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(2A) For the purposes of subsection (1) the "maximum percentage" means—
(a) 5% in a case where—
(i) the pension is in payment before the commencement day, or
(ii) the pension is not in payment before the commencement day but the entitlement to the relevant pension credit arose before that day, and
(b) 2.5% in a case where the entitlement to the relevant pension credit arises on or after the commencement day.
"commencement day" means the day appointed for the coming into force of section 214 of the Pensions Act 2004 (amendments to section 40);
"eligible", in relation to pension credit rights, means of a description prescribed by regulations made by the Secretary of State;
"pension credit rights", in relation to an occupational pension scheme, means rights to future benefits under the scheme which are attributable (directly or indirectly) to a credit under section 29(1)(b) or under corresponding Northern Ireland legislation;
"qualifying occupational pension scheme" means an occupational pension scheme which is not a public service pension scheme;
"relevant pension credit" means the pension credit to which the eligible pension credit rights or, as the case may be, the safeguarded rights relate;
"safeguarded rights" has the meaning given in section 68A of the Pension Schemes Act 1993.
Revaluation
Clause 215 -Exemption from statutory revaluation requirement
• Amendment of the Pension Schemes Act 1993: Section 84
84 Basis of revaluation.
(1) Subject to subsections (2) and (3), in the case of such benefits as are mentioned in section 83(1)(a), any pension or other retirement benefit payable under the scheme in question to the member and any pension or other benefit payable under it to any other person in respect of him, is to be revalued by the final salary method.
(a) any such benefit is an average salary benefit or flat rate benefit; and
(b) it appears to the trustees or managers of the scheme under which it is payable that it is appropriate to revalue the benefit by the average salary method or, as the case may be, the flat rate method,
then the benefit shall be revalued using that method.
(3) If any benefit such as is mentioned in paragraph (a) of section 83(1) is a money purchase benefit, and in the case of such benefit as is mentioned in paragraph (b) of that section, the benefit shall be revalued using the money purchase method.
"average salary benefit" means benefit the rate or amount of which is calculated by reference to the average salary of a member over the period of service on which the benefit is based;
"flat rate benefit" means any benefit the rate or amount of which is calculated by reference solely to the member's length of service;
"average salary method", "final salary method", "flat rate method" and "money purchase method" have the meanings given in Schedule 3.
(5) The fact that a scheme provides for the amount of the pension or other benefit for a member or for any other person in respect of him to be increased during the pre-pension period-
(a) by the percentages specified during that period under section 151(1) of the Social Security Administration Act 1992 (directions specifying percentage increases for up-rating purposes);
does not in itself result in conflict with this section, if the increase falls to be determined by reference to an amount from which the guaranteed minimum for a member or a member's widow or widower has not been deducted or
(b) under any arrangement which maintains the value of the pension or other benefit by reference to the rise in the retail prices index during that period.
(6) In subsection (5)(b), "retail prices index" means—
(a) the general index of retail prices (for all items) published by the Office for National Statistics; or
(b) where that index is not published for a month, any substituted index or figures published by that Office.
Contracting out
Clause 216 - Meaning of "working life" in Pension Schemes Act 1993
• Amendment of the Pension Schemes Act 1993: Section 181
181(1) working life" has the meaning given in paragraph 5(8) of Schedule 3 to the Social Security Contributions and Benefits Act 1992.
181(1)"working life", in relation to a person, means the period beginning with the tax year in which the person attains the age of 16 and ending with—
(a) the tax year before the one in which the person attains the age of 65 in the case of a man or 60 in the case of a woman, or
(b) if earlier, the tax year before the one in which the person dies.
Clause 217 - Power to prescribe conditions by reference to Inland Revenue approval
• Amendment of the Pensions Schemes Act 1993: section 9
Requirements for certification of schemes: general.
(1) Subject to subsection (4), an occupational pension scheme can be contracted-out in relation to an earner's employment only if it satisfies subsection (2) or (3).
(2) An occupational pension scheme satisfies this subsection only if-
(a) in relation to any earner's service before the principal appointed day, it satisfies the conditions of subsection (2A), and
(b) in relation to any earner's service on or after that day, it satisfies the conditions of subsection (2B).
(2A) The conditions of this subsection are that-
(a) the scheme complies in all respects with sections 13 to 23 or, in such cases or classes of case as may be prescribed, with those sections as modified by regulations, and
(b) the rules of the scheme applying to guaranteed minimum pensions are framed so as to comply with the relevant requirements.
(2B) The conditions of this subsection are that the Inland Revenue are satisfied that-
(a) the scheme complies with section 12A,
(b) restrictions imposed under section 40 of the Pensions Act 1995 (restriction on employer-related investments) apply to the scheme and the scheme complies with those restrictions,
(c) the scheme satisfies such other requirements as may be prescribed (which-
(i) must include requirements as to the amount of the resources of the scheme and,
(ii) may include a requirement that, if the only members of the scheme were those falling within any prescribed class or description, the scheme would comply with section 12A); and
(d) the scheme does not fall within a prescribed class or description,
and are satisfied that the rules of the scheme are framed so as to comply with the relevant requirements.
(2C) Regulations may modify subsection (2B)(a) and (b) in their application to occupational pension schemes falling within a prescribed class or description.
(3) An occupational pension scheme satisfies this subsection only if-
(a) the requirements imposed by or by virtue of sections 26 to 32 and such other requirements as may be prescribed are satisfied in its case
(aa) the Inland Revenue are satisfied that the scheme does not fall within a prescribed class or description; and
(b) the rules of the scheme applying to protected rights are framed so as to comply with the relevant requirements.
(4) Where there are two or more occupational pension schemes in force in relation to an earner's employment, none of which can by itself be a contracted-out scheme, the Inland Revenue may, if they think fit, treat them for contracting-out purposes as a single scheme.
(5) A personal pension scheme can be an appropriate scheme only if-
(a) the requirements imposed by or by virtue of sections 26 to 32 and such other requirements as may be prescribed are satisfied in its case; and
(b) the rules of the scheme applying to protected rights are framed so as to comply with the relevant requirements.
(5A) Regulations about pension schemes made under this Chapter may contain provisions framed by reference to whether or not a scheme-
(a) is approved under Chapter 1 (retirement benefit schemes of Part 14 of the Incomes and Corporation Taxes Act 1988, or isa relevant statutory scheme within the meaning of that Chapter, or
(b) is approved under Chapter 4 (personal pension schemes) of that Part.
(6) In this section "relevant requirements" means-
(a) the requirements of any regulations prescribing the form and content of rules of contracted-out or, as the case may be, appropriate schemes; and
(b) such other requirements as to form and content (not inconsistent with regulations) as may be imposed by the Secretary of State as a condition of contracting-out or, as the case may be, of being an appropriate scheme, either generally or in relation to a particular scheme.
Clause 218 - Restrictions on commutation and age at which benefits may be received]
• Amendment of the Pension Schemes Act 1993: Section 21
21 Commutation, surrender and forfeiture.
(1)Where the annual rate of a pension required to be provided by a scheme in accordance with section 13 or 17 would not exceed the prescribed amount and the circumstances are such as may be prescribed, the scheme may provide for the payment of a lump sum instead of that pension.
(1) A scheme may, in such circumstances and subject to such restrictions and conditions as may be prescribed, provide for the payment of a lump sum instead of a pension required to be provided by the scheme in accordance with section 13 or 17.
(2)Neither section 13 nor section 17 shall preclude a scheme from providing for the earner's or the earner's widow's or widower's guaranteed minimum pension to be suspended or forfeited in such circumstances as may be prescribed.
Section 17
• The clause inserts a new paragraph (8) at the end of section 17.
Minimum pensions for widows and widowers.
(1) Subject to the provisions of this Part, the scheme must provide that if the earner dies leaving a widow or widower (whether before or after attaining pensionable age), the widow or widower will be entitled to a guaranteed minimum pension under the scheme.
(2) The scheme must contain a rule to the effect that-
(a)if the earner is a man who has a guaranteed minimum under section 14, the weekly rate of the widow's pension will be not less than the widow's guaranteed minimum;
(b) if the earner is a woman who has a guaranteed minimum under that section, the weekly rate of the widower's pension will be not less than the widower's guaranteed minimum.
(3) The widow's guaranteed minimum shall be half that of the earner.
(4) The widower's guaranteed minimum shall be one-half of that part of the earner's guaranteed minimum which is attributable to earnings factors for the tax year 1988-89 and subsequent tax years.
(4A) The scheme must provide for the widow or widower's pension to be payable to the widow or widower-
(a) for any period for which a Category B retirement pension is payable to the widow or widower by virtue of the earner's contributions or would be so payable but for section 43(1) of the Social Security Contributions and Benefits Act 1992 (persons entitled to more than one retirement pension);
(b)for any period for which widowed parent's allowance or bereavement allowance is payable to the widow or widower by virtue of the earner's contributions; and
(c)in the case of a widow or widower whose entitlement by virtue of the earner's contributions to a widowed parent's allowance or bereavement allowance has come to an end at a time after the widow or widower attained the age of 45, for so much of the period beginning with the time when the entitlement came to an end as neither-
(i) comprises a period during which the widow or widower and a person of the opposite sex are living together as husband and wife; nor
(ii) falls after the time of any remarriage by the widow or widower.
(5) The scheme must also make provision for the widow's pension to be payable to her for any period for which a widowed mother's allowance or widow's pension is payable to her by virtue of the earner's contributions.
(6) The scheme must also make provision for the widower's pension to be payable to him in the prescribed circumstances and for the prescribed period.
(7) The trustees or managers of the scheme shall supply to the Inland Revenue any such information as the Inland Revenue may require relating to the payment of pensions under the scheme to widowers or widows.
(8) Where-
(a) a lump sum is paid to an earner under provisions included in a scheme by virtue of section 21(1), and
(b) those provisions are of a prescribed description,
the earner shall be treated for the purposes of this section as having any guaranteed minimum under section 14 that he would have had but for that payment.
Section 28
28 Ways of giving effect to protected rights.
1) The rules of the scheme must provide for effect to be given to the protected rights of a member-
(a) in any case where subsection (3) so requires, by the purchase of such an annuity as is mentioned in that subsection, and
(b) in any other case, in such of the ways provided for by the following subsections as the rules may specify,
and they must not provide for any part of a member's protected rights to be discharged otherwise than in accordance with those subsections.
(1A) Where the scheme is a personal pension scheme which provides for the member to elect to receive payments in accordance with this subsection, and the member so elects, effect shall be given to his protected rights during the interim period by the making of payments under an interim arrangement which-
(a) complies with section 28A, and
(b) satisfies such conditions as may be prescribed;
and in such a case subsections (2) to (4) accordingly apply as regards giving effect to his protected rights as from the end of that period.
(2) Effect may be given to protected rights-
(a) by the provision by the scheme of a pension which-
(i) complies with the pension requirements (within the meaning of section 29(1)), and
(ii) satisfies such conditions as may be prescribed; or
(b) in such circumstances and subject to such conditions as may be prescribed, by the making of a transfer payment-
(i) in the case of an occupational pension scheme, to another occupational pension scheme, to a personal pension scheme or to an overseas arrangement , and
(ii) in the case of a personal pension scheme, to another personal pension scheme, to an occupational pension scheme or to an overseas arrangement ,
where the scheme to which the payment is made satisfies such requirements as may be prescribed.
(3) Subject to subsections (5) and (7), if-
(a) the rules of the scheme do not provide for a pension; or
(b) the member or, where section 28A(2) applies, the member's widow or widower so elects,
then, except to the extent that effect is given to protected rights in accordance with subsection (1A), (4) or (4A) or (4), effect shall be given to them by the purchase by the scheme of an annuity which-
(i) complies with the annuity requirements (within the meaning of section 29(3)), and
(ii) satisfies such conditions as may be prescribed.
(4)Effect may be given to protected rights by the provision of a lump sum subject to such restrictions as may be prescribed, if-
(a)the lump sum is payable on a date which is-
(i)in the case of an occupational pension scheme, a date not earlier than that on which the member attains the age of 60 nor later than that on which he attains the age of 65 or such later date as has been agreed by him, or
(ii)in the case of a personal pension scheme, where the member has elected to receive payments under an interim arrangement, the date by reference to which the member elects to terminate that arrangement, and otherwise such date as has been agreed by him and is not earlier than his 60th birthday nor later than his 75th birthday.
(b)the annual rate of a pension under subsection (2) or an annuity under subsection (3) giving effect to the protected rights and commencing on the date on which the lump sum is payable would not exceed the prescribed amount;
(c)the circumstances are such as may be prescribed; and
(d)the amount of the lump sum is equal to the value on that date of the protected rights to which effect is being given, and
(e)such other conditions as may be prescribed are satisfied.
(4A) Subject to subsection (4B), in the case of an occupational pension scheme, effect may be given to protected rights by the provision of a lump sum if-
(a) the trustees or managers of the scheme are satisfied that the member is terminally ill and likely to die within the period of twelve months beginning with the date on which the lump sum becomes payable; and
(b) the amount of the lump sum is equal to the value on that date of the protected rights to which effect is being given.
(4B) The value of the protected rights to which effect may be given under subsection (4A) in a case in which the member is a married person on the date on which the lump sum becomes payable shall not exceed one half of the value on that date of all the member's protected rights.
(5) If the member has died without effect being given to protected rights under subsection (1A) (2), (3) , (4) or (4A) or (4), effect may be given to them in such manner as may be prescribed.
(6) No transaction is to be taken to give effect to protected rights unless it falls within this section.
(8) In this section and sections 28A, 28B and 29-
"the interim period" means the period beginning with the starting date in relation to the member in question and ending with the termination date;
"the starting date" means the date, which must not be earlier than the member's 60th birthday, by reference to which the member elects to begin to receive payments under the interim arrangement;
"the termination date" means the date by reference to which the member (or, where section 28A(2) applies, the member's widow or widower) elects to terminate the interim arrangement, and that date must be not later than-
(i) the member's 75th birthday, or
(ii) where section 28A(2) applies, the earlier of the member's widow or widower's 75th birthday and the 75th anniversary of the member's birth.
(9) This section is subject to section 32A.
Section 29
29 The pension and annuity requirements.
(1) For the purposes of section 28 a pension complies with the pension requirements if-
(a) in the case of an occupational pension scheme it commences on a date-
(i) not earlier than the member's 60th birthday, and
(ii) not later than his 65th birthday,
or on date that is not later than the member's 65th birthday, or on such later date as has been agreed by him, and continues until the date of his death, or
(aa) in the case of a personal pension scheme-
(i) where the member has elected under section 28(1A) to receive payments under an interim arrangement, it commences on the termination date, and continues until the date of the member's death or, where section 28A(2) applies, until the death of the member's widow or widower, or
(ii) otherwise, it commences on such a date as has been agreed by the member and is not earlier than his 60th birthday nor later than his 75th birthday, and continues until the date of his death;
b) in a case where the member dies while it is payable to him and is survived by a widow or widower-
(i) it is payable to the widow or widower in prescribed circumstances and for the prescribed period at an annual rate which at any given time is one-half of the rate at which it would have been payable to the member if the member had been living at that time; or
(ii) where that annual rate would not exceed a prescribed amount and the circumstances are such as may be prescribed, a lump sum calculated in the prescribed manner is provided in lieu of it.
Stakeholder pensions
Clause 219 - Meaning of "stakeholder pension scheme"
Amendment of the Welfare Reform and Pensions Act 1999: Section 1
1 Meaning of "stakeholder pension scheme"
(1) A pension scheme is a stakeholder pension scheme for the purposes of this Part if it is registered as such a scheme under section 2 and each of the following is fulfilled, namely -
(a) the conditions set out in subsections (2) to (9) to (10); and
(b) such other conditions as may be prescribed.
(2) The first condition is that the scheme is established under a trust or in such other way as may be prescribed.
(3) The second condition is that the provisions made by the instruments establishing the scheme comply with such requirements as may be prescribed.
(4) The third condition is that, subject to such exceptions as may be prescribed, the benefits provided by the scheme are money purchase benefits within the meaning given by section 181 of the Pension Schemes Act 1993 ("the 1993 Act").
(5) The fourth condition is that the scheme complies with such requirements as may be prescribed as regards the extent to which, and the circumstances in which -
(a) any payment made to the scheme by or on behalf of by, or on behalf or in respect of, a member of the scheme,
(b) any income or capital gain arising from the investment of such a payment, or
(c) the value of rights under the scheme,
may be used to defray the administrative expenses of the scheme, to pay commission or in any other way which does not result in the provision of benefits for or in respect of members.
(6) The fifth condition is that the scheme complies with such of the requirements of regulations under section 113 of the 1993 Act (disclosure of information about schemes to members etc) as are applicable to it.
(7) The sixth condition is that, subject to such minimum contribution levels and other restrictions as may be prescribed, members of the scheme may make such contributions to the scheme as they think appropriate.
(8) The seventh condition is that, except in so far as is necessary to ensure that the scheme has tax-exemption or tax-approval (within the meaning of the 1993 Act), the scheme accepts transfer payments in respect of members' rights under -
(a) other pension schemes;
(b) contracts and schemes approved under Chapter III of Part XIV of the Income and Corporation Taxes Act 1988 (retirement annuity contracts);
(c) annuities and insurance policies purchased or transferred for the purpose of giving effect to rights under pension schemes; and
(d) annuities purchased or entered into for the purpose of discharging liability in respect of pension credits under section 29(1)(b) or under corresponding Northern Ireland legislation.
(9) The eighth condition is that the scheme has such exemption or approval as is mentioned in subsection (8).
(10) The ninth condition is that—
(a) if the scheme is an occupational pension scheme, it is specified in a contracting-out certificate in relation to all categories of employment to which the scheme relates, and
(b) if the scheme is a personal pension scheme, it is an appropriate scheme within the meaning of section 7(4) of that Act.
2 Registration of stakeholder pension schemes
(1) The Occupational Pensions Regulatory Authority ("the Authority") shall keep a register of stakeholder pension schemes.
(2) Subject to subsection (3), the Authority shall register a pension scheme under this section if the trustees of the scheme, or any person or persons prescribed in relation to the scheme -
(a) make an application for the purpose and pay such fee as the Authority may determine; and
(b) declare that each of the following is fulfilled in relation to the scheme, namely -
(i) the conditions set out in subsections (2) to (9) to (10) of section 1; and
(ii) such other conditions as may be prescribed under subsection (1) of that section.
PART 6
STATE PENSIONS
Clause 220 - Persons entitled to more than one Category B retirement pension
• Amendment of the Social Security Contributions and Benefits Act 1992: Section 43
43 Persons entitled to more than one retirement pension
(1) A person shall not be entitled for the same period to more than one retirement pension under this Part of this Act except as provided by subsection (2) below.
(2) A person who, apart from subsection (1) above, would be entitled for the same period to both-
(a) a Category A or a Category B retirement pension under this Part; and
(b) a Category C or a Category D retirement pension under Part III below,
shall be entitled to both of those pensions for that period, subject to any adjustment of them in pursuance of regulations under section 73 of the Administration Act.
(3) A person who, apart from subsection (1) above, would be entitled-
(a) to both a Category A and a Category B retirement pension under this Part for the same period, or
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