on the
prescribed date, the statutory funding objective can be expected
40
to continue to be met for the period for which the schedule is to
be in force.
(7)
Where the statutory funding objective was not met on the prescribed date, the
trustees or managers must send a copy of the schedule of contributions to the
Regulator as soon as reasonably practicable.
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Pensions Bill
Part 3 — Scheme funding
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(8)
Where any requirement of the preceding provisions of this section is not
complied with section 10 of the Pensions Act 1995 (c. 26) (civil penalties)
applies to a trustee or manager who has failed to take all reasonable steps to
secure compliance.
(9)
If the actuary is unable to give the certificate required by subsection (6), he
5
must report the matter in writing to the Regulator as soon as reasonably
practicable.

Section 10 of the Pensions Act 1995 (civil penalties) applies to the actuary if he
fails without reasonable excuse to comply with this subsection.
(10)
The provisions of subsections (1) and (3) to (9) above do not apply in relation
10
to a schedule of contributions imposed by the Regulator under section 188 or,
as the case may be, where such a schedule of contributions is in force.
185
Failure to make payments
(1)
This section applies where an amount payable in accordance with the schedule
of contributions by or on behalf of the employer or an active member of a
15
scheme is not paid on or before the due date.
(2)
If the trustees or managers have reasonable cause to believe that the failure is
likely to be of material significance in the exercise by the Regulator of any of its
functions, they must, except in prescribed circumstances, give notice of the
failure to the Regulator in writing as soon as reasonably practicable.
20
(3)
If the failure comes to the notice of the actuary or auditor and they have
reasonable cause to believe that it is likely to be of material significance in the
exercise by the Regulator of any of its functions, he must, except in prescribed
circumstances, give notice of the failure to the Regulator in writing as soon as
reasonably practicable.
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(4)
The amount unpaid (whether payable by the employer or not), if not a debt due
from the employer to the trustees or managers apart from this subsection, shall
be treated as such a debt.
(5)
Section 10 of the Pensions Act 1995 (civil penalties) applies—
(a)
where subsection (2) above is not complied with, to a trustee or
30
manager who has failed to take all reasonable steps to secure
compliance with that subsection;
(b)
to the actuary or the auditor if he fails without reasonable excuse to
comply with subsection (3) above;
(c)
to the employer if he fails without reasonable excuse to make a
35
payment required of him—
(i)
in accordance with the schedule of contributions, or
(ii)
by virtue of subsection (4) above.
(6)
This section applies in relation to a schedule of contributions imposed by the
Regulator under section 188 as in relation to one agreed between the trustees
40
or managers and the employer.
186
Matters requiring agreement of the employer
(1)
The trustees or managers must obtain the agreement of the employer to—
(a)
any decision as to the methods and assumptions to be used in
calculating the scheme’s technical provisions (see section 179(4));
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Pensions Bill
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(b)
any matter to be included in the statement of funding principles (see
section 180);
(c)
any recovery plan (see section 183);
(d)
any matter to be included in the schedule of contributions (see section
184).
5
(2)
If it appears to the trustees or managers that it is not otherwise possible to
obtain the employer’s agreement within the prescribed time to any such
matter, they may (if the employer agrees) by resolution modify the scheme as
regards the future accrual of benefits.
(3)
Any such modification must be—
10
(a)
recorded in writing by the trustees or managers, and
(b)
notified to the members within one month of the decision being taken.
(4)
If the trustees or managers are unable to reach agreement with the employer
within the prescribed time on any such matter as is mentioned in subsection
(1), they must report the failure in writing to the Regulator as soon as
15
reasonably practicable.
(5)
Where subsection (1) or (4) is not complied with section 10 of the Pensions Act
1995 (c. 26) (civil penalties) applies to a trustee or manager who has failed to
take all reasonable steps to secure compliance.
187
Matters on which advice of actuary must be obtained
20
(1)
The trustees or managers must obtain the advice of the actuary before doing
any of the following—
(a)
making any decision as to the methods and assumptions to be used in
calculating the scheme’s technical provisions (see section 179(4)),
(b)
preparing or revising the statement of funding principles (see section
25
180),
(c)
preparing a recovery plan (see section 183),
(d)
preparing or revising the schedule of contributions (see section 184).
(2)
Regulations may require the actuary to comply with any prescribed
requirements when advising the trustees or managers of a scheme on any such
30
matter.
(3)
The regulations may require the actuary to have regard to prescribed guidance.
“Prescribed guidance” means guidance that is prepared and from time to time
revised by a prescribed body and, if the regulations so provide, is approved by
the Secretary of State.
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188
Powers of the Regulator
(1)
The powers conferred by this section are exercisable where it appears to the
Regulator with respect to a scheme (as a result of a report made to it or
otherwise)—
(a)
that the trustees or managers have failed—
40
(i)
to prepare a statement of funding principles as required by
section 180(1), or
(ii)
to review and revise such a statement as required by regulations
under section 180(3)(b);

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(b)
that the trustees or managers have failed to obtain an actuarial
valuation as required by section 181(1);
(c)
that the actuary is unable, on an actuarial valuation required by section
181(1), to certify the calculation of the scheme’s technical provisions;
(d)
that the trustees or managers—
5
(i)
have failed to prepare a recovery plan when required to do so
under section 183,
(ii)
have prepared a recovery plan that does not comply with the
the requirements of that section or any prescribed
requirements, or
10
(iii)
have failed to review, revise or replace a recovery plan as
required by subsection (5) of that section;
(e)
that the trustees or managers have failed—
(i)
to prepare a schedule of contributions as required by section
184(1), or
15
(ii)
to review and revise such a schedule as required by regulations
under section 184(3);
(f)
that the actuary is unable to certify a schedule of contributions (see
section 184(6));
(g)
that the employer has failed to make payments in accordance with the
20
schedule of contributions, or that are required of him by virtue of
section 185(4), and the failure is of material significance;
(h)
that the trustees or managers have been unable to reach agreement with
the employer within the prescribed time as to a matter in relation to
which such agreement is required (see section 186(4)).
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(2)
In any of those circumstances the Regulator may by order exercise all or any of
the following powers—
(a)
it may modify the scheme as regards the future accrual of benefits;
(b)
it may give directions as to—
(i)
the manner in which the scheme’s technical provisions are to be
30
calculated, including the methods and assumptions to be used
in calculating the scheme’s technical provisions, or
(ii)
the period within which, and manner in which, any failure to
meet the statutory funding objective is to be remedied;
(c)
it may impose a schedule of contributions.
35
(3)
In exercising any of the powers conferred by this section the Regulator must
comply with any prescribed requirements.
(4)
The powers conferred by this section are in addition to any other powers
exercisable by the Regulator under this Act or the Pensions Act 1995 (c. 26).
Supplementary provisions
40
189
Power to modify provisions of this Part
Regulations may modify the provisions of this Part as they apply in prescribed
circumstances.
190
Construction as one with the Pensions Act 1995
This Part shall be construed as one with Part 1 of the Pensions Act 1995.
45