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Serious ill-health commutation
The facility for people with severely reduced life expectancy to withdraw the full value of their pension fund, minus any entitlement to a survivors' benefit; as a cash lump sum.
Shared Additional Pension
Relevant to state pensions. Since December 2000, it has been possible for the additional pension component of the retirement pension to be shared as part of a divorce settlement. Shared additional pension is the weekly pension derived from the cash equivalent transfer value of a former spouse's additional pension.
Stakeholder pension
A type of personal pension scheme which meets set criteria, including a ceiling on charges and flexibility.
State Earnings-Related Pension Scheme (SERPS)
The additional pension from 1978 to 2002. The amount of additional pension a person can get from SERPS depends on their:
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earnings in each year since 1978; and
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National Insurance record.
Was reformed by State Second Pension (S2P) in April 2002.
State Pension
See 'Retirement Pension'.
State Pension Age
See 'Pensionable Age'.
State Second Pension (S2P)
The additional pension from 6th April 2002. Compared to the State Earnings-Related Pension Scheme which it reformed, it is more beneficial to those on low or moderate earnings and to certain carers and disabled people who are not working.
Tax year
The year starting on 6th April in one year and ending on 5th April the following year.
Transfer credits
Rights allowed to a member under the admissible rules of the scheme by reference to a transfer to that scheme of his accrued rights from another scheme (including any transfer credits allowed by that scheme).
Transfer of Undertakings (Protection of Employment)(TUPE) Regulations 1981
The legal framework which governs the continued employment rights of employees in business undertakings which are transferred from one employer to another as a going concern. The transferee takes over the employment contracts of all those employed in the undertaking immediately before the transfer and all rights and obligations arising from those contracts, except occupational pension rights. Some rights associated with retirement, such as the right to retire early, may be recovered by TUPE.
Transitional period (relating to PPF levies)
The period of time following the "initial period" when the PPF Board may modify the structure of the PPF levies.
Trivial commutation
The facility for people to convert small aggregate pension funds into a cash lump sum.
Widow's benefits
Widow's benefits are: widow's payment, widowed mother's allowance or widow's pension.
Withdrawal notice
Relevant to the Pension Protection Fund. A notice issued by the Board to the scheme trustees informing them of the termination of the involvement of the PPF.
ABBREVIATIONS AND ACRONYMS
APP Appropriate Personal Pension
COD Contracted-out Deduction
COMBS Contracted-out Mixed Benefit Scheme
COMP Contracted-out Money-Purchase Pension Scheme
COSR Contracted-out Salary Related Pension Scheme
EPB Equivalent Pension Benefits
GMP Guaranteed Minimum Pension
GPP Group Personal Pension
GRAD Graduated Retirement Benefit
GRB Graduated Retirement Benefit
LEL Lower Earnings Limit
LPI Limited Price Index
NICs National Insurance Contributions
OPRA Occupational Pensions Regulatory Authority
PPF Pension Protection Fund
RPI Retail Prices Index
RST Reference Scheme Test
SERPS State Earnings-Related Pension Scheme
S2P State Second Pension
TUPE Transfer of Undertaking (Protection of Employment)
PENSIONS BILL
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Annex
This document illustrates how the Bill amends existing legislation. Test inserted by the Pensions Bill appears in bold whilst deleted text is struck out.
Legislation copied in this document may not exactly conform to the precise layout used in the Acts amended. This document has no authoritative status.
PART 1
THE PENSIONS REGULATOR
Clause 19 - Powers to wind up occupational pension schemes
• Amendment of the Pensions Act 1995: Section 11
• The clause inserts a new subsection (3A), (3B) and (6A)
11 Powers to wind up schemes.
1. Subject to the following provisions of this section, the Authority may by order direct or authorise an occupational pension scheme to be wound up if they are satisfied that-
(a) the scheme, or any part of it, ought to be replaced by a different scheme,
(b) the scheme is no longer required, or
(c) it is necessary in order to protect the interests of the generality of the members of the scheme that it be wound up.
2. The Authority may not make an order under this section on either of the grounds referred to in subsection (1)(a) or (b) unless they are satisfied that the winding up of the scheme-
(a) cannot be achieved otherwise than by means of such an order, or
(b) can only be achieved in accordance with a procedure which-
(i)is liable to be unduly complex or protracted, or
(ii)involves the obtaining of consents which cannot be obtained, or can only be obtained with undue delay or difficulty,
and that it is reasonable in all the circumstances to make the order.
(3)An order made under this section on either of the grounds referred to in subsection (1)(a) or (b) may be made only on the application of-
(a) the trustees or managers of the scheme,
(b) any person other than the trustees or managers who has power to alter any of the rules of the scheme, or
(3A) The Authority may, during an assessment period (within the meaning of Part 2 of the Pensions Act 2004 (Board of the Pension Protection Fund)) in relation to an occupational pension scheme, by order direct the scheme to be wound up if they are satisfied that it is necessary to do so in order-
to ensure that the scheme's protected liabilities do not exceed its assets, or
(b) if those liabilities do exceed its assets, to keep the excess to a minimum.
(3B) In subsection (3A) -
(a) "protected liabilities" has the meaning given in section 103 of the Pensions Act 2004, and
references to the assets of the scheme are references to those assets excluding any assets representing the value of any rights in respect of money purchase benefits (within the meaning of that Act) under the scheme.
(4) An order under this section authorising a scheme to be wound up must include such directions with respect to the manner and timing of the winding up as the Authority think appropriate having regard to the purposes of the order. This subsection is subject to sections 24 and 107, of the Pensions Act 2004 (winding up order made when freezing order has effect in relation to scheme or during assessment period under Part 2 of that Act).
(5) The winding up of a scheme in pursuance of an order of the Authority under (this section is as effective in law as if it had been made under powers conferred by or under the scheme.
(6) An order under this section may be made and complied with in relation to a scheme-
a) in spite of any enactment or rule of law, or any rule of the scheme, which would otherwise operate to prevent the winding up, or
(b) except for the purpose of the Authority determining whether or not they are satisfied as mentioned in subsection (2), without regard to any such enactment, rule of law or rule of the scheme as would otherwise require, or might otherwise be taken to require, the implementation of any procedure or the obtaining of any consent, with a view to the winding up.
(6A) Subsection (6) does not have effect to authorise the Authority to make an order as mentioned in paragraph (a) or (b) of that subsection, if their doing so would be unlawful as a result of section 6(1) of the Human Rights Act 1998 (unlawful for public authority to act in contravention of a Convention right).
(7) In the case of a public service pension scheme-
(a) an order under subsection (1) directing or authorising the scheme to be wound up may only be made on the grounds referred to in paragraph (c), and
(b) such an order may, as the Authority think appropriate, adapt, amend or repeal any enactment in which the scheme is contained or under which it is made.
Clause 29 - Prohibition orders
• Amendment of the Pensions Act 1995: Section 3
(1) The Authority may by order prohibit a person from being a trustee of a particular trust scheme in any of the following circumstances.
(2) The circumstances are-
(a) that the Authority are satisfied that while being a trustee of the scheme the person has been in serious or persistent breach of any of his duties under-
(i) this Part, other than the following provisions: sections 51 to 54, 62 to 65 and 110 to 112,
(ii) the following provisions of the Pension Schemes Act 1993: section 6 (registration), Chapter IV of Part IV (transfer values), Chapter II of Part IVA (pension credit benefit transfer values), section 113 (information) and section 175 (levy), or
(iii) the following provisions of the Welfare Reform and Pensions Act 1999: section 33 (time for discharge of pension credit liability) and section 45 (information),
(b) that the Authority are satisfied that, while being a trustee of the scheme, this section has applied to the person by virtue of any other provision of this or any other Act ,
(c) that the person is a company and any director of the company is prohibited under this section from being a trustee of the scheme,
d) that the person is a Scottish partnership and any of the partners is prohibited under this section from being a trustee of the scheme, or
(e) that the person is a director of a company which, by reason of circumstances falling within paragraph (a) or (b), is prohibited under this section from being a trustee of the scheme and the Authority are satisfied that the acts or defaults giving rise to those circumstances were committed with the consent or connivance of, or attributable to any neglect on the part of, the director;
or any other prescribed circumstances.
(3) The making of an order under subsection (1) against a person who is a trustee of the scheme in question has the effect of removing him.
(4) The Authority may, on the application of any person against whom an order under subsection (1) is in force, by order revoke the order, but a revocation made at any time cannot affect anything done before that time.
3 Prohibition orders
(1) The Authority may by order prohibit a person from being a trustee of —
(a) a particular trust scheme,
(b) a particular description of trust schemes, or
(c) trust schemes in general,
if they are satisfied that he is not a fit and proper person to be a trustee of the scheme or schemes to which the order relates.
(2) Where a prohibition order is made under subsection (1) against a person in respect of one or more schemes of which he is a trustee, the order has the effect of removing him.
(3) The Authority may, on the application of any person prohibited under this section, by order revoke the order either generally or in relation to a particular scheme or description of schemes.
(4) An application under subsection (3) may not be made—
(a) during the period within which the determination to exercise the power to make the prohibition order may be referred to the Tribunal under section 70(3) or 73(7) of the Pensions Act 2004, and
(b) if the determination is so referred, until the reference, and any appeal against the Tribunal's determination, has been finally disposed of.
(5) A revocation made at any time under this section cannot affect anything done before that time.
(6) The Authority must prepare and publish a statement of the policies they intend to adopt in relation to the exercise of its powers under this section.
(7) The Authority may revise any statement published under subsection (6) and must publish any revised statement.
(8) In this section "the Tribunal" means the Pensions Regulator Tribunal established under section 76 of the Pensions Act 2004.
Clause 30 - Suspension orders
• Amendment of the Pensions Act 1995: Section 4
4 Suspension orders.
(1) The Authority may by order suspend a trustee of a trust scheme-
(a) pending consideration being given to the making of an order against him under section 3(1),
(b) where proceedings have been instituted against him for an offence involving dishonesty or deception and have not been concluded,
(b) pending consideration being given to the institution of proceedings against him for an offence involving dishonesty or deception or where such proceedings have been instituted and have not been concluded,
(c) where a petition has been presented to the court for an order adjudging him bankrupt, or for the sequestration of his estate, and proceedings on the petition have not been concluded,
(d) where the trustee is a company, if a petition for the winding up of the company has been presented to the court and proceedings on the petition have not been concluded,
(e) where an application has been made to the court for a disqualification order against him under the Company Directors Disqualification Act 1986 or under Part II of the Companies (Northern Ireland) Order 1989 and proceedings on the application have not been concluded, or
(f) where the trustee is a company or Scottish partnership and, if any director or, as the case may be, partner were a trustee, the Authority would have power to suspend him under paragraph (b), (c) or (e).
(2) An order under subsection (1)-
(a) if made by virtue of paragraph (a), has effect for an initial period not exceeding twelve months, and
aa) if made by virtue of paragraph (b), has effect—
(i) for an initial period of twelve months, if proceedings are not instituted within that period, and
(ii) in any other case, until the proceedings in question are concluded,
(b)in any other case, has effect in relation to a trust scheme until the proceedings in question are concluded;
but the Authority may by order extend the initial period referred to in paragraph (a) for a further period of twelve months, and any order suspending a person under subsection (1) ceases to have effect if an order is made against that person under section 3(1) in relation to that scheme
(3) An order under subsection (1) has the effect of prohibiting the person suspended, during the period of his suspension, from exercising any functions as trustee of any trust scheme to which the order applies; and the order may apply to a particular trust scheme, a particular class of trust schemes or trust schemes in general.
(4) An order under subsection (1) may be made on one of the grounds in paragraphs (b) to (e) whether or not the proceedings were instituted, petition presented or application made (as the case may be) before or after the coming into force of that subsection.
(5) The Authority may, on the application of any person suspended under subsection (1), by order revoke the order, either generally or in relation to a particular scheme or a particular class of schemes; but a revocation made at any time cannot affect anything done before that time.
(5A) An application under subsection (5) may not be made—
(a) during the period within which the determination to exercise the power to make an order under subsection (1) may be referred to the Tribunal under section 70(3) or 73(7) of the Pensions Act 2004, and
(b) if the determination is so referred, until the reference, and any appeal against the Tribunal's determination, has been finally disposed of.
(6) An order under this section may make provision as respects the period of the trustee's suspension for matters arising out of it, and in particular for enabling any person to execute any instrument in his name or otherwise act for him and for adjusting any rules governing the proceedings of the trustees to take account of the reduction in the number capable of acting.
(7) In this section "the Tribunal" means the Pensions Regulator Tribunal established under section 76 of the Pensions Act 2004.
Clause 31 - Appointments by Regulator
• Amendment of the Pensions Act 1995: Section 7 and Section 8
• The clause repeals subsection (4) and inserts new subsection (5A)
(7) Appointment of trustees.
(1) Where a trustee of a trust scheme is removed by an order under section 3, or a trustee of such a scheme ceases to be a trustee by reason of his disqualification, the Authority may by order appoint another trustee in his place.
(2) Where a trustee appointed under subsection (1) is appointed to replace a trustee appointed under section 23(1)(b), sections 22 to 26 shall apply to the replacement trustee as they apply to a trustee appointed under section 23(1)(b).
(3) The Authority may also by order appoint a trustee of a trust scheme where they are satisfied that it is necessary to do so in order-
(a) to secure that the trustees as a whole have, or exercise, the necessary knowledge and skill for the proper administration of the scheme,
(b) to secure that the number of trustees is sufficient for the proper administration of the scheme, or
(c) to secure the proper use or application of the assets of the scheme.
(4) The Authority may also appoint a trustee of a trust scheme in prescribed circumstances.
(5) The power to appoint a trustee by an order under this section includes power by such an order-
(a) to determine the appropriate number of trustees for the proper administration of the scheme,
(b) to require a trustee appointed by the order to be paid fees and expenses out of the scheme's resources,
(c) to provide for the removal or replacement of such a trustee.
(5A) An application may be made to the Regulator in relation to a trust scheme by-
(a) the trustees of the scheme,
(b) the employer, or
(c) any member of the scheme,
for the appointment of a trustee of the scheme under subsection (3)(a) or (c).
(6) Regulations may make provision about the descriptions of persons who may or may not be appointed trustees under this section.
Section 8
8 Appointment of trustees: consequences.
(1) An order under section 7 appointing a trustee may provide that an amount equal to the amount (if any) to which subsection (2) applies is to be treated for all purposes as a debt due from the employer to the trustees.
(2) This subsection applies to any amount which has been paid to the trustee so appointed out of the resources of the scheme and has not been reimbursed by the employer.
(1) An order under section 7 appointing a trustee may provide for any fees and expenses of trustees appointed under the order to be paid—
(a) by the employer,
(b) out of the resources of the scheme, or
(c) partly by the employer and partly out of those resources.
(2) Such an order may also provide that an amount equal to the amount (if any) paid out of the resources of the scheme by virtue of subsection (1)(b) or (c) is to be treated for all purposes as a debt due from the employer to the trustees of the scheme.
(3) Subject to subsection (4), a trustee appointed under that section shall, unless he is the independent trustee and section 22 applies in relation to the scheme, have the same powers and duties as the other trustees.
(4) Such an order may make provision-
(a) for restricting the powers or duties of a trustee so appointed,
(b) for powers or duties to be exercisable by a trustee so appointed to the exclusion of other trustees.
Clauses 32 - Disqualification
• Amendment of the Pensions Act 1995: Section 30
30 Persons disqualified: consequences.
(1)A trustee of a trust scheme who becomes disqualified under section 29 shall, while he is so disqualified, cease to be a trustee.
(1) Where a person who is a trustee of a trust scheme becomes disqualified under section 29 in relation to the scheme, his becoming so disqualified has the effect of removing him as a trustee.
(a) a trustee of a trust scheme becomes disqualified under section 29, or
(b) in the case of a trustee of a trust scheme who has become so disqualified, his disqualification is waived or the order disqualifying him is revoked or he otherwise ceases to be disqualified,
the Authority may exercise the same jurisdiction and powers as are exercisable by the High Court or, in relation to a trust scheme subject to the law of Scotland, the Court of Session for vesting any property in, or transferring any property to, the trustees.
(3) A person who purports to act as a trustee of a trust scheme while he is disqualified under section 29 is guilty of an offence and liable-
(a) on summary conviction to a fine not exceeding the statutory maximum, and
(b) on conviction on indictment, to a fine or imprisonment or both.
(4) An offence under subsection (3) may be charged by reference to any day or longer period of time; and a person may be convicted of a second or subsequent offence under that subsection by reference to any period of time following the preceding conviction of the offence.
(5) Things done by a person disqualified under section 29 while purporting to act as trustee of a trust scheme are not invalid merely because of that disqualification.
(6) Nothing in section 29 or this section affects the liability of any person for things done, or omitted to be done, by him while purporting to act as trustee of a trust scheme.
(7) The Authority must keep, in such manner as they think fit, a register of all persons who are disqualified under section 29(3) or (4); but the arrangements made by the Authority for the register must secure that the contents of the register are not disclosed or otherwise made available to members of the public except in accordance with section 30A .
(8) Nothing in subsection (7) requires the Authority to exclude any matter from a report published under section 103.
PART 5
PERSONAL AND OCCUPATIONAL SCHEMES: MISCELLANEOUS PROVISIONS
Obligations of trustees of occupational schemes
Clauses 199 - Investment principles
• Amendment of the Pensions Act 1995: Section 35
35 Investment principles.
(1) The trustees of a trust scheme must secure that there is prepared, maintained and from time to time revised a written statement of the principles governing decisions about investments for the purposes of the scheme.
(2) The statement must cover, among other things-
(a) the trustees' policy for securing compliance with sections 36 and 56, and
(b) their policy about the following matters.
(a) the kinds of investments to be held,
(b) the balance between different kinds of investments,
(d) the expected return on investments,
(e) the realisation of investments, and
(f) such other matters as may be prescribed.
(4) Neither the trust scheme nor the statement may impose restrictions (however expressed) on any power to make investments by reference to the consent of the employer.
(5) The trustees of a trust scheme must, before a statement under this section is prepared or revised-
(a) obtain and consider the written advice of a person who is reasonably believed by the trustees to be qualified by his ability in and practical experience of financial matters and to have the appropriate knowledge and experience of the management of the investments of such schemes, and
(b) consult the employer.
(6) If in the case of any trust scheme-
(a) a statement under this section has not been prepared or is not being maintained, or
(b) the trustees have not obtained and considered advice in accordance with subsection (5),
sections 3 and 10 apply to any trustee who has failed to take all such steps as are reasonable to secure compliance
(7) This section does not apply to any scheme which falls within a prescribed class or description.
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