Pensions Bill

House of Commons

Session 2003 - 04
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Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
65

105
Admission of new members, payment of contributions etc
(1)
This section applies where there is an assessment period in relation to an
eligible scheme.
(2)
No new members may be admitted to the scheme during the assessment
period.
5
(3)
No further contributions (other than those due to be paid before the beginning
of the assessment period) may be paid towards the scheme during the
assessment period.
(4)
Any obligation to pay contributions towards the scheme during the assessment
period (including any obligation under section 49(8) of the Pensions Act 1995
10
(c. 26) to pay amounts deducted corresponding to such contributions) is to be
read subject to subsection (3) and section 118 (obligation to pay contributions
when assessment period ends).
(5)
During the assessment period, except in prescribed circumstances and subject
to prescribed conditions, no transfers of, or transfer payments in respect of, any
15
member’s rights under the scheme are to be made from the scheme.
(6)
No benefits may accrue under the scheme to, or in respect of, members of the
scheme during the assessment period.
(7)
Subsection (6) does not prevent any increase, in a benefit, which would
otherwise accrue in accordance with the scheme or any enactment.
20

This subsection is subject to section 110 (which limits the scheme benefits
payable during an assessment period).
(8)
Subsection (6) does not prevent the accrual of money purchase benefits to the
extent that they are derived from income or capital gains arising from the
investment of payments which—
25
(a)
are made by, or in respect of, a member of the scheme, and
(b)
relate to periods of pensionable service (within the meaning of section
124(1) and (3) of the Pensions Act 1995) prior to the assessment period.
(9)
Any action taken in contravention of this section is void.
(10)
Disregarding subsection (9), section 10 of the Pensions Act 1995 (civil penalties)
30
applies to any trustee or manager of a scheme who fails to take all reasonable
steps to secure compliance with this section.
106
Directions
(1)
This section applies where there is an assessment period in relation to an
eligible scheme.
35
(2)
With a view to ensuring that the scheme’s protected liabilities do not exceed its
assets or, if they do exceed its assets, that the excess is kept to a minimum, the
Board may give a relevant person in relation to the scheme directions
regarding the exercise during that period of their powers in respect of—
(a)
the investment of the scheme’s assets,
40
(b)
the incurring of expenditure,
(c)
the instigation or conduct of legal proceedings, and
(d)
such other matters as may be prescribed.
(3)
In subsection (2)—

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
66

(a)
“relevant person” in relation to a scheme means—
(i)
the trustees or managers of the scheme,
(ii)
the employer in relation to the scheme, or
(iii)
such other persons as may be prescribed, and
(b)
the reference to the assets of the scheme is a reference to those assets
5
excluding any assets representing the value of any rights in respect of
money purchase benefits under the scheme.
(4)
The Board may revoke or vary any direction under this section.
(5)
Where a direction under this section given to the trustees or managers of a
scheme is not complied with section 10 of the Pensions Act 1995 (c. 26) (civil
10
penalties) applies to any such trustee or manager who has failed to take all
reasonable steps to secure compliance with the direction.
(6)
That section also applies to any other person who, without reasonable excuse,
fails to comply with a direction given to him under this section.
107
Restrictions on winding up of schemes
15
(1)
This section applies where there is an assessment period in relation to an
eligible scheme.
(2)
Subject to subsection (3), the winding up of the scheme must not begin during
the assessment period.
(3)
Subsection (2) does not apply to the winding up of the scheme in accordance
20
with an order by the Regulator under section 11(3A) of the Pensions Act 1995
(Regulator’s powers to wind up occupational pension schemes to protect
Pension Protection Fund) directing the scheme to be wound up (and section
177 makes provision for the backdating of the winding up).
(4)
Where the winding up of the scheme begins by virtue of subsection (3), or
25
otherwise began before the assessment period, no steps may be taken during
that period to discharge any liability to or in respect of a member of the scheme
in respect of pensions or other benefits.
(5)
Any action taken in contravention of this section is void, except to the extent
that the Board validates the action (see section 108).
30
(6)
Disregarding subsection (5), where there is a contravention of this section,
section 10 of the Pensions Act 1995 (civil penalties) applies to any trustee or
manager who has failed to take all reasonable steps to secure compliance with
this section.
(7)
The Regulator may not make a freezing order (see section 20) in relation to the
35
scheme during the assessment period.
(8)
Nothing in this section operates to prevent the winding up of a scheme, and the
discharge of any liability to or in respect of a member of the scheme, in
accordance with section 119 (requirement to wind up schemes with sufficient
assets to meet protected liabilities).
40
108
Power to validate contraventions of section 107
(1)
The Board may validate an action for the purposes of section 107(5) only if it is
satisfied that to do so is consistent with the objective of ensuring that the

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
67

scheme’s protected liabilities do not exceed its assets or, if those liabilities do
exceed its assets, that the excess is kept to a minimum.
(2)
Where the Board determines to validate, or not to validate, any action of the
trustees or managers for those purposes, it must give a notice to that effect to—
(a)
the Regulator,
5
(b)
the trustees or managers of the scheme,
(c)
any insolvency practitioner in relation to the employer or, if there is no
such insolvency practitioner, the employer, and
(d)
any other person who appears to the Board to be directly affected by the
determination.
10
(3)
A notice under subsection (2) must contain a statement of the Board’s reasons
for the determination.
(4)
A determination to validate an action does not take effect—
(a)
until the period within which the determination may be reviewed by
virtue of Chapter 6 has expired, and
15
(b)
if the determination is so reviewed, until—
(i)
the review and any reconsideration,
(ii)
any reference to the PPF Ombudsman in respect of the
determination, and
(iii)
any appeal against his determination or directions,
20

has been finally disposed of.
109
Board to act as creditor of the employer
(1)
Subsection (2) applies where there is an assessment period in relation to an
eligible scheme.
(2)
During the assessment period, the rights and powers of the trustees or
25
managers of the scheme in relation to any debt (including any contingent debt)
owed to them by the employer, whether by virtue of section 75 of the Pensions
Act 1995 (c. 26) (deficiencies in the scheme assets) or otherwise, are exercisable
by the Board to the exclusion of the trustees or managers.
(3)
Where, by virtue of subsection (2), any amount is paid to the Board in respect
30
of such a debt, the Board must pay that amount to the trustees or managers of
the scheme.
(4)
Where an insolvency arrangement is made in respect of the employer, the
Board is not bound by the terms of that arrangement if, and to the extent that,
the arrangement relates to a debt which, at the time the arrangement was
35
made, was a contingent debt of the employer in respect of the scheme under
section 75 of the Pensions Act 1995.
(5)
Subsection (4) does not apply where, before the arrangement was made, the
Board consented to be so bound.
(6)
In subsection (4) “insolvency arrangement” means—
40
(a)
a voluntary arrangement under Part 1 or 8 of the Insolvency Act 1986
(c. 45);
(b)
an arrangement which has effect under section 425 of the Companies
Act 1985 (c. 6);

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
68

(c)
a deed of arrangement registered in accordance with the Deeds of
Arrangement Act 1914 (c. 47);
(d)
a trust deed executed for the employer’s creditors or a composition
contract entered into by the employer.
110
Payment of scheme benefits
5
(1)
Subsection (2) applies where there is an assessment period in relation to an
eligible scheme.
(2)
The benefits payable to or in respect of any member under the scheme during
the assessment period must be reduced to the extent necessary to ensure that
they do not exceed the compensation which would be payable to or in respect
10
of the members for that period in accordance with this Chapter if—
(a)
the Board assumed responsibility for the scheme under this Chapter,
and
(b)
the assessment date referred to in Schedule 7 were the date on which
the assessment period began.
15
(3)
Section 10 of the Pensions Act 1995 (c. 26) (civil penalties) applies to a trustee
or manager of a scheme who fails to take all reasonable steps to secure
compliance with subsection (2).
(4)
Regulations may provide that, where there is an assessment period in relation
to an eligible scheme, the commencement of a member’s pension or other
20
benefits is, in such circumstances and on such terms and conditions as may be
prescribed, to be postponed for the whole or any part of the assessment period
for which he continues in employment after attaining normal pension age.
(5)
Nothing in subsection (2) applies to money purchase benefits.
111
Loans to pay scheme benefits
25
(1)
This section applies where section 110(2) applies in relation to an eligible
scheme.
(2)
Where the Board is satisfied that the trustees or managers of the scheme are not
able to pay benefits under the scheme (reduced in accordance with section
110(2)) as they fall due, it may, on an application by the trustees or managers,
30
lend to them such amounts as the Board considers appropriate for the purpose
of enabling them to pay those benefits.
(3)
Where an amount lent to the trustees or managers of a scheme under
subsection (2) is outstanding at—
(a)
the time the Board ceases to be involved with the scheme, or
35
(b)
if earlier—
(i)
the time during the assessment period when an order is made
under section 11(3A) of the Pensions Act 1995 directing the
winding up of the scheme, or
(ii)
where no such order is made during that period, the time when
40
section 119 (requirement to wind up schemes with sufficient
assets to meet protected liabilities) first applies in relation to the
scheme,

that amount, together with the appropriate interest on it, falls to be repaid by
the trustees or managers of the scheme to the Board at that time.
45

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
69

(4)
No loan may be made under subsection (2) after the time mentioned in
subsection (3)(b).
(5)
In subsection (2) the reference to “benefits” does not include money purchase
benefits.
(6)
In subsection (3) “the appropriate interest” on an amount lent under subsection
5
(2) means interest at the prescribed rate from the time the amount was so lent
until repayment.
(7)
Subject to this section, the Board may make a loan under subsection (2) on such
terms as it thinks fit.
Valuation of assets and liabilities
10
112
Board’s obligation to obtain valuation of assets and protected liabilities
(1)
This section applies in a case within subsection (1) of section 99 or 100.
(2)
For the purposes of determining whether the condition in subsection (2)(a) of
the section in question is satisfied, the Board must, as soon as reasonably
practicable, obtain an actuarial valuation of the scheme as at the relevant time.
15
(3)
For this purpose—

“actuarial valuation”, in relation to the scheme, means a written valuation,
prepared and signed by a person with prescribed qualifications, of the
assets and protected liabilities of the scheme; and

“relevant time”—
20
(a)
in a case within subsection (1) of section 99 has the meaning
given in subsection (3)(c) of that section, and
(b)
in a case within subsection (1) of section 100 has the meaning
given in subsection (3)(b) of that section.
(4)
For the purposes of this Chapter, regulations may prescribe how—
25
(a)
the assets and the protected liabilities of eligible schemes, and
(b)
their amount or value,

are to be determined, calculated and verified.
(5)
Subject to any provision made under subsection (4), those matters are to be
determined, calculated and verified in accordance with guidance issued by the
30
Board.
(6)
In calculating the amount of any liabilities for those purposes, a provision of
the scheme which limits the amount of its liabilities by reference to the value of
its assets is to be disregarded.
(7)
The duty imposed by subsection (2) ceases to apply if and when the Board
35
ceases to be involved with the scheme.
(8)
In this section references to “assets” do not include assets representing the
value of any rights in respect of money purchase benefits under the scheme.
113
Approval of valuation
(1)
This section applies where the Board obtains a valuation in respect of a scheme
40
under section 112.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
70

(2)
Where the Board is satisfied that the valuation has been prepared in
accordance with that section, it must—
(a)
approve the valuation, and
(b)
give a copy of the valuation to—
(i)
the Regulator,
5
(ii)
the trustees or managers of the scheme, and
(iii)
any insolvency practitioner in relation to the employer or, if
there is no such insolvency practitioner, the employer.
(3)
Where the Board is not so satisfied, it must obtain another valuation under that
section.
10
114
Binding valuations
(1)
For the purposes of this Chapter a valuation obtained under section 112 is not
binding until—
(a)
it is approved under section 113,
(b)
the period within which the approval may be reviewed by virtue of
15
Chapter 6 has expired, and
(c)
if the approval is so reviewed—
(i)
the review and any reconsideration,
(ii)
any reference to the PPF Ombudsman in respect of the
determination, and
20
(iii)
any appeal against his determination or directions,

has been finally disposed of.
(2)
For the purposes of determining whether or not the condition in section
99(2)(a) or, as the case may be, section 100(2)(a) (condition that scheme assets
are less than protected liabilities) is satisfied in relation to a scheme, a binding
25
valuation is conclusive.

This subsection is subject to section 134(3) and (4) (treatment of fraud
compensation payments).
(3)
Where a valuation becomes binding under this section the Board must as soon
as practicable give a notice to that effect together with a copy of the binding
30
valuation to—
(a)
the trustees or managers of the scheme,
(b)
any insolvency practitioner in relation to the employer or, if there is no
such insolvency practitioner, the employer.
(4)
A notice under subsection (3) must be in the prescribed form and contain the
35
prescribed information.
Refusal to assume responsibility
115
Schemes which become eligible schemes
(1)
Regulations may provide that where the Board is satisfied that an eligible
scheme was not such a scheme throughout such period as may be prescribed,
40
the Board must refuse to assume responsibility for the scheme under this
Chapter.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
71

(2)
Where, by virtue of subsection (1), the Board is required to refuse to assume
responsibility for a scheme, it—
(a)
must issue a withdrawal notice, and
(b)
give a copy of that notice to—
(i)
the Regulator,
5
(ii)
the trustees or managers of the scheme, and
(iii)
any insolvency practitioner in relation to the employer or, if
there is no such insolvency practitioner, the employer.
(3)
In this section “withdrawal notice” means a notice in the prescribed form
which—
10
(a)
states the time from which the Board ceases to be involved with the
scheme (see section 117), and
(b)
contains such other information as may be prescribed.
116
New schemes created to replace existing schemes
(1)
The Board must refuse to assume responsibility for a scheme (“the new
15
scheme”) under this Chapter where it is satisfied that—
(a)
the new scheme was established during such period as may be
prescribed,
(b)
the employer in relation to the new scheme was, at the date of
establishment of that scheme, also the employer in relation to a scheme
20
established before the new scheme (the “old scheme”),
(c)
a transfer or transfers of, or transfer payment or transfer payments in
respect of, any rights of members under the old scheme has or have
been made to the new scheme, and
(d)
the main purpose or one of the main purposes of establishing the new
25
scheme and making the transfer or transfers, or transfer payment or
transfer payments, was to enable those members to receive
compensation under the pension compensation provisions in respect of
their rights under the new scheme in circumstances where, in the
absence of the transfer or transfers, regulations under section 115
30
would have operated to prevent such payments in respect of their
rights under the old scheme.
(2)
Where, under subsection (1), the Board is required to refuse to assume
responsibility for a scheme, it—
(a)
must issue a withdrawal notice, and
35
(b)
give a copy of that notice to—
(i)
the Regulator,
(ii)
the trustees or managers of the scheme, and
(iii)
any insolvency practitioner in relation to the employer or, if
there is no such insolvency practitioner, the employer.
40
(3)
In this section “withdrawal notice” means a notice in the prescribed form
which—
(a)
states the time from which the Board ceases to be involved with the
scheme (see section 117), and
(b)
contains such other information as may be prescribed.
45