Pensions Bill

House of Commons

Session 2003 - 04
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
77

Assumption of responsibility for a scheme
122
Transfer notice
(1)
This section applies where the Board is required to assume responsibility for a
scheme under section 99, 100 or 121.
(2)
The Board must give the trustees or managers a notice (a “transfer notice”).
5
(3)
In a case to which section 99 or 100 applies, a transfer notice may not be given
until the valuation obtained under section 112 is binding.
(4)
The Board must give a copy of any notice given under subsection (2) to—
(a)
the Regulator, and
(b)
any insolvency practitioner in relation to the employer or, if there is no
10
such insolvency practitioner, the employer.
(5)
This section is subject to section 134(1) and (2) (no transfer notice within first 12
months of assessment period or when fraud compensation application is
pending).
123
Effect of Board assuming responsibility for a scheme
15
(1)
Where a transfer notice is given to the trustees or managers of an eligible
scheme, the Board assumes responsibility for the scheme in accordance with
this Chapter.
(2)
The effect of the Board assuming responsibility for a scheme is that—
(a)
the property, rights and liabilities of the scheme are transferred to the
20
Board, without further assurance, with effect from the time the trustees
or managers receive the transfer notice,
(b)
the trustees or managers of the scheme are discharged from their
pension obligations from that time, and
(c)
from that time the Board is responsible for securing that compensation
25
is paid in accordance with the pension compensation provisions,

and, accordingly, the scheme is to be treated as having been wound up
immediately after that time.
(3)
In subsection (2)(a) the reference to “liabilities of the scheme” does not include
any liability to, or in respect of, any member of the scheme, other than liabilities
30
in respect of money purchase benefits.
(4)
In subsection (2)(b) “pension obligations” in relation to the trustees or
managers of the scheme means—
(a)
their obligations to provide pensions or other benefits to or in respect
of persons (including any obligation to provide guaranteed minimum
35
pensions within the meaning of the Pension Schemes Act 1993 (c. 48)),
and
(b)
their obligations to administer the scheme in accordance with the
scheme rules and this or any other enactment.
(5)
Schedule 6 makes provision in respect of the transfer of the property, rights
40
and liabilities of a scheme under subsection (2)(a).
(6)
Regulations may make further provision regarding such transfers.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
78

124
The pension compensation provisions
(1)
Schedule 7 makes provision for pension compensation to be paid in relation to
a scheme for which the Board assumes responsibility under this Chapter,
including provision for—
(a)
periodic compensation to be paid to or in respect of members,
5
(b)
lump sum compensation to be paid to members,
(c)
a cap to be imposed on the periodic compensation and lump sum
compensation payable, and
(d)
annual increases to be made to periodic compensation.
(2)
In this Part references to the pension compensation provisions are to the
10
provisions of this section and section 123(2)(c), Schedule 7 and any regulations
made under section 130.

(Those references do not include section 132 (discharge of liabilities in respect
of money purchase benefits).)
125
Adjustments to be made where Board assumes responsibility for a scheme
15
(1)
This section applies where the Board assumes responsibility for an eligible
scheme under this Chapter.
(2)
Any benefits (other than money purchase benefits) which—
(a)
were payable under the scheme to any member, or to any person in
respect of any member, during the assessment period, and
20
(b)
have been paid before the transfer notice is given,

are to be regarded as going towards discharging any liability of the Board to
pay compensation to the member or, as the case may be, person in accordance
with the pension compensation provisions.
(3)
The Board must—
25
(a)
if any amount paid, during the assessment period, by the trustees or
managers of the scheme to a member, or to a person in respect of a
member, exceeded the entitlement of that member or person under the
pension compensation provisions, take such steps as it considers
appropriate (including adjusting future compensation payments made
30
in accordance with those provisions) to recover an amount equal to the
aggregate of—
(i)
the amount of the excess, and
(ii)
interest on that amount, at the prescribed rate, for the period
which begins when the excess was paid by the trustees or
35
managers and ends with the recovery of the excess, and
(b)
if any amount so paid was less than that entitlement (or no amount was
paid in respect of that entitlement), pay an amount to the member or
person concerned equal to the aggregate of—
(i)
the amount of the shortfall, and
40
(ii)
interest on that amount, at the prescribed rate, for the period
which begins when the shortfall ought to have been paid by the
trustees or managers and ends with the payment of the shortfall
by the Board.
(4)
In subsection (3) references to an amount paid do not include an amount paid
45
in respect of any money purchase benefit.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
79

(5)
Nothing in subsection (3) requires the Board to recover from any person any
amount which it considers to be trivial.
126
Postponement of compensation entitlement for the assessment period
(1)
Regulations may provide that, where the Board assumes responsibility for an
eligible scheme, the entitlement of any member of the scheme to compensation
5
under this Chapter is, in such circumstances as may be prescribed, postponed
for the whole or any part of the assessment period for which he continued in
employment after attaining normal pension age.
(2)
Regulations under subsection (1) may provide that the postponement is on
such terms and conditions (including those relating to increments) as may be
10
prescribed.
127
Guaranteed minimum pensions
(1)
The Board must notify the Commissioners for Inland Revenue where, by
reason of it assuming responsibility for an eligible scheme under this Chapter,
the trustees or managers of the scheme are discharged from their liability to
15
provide a guaranteed minimum pension (within the meaning of the Pension
Schemes Act 1993 (c. 48)) to or in respect of a member of the scheme.
(2)
Notification under subsection (1) must be given as soon as reasonably
practicable.
128
Duty to pay scheme benefits unpaid at assessment date
20
(1)
Where the Board assumes responsibility for a scheme under this Chapter it
must pay any amount by way of benefits under the scheme to which a person
had become entitled under the scheme rules before the assessment date but
which remained unpaid at the time the transfer notice was received by the
trustees or managers of the scheme.
25
(2)
If, immediately before the assessment date, the person is entitled to the amount
but has postponed payment of it, subsection (1) does not apply.
(3)
In this section “assessment date” is to be construed in accordance with
Schedule 7.
129
Modification of Chapter where liabilities discharged during assessment
30
period
Regulations may modify any of the provisions of this Chapter as it applies to
cases where any liability to provide pensions or other benefits to or in respect
of any member or members under a scheme is discharged during an
assessment period in relation to the scheme by virtue of—
35
(a)
regulations under section 105(5), or
(b)
the Board validating any action mentioned in section 107(5).
130
Administration of compensation
(1)
Regulations may make further provision regarding the operation and
administration of this Chapter.
40
(2)
Regulations under subsection (1) may, in particular, make provision—

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
80

(a)
prescribing the manner in which and time when compensation is to be
paid (including provision requiring periodic compensation to be paid
by instalments);
(b)
for calculating the amounts of compensation payable under Schedule 7
according to a prescribed scale or otherwise adjusting them to avoid
5
fractional amounts or facilitate computation;
(c)
prescribing the circumstances and manner in which the Board may
discharge its liability to provide periodic compensation by the payment
of a lump sum;
(d)
prescribing the circumstances and manner in which compensation to
10
which a person (“the beneficiary”) is entitled may be made to another
person on behalf of the beneficiary for any purpose (including the
discharge in whole or in part of an obligation of the beneficiary or any
other person);
(e)
for the payment or distribution of compensation to or among persons
15
claiming to be entitled on the death of any person and for dispensing
with strict proof of their title;
(f)
for the recovery of amounts of compensation paid by the Board in
excess of entitlement (together with interest on such amounts for the
period from payment until recovery);
20
(g)
specifying the circumstances in which payment of compensation can be
suspended.
(3)
In this section “compensation” means compensation payable under Schedule 7.
Discharge of Board’s liabilities
131
Discharge of liabilities in respect of compensation
25
(1)
The section applies where the Board assumes responsibility for an eligible
scheme under this Chapter.
(2)
The Board may provide for the discharge of any liability imposed by this
Chapter to provide compensation—
(a)
by the taking out of a policy of insurance or a number of such policies;
30
(b)
by the entry into an annuity contract or a number of such contracts;
(c)
by the transfer of the benefit of such a policy or policies or such a
contract or contracts.
132
Discharge of liabilities in respect of money purchase benefits
(1)
This subsection applies where—
35
(a)
the Board assumes responsibility for an eligible scheme under this
Chapter, and
(b)
one or more members have accrued rights under the scheme to money
purchase benefits.
(2)
Regulations must make provision in respect of cases to which subsection (1)
40
applies requiring the Board to secure that liabilities in respect of such benefits
transferred to the Board under section 123 are discharged by it in the
prescribed manner.
(3)
The provision made under subsection (2) must include provision prescribing
the manner in which protected rights are to be given effect to.
45

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
81

(4)
In this section “protected rights” has the meaning given in section 10 of the
Pension Schemes Act 1993 (c. 48) (protected rights and money purchase
benefits).
Equal treatment
133
Equal treatment
5
(1)
This section applies where—
(a)
a woman has been employed on like work with a man in the same
employment,
(b)
a woman has been employed on work rated as equivalent with that of
a man in the same employment, or
10
(c)
a woman has been employed on work which, not being work in relation
to which paragraph (a) or (b) applies, was, in terms of the demands
made on her (for instance under such headings as effort, skill and
decision), of equal value to that of a man in the same employment,

and service in that employment was pensionable service under an
15
occupational pension scheme.
(2)
If, apart from this subsection, any of the payment functions as it applies
(directly or indirectly) in respect of the scheme—
(a)
is or becomes less favourable to the woman than it is to the man, or
(b)
is or becomes less favourable to the man than it is to the woman,
20

that function has effect with such modifications as are necessary to ensure that
the provision is not less favourable.
(3)
Subsection (2) does not operate in relation to any difference as between a
woman and a man in the operation of any of the payment functions if the Board
proves that the difference is genuinely due to a material factor which—
25
(a)
is not the difference of sex, but
(b)
is a material difference between the woman’s case and the man’s case.
(4)
Subsection (2) does not apply in such circumstances as may be prescribed.
(5)
This section has effect in relation to the exercise of any payment function in so
far as it relates to pensionable service under the scheme on or after 17th May
30
1990.
(6)
In this section—

“payment function” means any function conferred on the Board by or by
virtue of this Chapter which relates to a person’s entitlement to or the
payment of any amount under or by virtue of—
35
(a)
section 123(2)(c), 124 or 130 or Schedule 7 (pension
compensation provisions),
(b)
section 128 (duty to pay scheme benefits unpaid at assessment
date),
(c)
section 132 (discharge of liabilities in respect of money purchase
40
benefits);

“pensionable service” has the meaning given in paragraph 33 of Schedule
7.