|Pensions Bill - continued||House of Commons|
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Clause 84 - Board's functions
219. The functions of the Board are to: hold and manage the Pension Protection and Fraud Compensation Funds; to levy contributions to those funds, and to carry out such other functions as set out in this Bill or any Act.
Clause 85 - Supplementary powers
220. The Board may do anything which is calculated to aid the discharge of its objectives and functions, or is incidental or conducive to their discharge.
The Non-Executive Committee
Clause 86 - The Non-Executive Committee
221. This clause establishes the Non-Executive Committee, comprising the chairman and other non-executive members of the Board of the Pension Protection Fund. The Board must establish and maintain the Non-Executive Committee, which is to be chaired by the chairman of the Board. The non-executive functions (outlined below) are to be functions of the Board and must be discharged by the Non-Executive Committee on behalf of the Board.
222. By virtue of subsection (5) of this clause, the non-executive functions comprise of: reviewing and contributing to the strategic direction of the Board; scrutinising the Chief Executive's performance; monitoring the extent to which the Board is complying with its objectives and targets; reviewing the adequacy of the Protection Fund's internal financial controls; determining, subject to the approval of the Secretary of State, the remuneration of any Chief Executive of the Board; and determining, subject to the approval of the Secretary of State, the remuneration of other employees of the Board appointed under paragraph 9(1) of Schedule 5. The Non-Executive Committee will also contribute to the annual report from the Board to the Secretary of State (see clause 93) in reporting on the discharge of the non-executive functions. This clause also provides that the Non-Executive Committee can delegate to any of its subcommittees.
Clause 87 - Investment of Funds
223. The Board is permitted to invest its funds for the purposes of the prudent management of its financial affairs providing that it has at least two fund managers (defined in subsection (3)) to manage the investments held by or on behalf of the Board.
Clause 88 - Investment principles
224. The Board must produce, and review, a statement of investment principles. This must be in the form of a written statement of the investment principles governing decisions made by the Board about investments. The Board must follow prescribed requirements when preparing and reviewing the statements.
Clause 89 - Borrowing
225. This clause enables the Board to borrow money subject to a prescribed limit ("borrowing limit") which will be specified by the Secretary of State by order. The Board is permitted to borrow money from a "deposit-taker" (the meaning of which is set out in subsections (3) and (4)).
Clause 90 - Grants
226. This provision allows the Secretary of State to pay the Board, money voted/provided by Parliament towards its administrative expenses. Such money can be used solely for this purpose.
Clause 91 - Administration levy
227. Eligible schemes defined under clause 98 will be required to pay a levy per member to fund the administration and initial start up costs of the Board. This is known as the "administration levy". This levy will be payable by or on behalf of the trustees or managers of an eligible scheme, or any other person as detailed in regulations. The administration levy is set by the Secretary of State; is payable to the Secretary of State; and is recoverable by the Secretary of State or by the Regulator on his behalf. Subsection (4) states that the Secretary of State must consult the Board before determining the rate of the administration levy. The details of how this levy is to be calculated, collected and recovered will be set out in secondary legislation.
Clause 92 - Fees
228. This clause enables the Board to charge fees in circumstances to be prescribed.
Clause 93 - Annual reports to Secretary of State
229. The Board must produce an annual report (for each financial year) dealing with its activities during this period and including the report prepared by the Non-Executive Committee (see clause 86(6)). This report must be sent by the Board to the Secretary of State as soon as practicable after the end of the reporting period. The Secretary of State will then lay a copy of each report received by him under this section before both Houses of Parliament.
Chapter 2 - Information Relating to Employer's Insolvency etc
Clauses 94, 95 - Duty to notify insolvency events in respect of employers; Insolvency event, insolvency date and insolvency practitioner
230. The insolvency practitioner must give a notice to the Board or the Regulator and the trustees and managers of the scheme within the notification period (beginning with the later of the insolvency date or the date the insolvency practitioner becomes aware of the scheme's insolvency and ends at the end of the assessment period).
231. This clause defines an insolvency event in relation to an individual, a company or partnership for the purposes of this chapter.
Status of scheme
Clause 96 - Insolvency practitioner's duty to issue notices confirming status of scheme
232. This clause requires the insolvency practitioner to notify the Board that a scheme rescue has occurred, or is not possible.
Clause 97 - Board's duty where there is a failure to comply with section 96
233. This clause provides for the Board, in circumstances where it is satisfied that an insolvency practitioner or former insolvency practitioner has failed to issue the notice required, to issue the trustees or managers of the scheme with the notice which ought to have been issued by the insolvency practitioner.
Chapter 3 - Pension Protection
Clause 98 - Eligible schemes
234. This clause defines those occupational pension schemes which are not eligible to be taken over by the Pension Protection Fund. Eligible schemes exclude money purchase schemes and schemes of a prescribed description (which will be, in the main, those schemes currently exempted from the application of the Minimum Funding Requirement in section 56 of the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996 (regulation 28)). This clause also makes reference to clause 231 which gives power to make regulations modifying this Act in its application to hybrid and multi employer schemes. For this purpose, hybrid schemes are those where some of the benefits that may be provided are money purchase benefits attributable to voluntary contributions of the members, or other money purchase benefits. Multi employer schemes are schemes which apply to earners in employment under different employers.
Circumstances in which Board assumes responsibility for eligible schemes
Clause 99 - Duty to assume responsibility for schemes following insolvency event
235. This clause provides for the Board to assume responsibility for the scheme where a qualifying event has occurred, the assets of the scheme immediately before the insolvency date were not sufficient to meet the scheme's protected liabilities, and an insolvency practitioner has confirmed that a scheme rescue is not possible.
Clause 100 - Duty to assume responsibility for schemes following application or notification
236. This clause provides for the Board to assume responsibility for the scheme in cases where the trustees or managers commence winding up and the assets are insufficient to meet the scheme's protected liabilities immediately before the winding up process started.
Clause 101 - Applications and notifications for the purposes of section 100
237. This clause provides for the trustees or managers of an eligible scheme to make an application for the Board to assume responsibility for the scheme if the employer in relation to the scheme is unlikely to continue as a going concern, and prescribed conditions are met.
Clause 102 - Board's duty where application or notification received under section 101
238. This clause sets out the Board's duty where it receives an application or notification under clause 101 because the employer in relation to an eligible scheme is unlikely to continue as a going concern. The Board must confirm whether or not a scheme rescue has occurred. Where the Board confirms that a scheme rescue has not occurred, it must withdraw from involvement with the scheme.
Clause 103 - Protected liabilities
239. This clause defines the "protected liabilities" in relation to an eligible scheme.
Restrictions on schemes during the assessment period
Clause 104 - Assessment periods
240. This clause provides for a qualifying insolvency event in relation to an employer and sets out the beginning and ending of the assessment period. An assessment period starts with the insolvency date in relation to that event and ends when the trustees or managers of the scheme:
241. An insolvency event in relation to the employer is a qualifying event in circumstances where that event does not fall within an assessment period.
Clause 105 - Admission of new members, payments of contributions etc
242. This clause sets out the effects on the scheme where a qualifying insolvency event occurs, in relation to new members, contributions, and benefits during the assessment period in relation to an eligible scheme. During the assessment period:
Clause 106 - Directions
243. The Board may give directions during the assessment period minimising the amounts to be paid out of the Pension Protection Fund. The Board may direct a relevant person in relation to the scheme in respect of:
244. The Board may revoke or amend any direction under this clause.
Clause 107 - Restrictions on winding up of schemes
245. This clause provides the restrictions on winding up schemes during the assessment period. It prevents a scheme from winding up during the assessment period but does not apply to the winding up of the schemes in accordance with an order by the Regulator under clause 20. In circumstances where an order is made during the assessment period, the winding up is to be taken as beginning immediately before the assessment period. Where winding up commences before or during the assessment period, no steps may be taken to discharge any liability to or in respect of a member of the scheme. Any action by the Board or managers in contravention of the above is void, unless the Board ratifies their action. The Regulator may not make a freezing order in relation to the scheme during the assessment period.
Clause 108 - Power to validate contraventions of section 107
246. Further to subsection (5) of clause 107, this clause provides for the Board to validate an action of the trustees or managers of a scheme which is in contravention of clause 107, only if it is satisfied that to ratify such action is consistent with the objective of minimising the amounts to be paid out of the Pension Protection Fund. Should the Board decide to validate an action it must give notice to that effect, containing reasons for the Board's decision.
Clause 109 - Board to act as creditor of the employer
247. This clause provides for any debt owed by the employer to trustees or managers to be regarded as a debt owed to the Board, and for the Board in this case to be treated as if it had powers of a creditor.
Clause 110 - Payment of scheme benefits
248. This clause provides that, during the assessment period, benefits to members under the scheme must be reduced to the Pension Protection Fund level of benefits.
Clause 111 - Loans to pay scheme benefits
249. This clause provides that, in certain circumstances, the Board may make short-term loans to schemes upon the application of the trustees to allow them to continue to pay benefits during the assessment period.
Valuation of assets and liabilities
Clause 112 - Board's obligation to obtain valuation of assets and protected liabilities
250. This clause provides for the Board to obtain an actuarial valuation of the assets and liabilities of the scheme immediately before the first insolvency event, and for a certificate to be prepared stating whether or not the assets were sufficient to meet the protected liabilities.
Clause 113 - Approval of valuation
251. This clause applies where the Board obtains a valuation in respect of an eligible scheme. Where the Board is satisfied that the valuation has been prepared in the manner stated, it must:
Clause 114 - Binding valuations
252. A valuation obtained under clause 112 must be approved by the Board under clause 113. The valuation only becomes binding once the period to dispute the valuation has expired, or once any dispute has been resolved.
253. Subsection (2) states that once a valuation has become binding, it is conclusive for the purposes of establishing whether scheme assets are less than the protected liabilities under clause 99 or under clause 100, although fraud compensation (under clause 134) may be taken into account.
254. Subsection (3) provides that the Board must notify the trustees, the employer and the Regulator once the valuation becomes binding.
Refusal to assume responsibility
Clause 115 - Schemes which become eligible schemes
255. This clause provides for Regulations to provide that any provision of this Chapter in relation to an eligible scheme should not apply in cases where the scheme was not an eligible scheme throughout such period as may be prescribed.
Clause 116 - New schemes created to replace existing schemes
256. This clause provides that, in certain circumstances, the Board may exempt a scheme from application of the Pension Protection Fund if the scheme has been established with a view to benefiting from the Pension Protection Fund where it previously would not have done, this includes new schemes which are established during a period as may be prescribed. This clause is intended to prevent abuse by schemes being set up to avoid paying the levy and then establishing a new scheme and transferring existing members to the new scheme when insolvency seems likely. Where the Board refuses to assume responsibility for a scheme it must issue a withdrawal notice and give a copy of the notice to the Regulator, the trustees and managers of the scheme and any insolvency practitioner in relation to the employer or if there is no insolvency practitioner, the employer. A withdrawal notice means a notice in the prescribed form which states the time from which the Board ceases to be involved with the scheme and contains any other information as may be prescribed in regulations.
Cessation of involvement with a scheme
Clause 117 - Circumstances in which Board ceases to be involved with an eligible scheme
257. This clause provides for the Board to cease involvement with a scheme under circumstances where it determines that no insolvency event has occurred or is likely to occur during the assessment period. Once the determination is made, it must issue a withdrawal notice and copy it to those listed.
Clause 118 - Consequences of the Board ceasing to be involved with a scheme
258. This clause provides for the resumption of scheme benefits accrual in respect of the assessment period and for contributions which would have been payable during the assessment period to become payable.
Reconsideration and winding up
Clause 119 - Requirement to wind up schemes with sufficient assets to meet protected liabilities
259. This clause provides for the requirement to wind up schemes with sufficient assets to meet their protected liabilities. This applies in cases where:
Clause 120 - Application for reconsideration
260. The Board must reconsider the decision to withdraw from a scheme once an application has been made by the trustees of a scheme within three months. This reconsideration is based on the auditors valuation.
Clause 121 - Duty to assume responsibility following reconsideration
261. This clause provides for the Board to assume responsibility for the scheme where an application is accompanied by a protected benefits quotation if it is satisfied that the value of the assets of the scheme at the reconsideration date is less than the aggregate of:
Assumption of responsibility for a scheme
Clause 122 - Transfer notice
262. The Board must give the trustees or managers of a scheme a transfer notice in circumstances where the Board is required to assume responsibility. A transfer notice cannot be given to the trustees or managers until the valuation obtained under clause 112 is binding. The Regulator must also be given a copy of the transfer notice by the trustees or managers.
Clause 123 - Effect of Board assuming responsibility for a scheme
263. This clause provides for the effect of the Board assuming responsibility for a scheme. Property, rights and liabilities are to be transferred to the Board. The Board will then assume responsibility for paying compensation to members, and discharge the trustees or managers from their pension obligations.
Clause 124 - The pension compensation provisions
264. This clause provides for pension compensation to be paid in relation to a scheme for which the Board assumes responsibility including provision for:
265. Subsection (2) makes clear that references to compensation provisions are to the provisions of Schedule 7 and any regulations made under clause 130.
Clause 125 - Adjustments to be made where Board assumes responsibility for a scheme
266. Adjustments may be made where the Board assumes responsibility for an eligible scheme to ensure members receive the correct amount of compensation for the assessment period.
Clause 126 - Postponement of compensation entitlement for the assessment period
267. Where the Board assumes responsibility for a scheme, it may postpone payment of an individual's pension (under prescribed circumstances) for the duration of the assessment period, if he continues in employment after Normal Pension Age.
Clause 127 - Guaranteed minimum pensions
268. The trustees or managers of a scheme must notify the Commissioners for Inland Revenue that they are discharged from their liability to provide a Guaranteed Minimum Pension (GMP) for applicable members once the Board has assumed responsibility.
Clause 128 - Duty to pay scheme benefits unpaid at assessment date
269. This clause provides for the Pension Protection Fund to make payments, under scheme rules that the Pension Protection Fund consider admissible, to those scheme members who were due payment from their scheme, but had payments outstanding when the Pension Protection Fund took over the scheme.
Clause 129 - Modification of Chapter where liabilities discharged during assessment period
270. Regulations may set out how the provisions of this Chapter will apply, where the liabilities of a scheme are discharged during the assessment period.
Clause 130 - Administration of compensation
271. The Secretary of State may make regulations with regard to the administration of Pension Protection Fund compensation. These may relate to:
Discharge of Board's liabilities
Clause 131 - Discharge of liabilities in respect of compensation
272. The Board may arrange the discharge of liabilities by an insurance company for, or in respect of, a scheme member by:
273. This only applies where the Board has assumed responsibility for an eligible scheme.
Clause 132 - Discharge of liabilities in respect of money purchase benefits
274. Where the Board has assumed liability for a scheme that has members with money-purchase benefits, regulations may determine how liabilities in respect of those benefits are discharged.
Clause 133 - Equal treatment
275. This clause defines equal treatment of men and women where a woman has been employed on like for like work, work rated as equivalent, work that is equivalent in terms of demand made on effort, skill and decision, and the service in that employment was pensionable service under an eligible scheme for Pension Protection Fund purposes.
276. This clause states that if any payment functions relating to pensionable service under the scheme on or after 17 May 1990 in respect of the scheme are or become less favourable to either the man or the woman then modifications will be made to ensure that the payment function is not less favourable. Payment function means any function conferred on the Board by virtue of this Chapter which relates to a person's entitlement to, or the payment of, any amount under Schedule 7 (pension compensation provisions), clause 128 (duty to pay scheme benefits unpaid at assessment date) or clause 132 (discharge of liabilities in respect of money purchase benefits).
277. This clause also provides that scheme provisions are not to be modified if the Board proves that the difference in treatment is genuinely due to a material factor which is not the difference of sex, but is a material difference between the woman's case and man's case. The clause provides a power for regulations to provide further circumstances where provisions are not to be modified.
Relationship with fraud compensation
|© Parliamentary copyright 2004||Prepared: 12 February 2004|