Pension disputes

Clause 210 - Resolution of disputes

•     Amendment of the Pensions Act 1995: Section 50

50 Resolution of disputes.

(1) The trustees or managers of an occupational pension scheme must secure that such arrangements as are required by or under this section for the resolution of disagreements between prescribed persons about matters in relation to the scheme are made and implemented.

2) The arrangements must-

(a) provide for a person, on the application of a complainant of a prescribed description, to give a decision on such a disagreement, and

(b) require the trustees or managers, on the application of such a complainant following a decision given in accordance with paragraph (a), to reconsider the matter in question and confirm the decision or give a new decision in its place.

(3) Regulations may make provision about-

(a) applications for decisions under such arrangements, and

(b) the procedure for reaching and giving such decisions,

including the times by which applications are to be made and decisions given.

(4) Applications and decisions under subsection (2) must be in writing.

(5) Arrangements under subsection (1) must, in the case of existing schemes, have effect as from the commencement of this section.

(6) If, in the case of any occupational pension scheme, such arrangements as are required by this section to be made have not been made, or are not being implemented, section 10 applies to any of the trustees or managers who have failed to take all such steps as are reasonable to secure that such arrangements are made or implemented.

(7) This section does not apply to a scheme of a prescribed description and subsection (1) does not apply to prescribed matters in relation to the scheme.

50 Requirement for dispute resolution arrangements

(1) The trustees or managers of an occupational pension scheme must secure that dispute resolution arrangements are made and implemented.

(2) Dispute resolution arrangements are such arrangements as are required by this section for the resolution of pension disputes.

(3) For this purpose a pension dispute is a dispute which-

(a) is between-

(i) the trustees or managers of a scheme, and

(ii) one or more persons with an interest in the scheme (see section 50A),

(b) is about matters relating to the scheme, and

(c) is not an exempted dispute (see subsection (9)).

(4) The dispute resolution arrangements must provide a procedure-

(a) for any of the parties to the dispute mentioned in subsection (3)(a)(ii) to make an application for a decision to be taken on the matters in dispute ("an application for the resolution of a pension dispute"), and

(b) for the trustees or managers to take that decision.

(5) Where an application for the resolution of a pension dispute is made in accordance with the dispute resolution arrangements, the trustees or managers must-

(a) take the decision required on the matters in dispute within a reasonable period of the receipt of the application by them, and

(b) notify the applicant of the decision within a reasonable period of it having been taken.

(6) The procedure provided for by the dispute resolution arrangements must include the provision required by section 50B.

(7) Dispute resolution arrangements under subsection (1) must, in the case of existing schemes, have effect on and after the date of commencement of this section in relation to applications made on or after that date.

(8) This section does not apply in relation to an occupational pension scheme if-

(a) every member of the scheme is a trustee of the scheme,

(b) the scheme has no more than one member, or

(c) the scheme is of a prescribed description.

(9) For the purposes of this section a dispute is an exempted dispute if-

(a) proceedings in respect of it have been commenced in any court or tribunal,

(b) the Pensions Ombudsman has commenced an investigation in respect of it as a result of a complaint made or a dispute referred to him, or

(c) it is of a prescribed description.

(10) If, in the case of an occupational pension scheme, the dispute resolution arrangements required by this section to be made-

(a) have not been made, or

(b) are not being implemented,

section 10 applies to any of the trustees or managers who have failed to take all such steps as are reasonable to secure that such arrangements are made or implemented.

50A Meaning of "person with an interest in the scheme"

(1) For the purposes of section 50 a person is a person with an interest in an occupational pension scheme if-

(a) he is a member of the scheme,

(b) he is a widow, widower or surviving dependant of a deceased member of the scheme,

(c) he is a surviving non-dependant beneficiary of a deceased member of the scheme,

(d) he is a prospective member of the scheme,

(e) he has ceased to be within any of the categories of persons referred to in paragraphs (a) to (d), or

(f) he claims to be such a person as is mentioned in paragraphs (a) to (e) and the dispute relates to whether he is such a person.

(2) In subsection (1)(c) a "non-dependant beneficiary", in relation to a deceased member of an occupational pension scheme, means a person who, on the death of the member, is entitled to the payment of benefits under the scheme.

(3) In subsection (1)(d) a "prospective member" means any person who, under the terms of his contract of service or the rules of the scheme-

(a) is able, at his own option, to become a member of the scheme,

(b) will become so able if he continues in the same employment for a sufficiently long period,

(c) will be admitted to it automatically unless he makes an election not to become a member, or

(d) may be admitted to it subject to the consent of his employer.

50B The dispute resolution procedure

(1) The procedure provided for by the dispute resolution arrangements under section 50 must include the following provision.

(2) The procedure must provide that an application for the resolution of a pension dispute under section 50(4) may be made or continued on behalf of a person who is a party to the dispute mentioned in section 50(3)(a)(ii)-

(a) where the person dies, by his personal representative,

(b) where the person is a minor or is otherwise incapable of acting for himself, by a member of his family or some other person suitable to represent him, and

(c) in any other case, by a representative nominated by him.

(3) The procedure may include provision about the time limits for making an application for the resolution of a pension dispute but it must require that-

(a) in the case of a person with an interest in a scheme as mentioned in section 50A(1)(e), the time limit for making an application is the end of the period of 6 months beginning immediately after the date upon which he ceased to be a person with an interest as mentioned in section 50A(1)(a), (b), (c) or (d), and

(b) in the case of a person with an interest in a scheme as mentioned in section 50A(1)(f) who is claiming to be such a person as is mentioned in section 50A(1)(e), the time limit for making an application is the end of the period of 6 months beginning immediately after the date upon which he claims that he ceased to be a person with an interest as mentioned in section 50A(1)(a), (b), (c) or (d).

(4) The procedure must include provision about-

(a) the manner in which an application for the resolution of a pension dispute is to be made,

(b) the particulars which must be included in such an application, and

(c) the manner in which any decisions required are to be reached and given.

(5) The procedure must provide that if, after an application for the resolution of a pension dispute has been made, the dispute becomes an exempted dispute within the meaning of section 50(9)(a) or (b), the resolution of the dispute under the procedure ceases.

Pension compensation

Clause 211- Amendments relating to the Pensions Compensation Board

•     Amendment of the Pensions Act 1995: Section 80

•     The clause inserts new (2A) after subsection (2)

80 Review of decisions.

(1)Subject to the following provisions of this section, any determination by the Compensation Board of a question which it is within their functions to determine shall be final.

(2)The Compensation Board may on the application of a person appearing to them to be interested-

(a)at any time review any such determination of theirs as is mentioned in subsection (1) (including a determination given by them on a previous review), if they are satisfied that there has been a relevant change of circumstances since the determination was made, or that the determination was made in ignorance of a material fact or based on a mistake as to a material fact or was erroneous in point of law, and

(b)at any time within a period of three months from the date of the determination, or within such longer period as they may allow in any particular case, review such a determination on any ground.

(2A)The Compensation Board may also review such a determination without an application being made.

(3)The Compensation Board's powers on a review under this section include power-

(a)to vary or revoke any determination previously made,

(b)to substitute a different determination, and

(c)generally to deal with the matters arising on the review as if they had arisen on the original determination;

and also include power to make savings and transitional provisions.

(4)Subject to subsection (5), regulations may make provision with respect to the procedure to be adopted on any application for a review under this section, or under any corresponding provision in force in Northern Ireland, and generally with respect to such applications and reviews.

(5)Nothing in subsection (4) shall be taken to prevent such a review being entered upon by the Compensation Board without an application being made.

(4) Regulations may make provision—

(a) with respect to reviews under this section (or any corresponding provision in force in Northern Ireland);

(b) with respect to applications under subsection (2) (or any corresponding provision in force in Northern Ireland) and the procedure to be adopted on any such application.

Section 81

•    The clause repeals subsections (1)(d), (2A) and (7).

81 Cases where compensation provisions apply.

(1) Subject to subsection (2), this section applies to an application for compensation under section 82 in respect of an occupational pension scheme if all the following conditions are met -

(a) the scheme is a trust scheme,

(b) the employer is insolvent,

(c) the value of the assets of the scheme has been reduced, and there are reasonable grounds for believing that the reduction was attributable to an act or omission constituting a prescribed offence,

(d) in the case of a salary related trust scheme, immediately before the date of the application the value of the assets of the scheme is less than the protection level , and

(e) it is reasonable in all the circumstances that the members of the scheme should be assisted by the Compensation Board paying to the trustees of the scheme, out of funds for the time being held by them, an amount determined in accordance with the compensation provisions.

(2) Subsection (1) does not apply in respect of a trust scheme falling within a prescribed class or description; and paragraph (c) applies only to reductions in value since the appointed day.

(2A) In subsection (1)(d) "the protection level" means the aggregate of-

(a) the amount of the liabilities of the scheme to, or in respect of, its pensioner members and such other of its members as fall within a prescribed class or description,

(b) 90 per cent of the amount of the liabilities of the scheme to, or in respect of, any other members of the scheme, and

(c) the amount of the liabilities of the scheme which are not liabilities to, or in respect of, its members;

and references in this subsection to liabilities to, or in respect of, members of the scheme are references to liabilities in respect of pensions or other benefits.

(3) In this Part the "compensation provisions" means the provisions of this section and sections 82 to 85; and below in the compensation provisions as they relate to a trust scheme-

(a) "the application date" means the date of the application for compensation under section 82,

(b) "the appointed day" means the day appointed under section 180 for the commencement of this section,

(c) "the insolvency date" means the date on which the employer became insolvent,

(d) "the settlement date" means the date determined by the Compensation Board, after consulting the trustees, to be the date after which further recoveries of value are unlikely to be obtained without disproportionate cost or within a reasonable time,

(e) "the shortfall at the application date" means the amount of the reduction falling within subsection (1)(c) or (if there was more than one such reduction) the aggregate of the reductions, being the amount or aggregate immediately before the application date,

(f) "recovery of value" means any increase in the value of the assets of the scheme, being an increase attributable to any payment received (otherwise than from the Compensation Board) by the trustees of the scheme in respect of any act or omission-

(i) which there are reasonable grounds for believing constituted a prescribed offence, and

(ii) to which any reduction in value falling within subsection (1)(c) was attributable.

(4) It is for the Compensation Board to determine whether anything received by the trustees of the scheme is to be treated as a payment received for any such act or omission as is referred to in subsection (3)(f); and in this section "payment" includes any money or money's worth.

(5) Where this section applies to an application for compensation under section 82, the trustees must obtain any recoveries of value, to the extent that they may do so without disproportionate cost and within a reasonable time.

(6) If subsection (5) is not complied with, section 3 applies to any trustee who has failed to take all such steps as are reasonable to secure compliance.

(7) Section 56(3) and (4) applies for the purposes of the compensation provisions as it applies for the purposes of sections 56 to 61.

(8) Section 123 of the Pension Schemes Act 1993 (meaning of insolvency) applies for the purposes of the compensation provisions as it applies for the purposes of Chapter II of Part VII of that Act (unpaid scheme contributions).

Section 83

83 Amount of compensation.

(1) Where in the opinion of the Compensation Board section 81 applies to an application for compensation under section 82 in respect of a trust scheme, and the Board have determined the settlement date, the Board may make a payment or payments to the trustees of the scheme in accordance with this section.

(2) The amount of any payment must be determined in accordance with regulations and must take account of any payment already made under section 84, and the Compensation Board must give written notice of their determination to the person who made the application under section 82 and (if different) to the trustees.

(3) The amount of the payment or (if there is more than one) the aggregate-

(a) must not exceed the shortfall at the application date, together with interest at the prescribed rate for the prescribed period on the shortfall or (if the shortfall comprises more than one reduction in value) on each of the reductions, and also,

(b) in the case of a salary related scheme, must not exceed the amount which, on the settlement date, is required to be paid to the trustees of the scheme in order to secure that the value on that date of the assets of the scheme is equal to the aggregate of the protected liabilities.

(4) In subsection (3) "the protected liabilities" means-

(a) the amount on the the settlement date of the liabilities of the scheme to, or in respect of, its pensioner members and such other of its members as fall within a prescribed class or description,

(b) 90 per cent of the amount on that date of the liabilities of the scheme to, or in respect of, any other members of the scheme, and

(c) the amount on that date of the liabilities of the scheme which are not liabilities to, or in respect of, its members;

and references in this subsection to liabilities to, or in respect of, members of the scheme are to liabilities in respect of pensions or other benefits.

(3) The amount of the payment, or (if there is more than one) the aggregate, must not exceed the aggregate of—

(a) the amount (if any) by which the shortfall at the application date exceeds the recoveries of value made between the application date and the settlement date, and

(b) interest at the prescribed rate for the prescribed period on the amount of that excess (if any).

Annual increases in rate of pensions

Clause 212 - Annual increase in rate of certain occupational pensions

•     The clause inserts new subsection 51ZA after Section 51

51 Annual increase in rate of pension.

(1) Subject to subsection (6) this section applies to a pension under an occupational pension scheme if-

(a) the scheme-

(i) is an approved scheme, within the meaning of Chapter I of Part XIV of the Taxes Act 1988 (retirement benefit schemes approved by the Commissioners of Inland Revenue) or is a scheme for which such approval has been applied for under that Chapter and not refused, and

(ii) is not a public service pension scheme, and

     (b) apart from this section, the annual rate of the pension would not be increased each year by at least the appropriate percentage of that rate.

(b) the whole, or any part of, the pension is attributable to pensionable service on or after the appointed day or, in the case of money purchase benefits, to payments in respect of employment carried on on or after the appointed day, and

(c) apart from this section—

(i) the annual rate of the pension, or

(ii) if only part of the pension is attributable as described in paragraph (b), so much of the annual rate as is attributable to that part,

would not be increased each year by at least the appropriate percentage of that rate.

(2) Subject to sections 51A and 52 , where a pension to which this section applies, or any part of it, is attributable to pensionable service on or after the appointed day or, in the case of money purchase benefits, to payments in respect of employment carried on or after the appointed day-

(a) the annual rate of the pension, or

(b) if only part of the pension is attributable to pensionable service or, as the case may be, to payments in respect of employment carried on on or after the appointed day, so much of the annual rate as is attributable to that part,

must be increased annually by at least the appropriate percentage.

(3) Subsection (2) does not apply to a pension under an occupational pension scheme if the rules of the scheme require-

(a) the annual rate of the pension, or

(b) if only part of the pension is attributable to pensionable service or, as the case may be, to payments in respect of employment carried on on or after the appointed day, so much of the annual rate as is attributable to that part,

to be increased at intervals of not more than twelve months by at least the relevant percentage and the scheme complies with any prescribed requirements.

(4) For the purposes of subsection (3) the relevant percentage is-

(a) the percentage increase in the retail prices index for the reference period, being a period determined, in relation to each periodic increase, under the rules, or

(b)the percentage for that period which corresponds to 5 per cent per annum,

(i) in the case of a category X pension, 5% per annum, and

(ii) in the case of a category Y pension, 2.5% per annum.

whichever is the lesser.

(4A) For the purposes of this section, a pension is a category X pension if it is—

(a) a pension which became a pension in payment before the commencement day, or

(b) a pension—

(i) which becomes a pension in payment on or after the commencement day, and

(ii) the whole of which is attributable to pensionable service before that day or, in the case of money purchase benefits, to payments in respect of employment carried on before that day.

(4B) For the purposes of this section, a pension is a category Y pension if it is a pension—

(a) which becomes a pension in payment on or after the commencement day, and

(b) the whole of which is attributable to pensionable service on or after the commencement day or, in the case of money purchase benefits, to payments in respect of employment carried on or after that day.

(4C) For the purposes of applying this section in the case of a pension—

(a) which becomes a pension in payment on or after the commencement day,

(b) part of which is attributable to pensionable service before the commencement day or, in the case of money purchase benefits, to payments in respect of employment carried on before that day, and

(c) part of which is attributable to pensionable service on or after that day or, in the case of money purchase benefits, to payments in respect of employment carried on on or after that day, each of those parts of the pension is to be treated as if it is a separate pension.

(5) Regulations may provide that the provisions of subsections (2) and (3) any of the provisions of this section apply in relation to a pension as if so much of it as would not otherwise be attributable to pensionable service or to payments in respect of employment were attributable to pensionable service or, as the case may be, payments in respect of employment-

(a) before the appointed day, or the commencement day

(b) on or after that day, or

(c) partly before and partly on or after that day.

(6) This section does not apply to any pension or part of a pension which is attributable (directly or indirectly) to a pension credit or which, in the opinion of the trustees or managers, is derived from the payment by any member of the scheme of voluntary contributions.

Clause 213 - Annual increase in rate of certain personal pensions

•     The clause inserts new subsections (2A), (2B) and (2C) after subsection (2) of Section 162 and a new section 162A after section 162 of the Pensions Act 1995

Section 162

162 Annual increase in rate of personal pension.

(1) This section applies to any pension provided to give effect to protected rights of a member of a personal pension scheme if-

(a) there is in force, or was in force at any time after the appointed day, an appropriate scheme certificate issued in accordance with Chapter I of Part III (certification) of the Pension Schemes Act 1993, and

(b) apart from this section, the annual rate of the pension would not be increased each year by at least the appropriate percentage of that rate.

(b) the whole, or any part of, the pension is attributable to contributions in respect of employment carried on on or after the appointed day, and

(c) apart from this section—

(i) the annual rate of the pension, or

(ii) if only part of the pension is attributable as described in paragraph (b), so much of the annual rate as is attributable to that part, would not be increased each year by at least the appropriate percentage of that rate.

(2) Where a pension to which this section applies, or any part of it, is attributable to contributions in respect of employment carried on on or after the appointed day-

(a) the annual rate of the pension, or

(b) if only part of the pension is attributable to contributions in respect of employment carried on on or after the appointed day, so much of the annual rate as is attributable to that part,

must be increased annually by at least the appropriate percentage.

Clause 214 - Power to increase pensions giving effect to pension credits etc

•     Amendment of the Welfare Reform and Pensions Act 1999: Section 40

40 Other pension schemes

(1) The Secretary of State may by regulations make provision for a pension to which subsection (2) applies to be increased, as a minimum, by reference to increases in the retail prices index, so far as not exceeding 5% the maximum percentage per annum.

(2) This subsection applies to-

(a) a pension provided to give effect to eligible pension credit rights of a member under a qualifying occupational pension scheme, and

(b) a pension provided to give effect to safeguarded rights of a member under a personal pension scheme.