Pensions Bill

House of Commons

Session 2003 - 04
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
154

231
Consultation by employers: personal pension schemes
(1)
Regulations may require any prescribed person who—
(a)
is the employer in relation to a personal pension scheme where direct
payment arrangements exist in respect of one or more members of the
scheme who are his employees, and
5
(b)
proposes to make a prescribed decision affecting the application of the
direct payment arrangements in relation to those employees,

to consult prescribed persons in the prescribed manner before he makes the
decision.
(2)
The validity of any decision prescribed for the purposes of subsection (1)(b) is
10
not affected by any failure to comply with regulations under this section.
(3)
Section 232 contains further provisions about regulations under this section.
232
Further provisions about regulations relating to consultation
(1)
In this section “consultation regulations” means regulations under section 230
or 231.
15
(2)
Consultation regulations may—
(a)
make provision about the time to be allowed for consultation;
(b)
prescribe the information which must be provided to the persons who
are required to be consulted;
(c)
confer a discretion on the employer in prescribed cases as to the persons
20
who are to be consulted;
(d)
make provision about the representatives the employees may have for
the purposes of the regulations and the methods by which those
representatives are to be selected;
(e)
require or authorise the holding of ballots;
25
(f)
amend, apply with or without modifications, or make provision similar
to, any provision of the Employment Rights Act 1996 (c. 18) (including,
in particular, Parts 5, 10 and 13), the Employment Tribunals Act 1996
(c. 17) or the Trade Union and Labour Relations (Consolidation) Act
1992 (c. 52);
30
(g)
enable any requirement for consultation imposed by the regulations to
be waived or relaxed by order of the Regulator;
(h)
require the employer to communicate to the trustees and managers of
the scheme any representations received by the employer in response
to any consultation required by the regulations.
35
(3)
Persons on whom obligations are imposed by consultation regulations, either
as employers or as the trustees or managers of occupational pension schemes,
must, if so required by the Regulator, provide information to the Regulator
about the action taken by them for the purpose of complying with the
regulations.
40
(4)
Consultation regulations may make provision as to—
(a)
the information to be provided under subsection (3);
(b)
the form and manner in which the information is to be provided;
(c)
the period within which the information is to be provided.
(5)
Nothing in consultation regulations is to be regarded as affecting any duty to
45
consult arising otherwise than under the regulations.

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
155

Modification of pension rights
233
Modification of subsisting rights
For section 67 of the Pensions Act 1995 (c. 26) substitute—
“67
The subsisting rights provisions
(1)
The subsisting rights provisions apply to any power conferred on any
5
person by an occupational pension scheme, other than a public service
pension scheme, to modify the scheme.
(2)
Any exercise of such a power to make a regulated modification is
voidable in accordance with section 67G unless the following are
satisfied in respect of the modification—
10
(a)
in the case of each affected member—
(i)
if the modification is a protected modification, the
consent requirements (see section 67B),
(ii)
if it is not, either the consent requirements or the
actuarial equivalence requirements (see section 67C),
15
(b)
the trustee approval requirement (see section 67E), and
(c)
the reporting requirement (see section 67F).
(3)
The subsisting rights provisions do not apply in relation to the exercise
of a power—
(a)
for a purpose connected with debits under section 29(1) of the
20
Welfare Reform and Pensions Act 1999, or
(b)
in a prescribed manner.
(4)
References in this section and sections 67A to 67I to “the subsisting
rights provisions” are to this section and those sections.
(5)
Subsection (6) applies in relation to the exercise of a power to which the
25
subsisting rights provisions apply to make a regulated modification
where a member of the scheme dies before the requirements mentioned
in subsection (2), so far as they apply in his case, have been complied
with in respect of the modification if—
(a)
before he died he had given his consent to the modification in
30
accordance with section 67B(4)(b), or
(b)
before he died, or before the trustees of the scheme had become
aware that he had died, the trustees had complied with section
67C(4)(a), (b) and (d) in respect of the modification in his case.
(6)
Any of the requirements mentioned in subsection (2), as it applies in
35
respect of the modification—
(a)
which is satisfied in the case of the member, or
(b)
which would have been satisfied in his case had he not died
before it was satisfied,

is to be taken to be satisfied in the case of any survivor of the member
40
in respect of the modification.
67A
The subsisting rights provisions: interpretation
(1)
In the subsisting rights provisions, each of the following expressions
has the meaning given to it by the following provisions of this section—

“regulated modification”
45

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
156


“protected modification”

“detrimental modification”

“affected member”

“subsisting right”

“scheme rules”.
5
(2)
“Regulated modification” means a modification which is—
(a)
a protected modification, or
(b)
a detrimental modification,

or is both.
(3)
“Protected modification” means a modification of an occupational
10
pension scheme which—
(a)
on taking effect would or might result in any subsisting right
of—
(i)
a member of the scheme, or
(ii)
a survivor of a member of the scheme,
15

which is not a right or entitlement to money purchase benefits
becoming, or being replaced with, a right or entitlement to
money purchase benefits under the scheme rules,
(b)
would or might result in a reduction in the prevailing rate of
any pension in payment under the scheme rules, or
20
(c)
is of a prescribed description.

For the purposes of paragraph (a), the reference in the definition of
“money purchase benefits” in section 181(1) of the Pension Schemes Act
1993 to the widow or widower of a member of an occupational pension
scheme is to be read as including any other survivor of the member.
25
(4)
“Detrimental modification” means a modification of an occupational
pension scheme which on taking effect would or might adversely affect
any subsisting right of—
(a)
any member of the scheme, or
(b)
any survivor of a member of the scheme.
30
(5)
A person is an “affected member”—
(a)
in relation to a protected modification within paragraph (a) or
(b) of subsection (3), if, at the time the modification takes effect,
he is—
(i)
a member of the scheme, or
35
(ii)
a survivor of a member of the scheme,

and, on taking effect, the modification would or might affect
any of his subsisting rights as mentioned in that paragraph,
(b)
in relation to a protected modification within paragraph (c) of
that subsection, if he is of a prescribed description, and
40
(c)
in relation to a detrimental modification which is not a
protected modification if, at the time the modification takes
effect, he is—
(i)
a member of the scheme, or
(ii)
a survivor of a member of the scheme,
45

and, on taking effect, the modification would or might
adversely affect any of his subsisting rights.
(6)
“Subsisting right” means—

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
157

(a)
in relation to a member of an occupational pension scheme, at
any time—
(i)
any right which at that time has accrued to or in respect
of him to future benefits under the scheme rules, or
(ii)
any other entitlement to benefits which he has at that
5
time, under the scheme rules, and
(b)
in relation to the survivor of a member of an occupational
pension scheme, at any time, any entitlement to benefits, or
right to future benefits, which he has at that time under the
scheme rules in respect of the member.
10

For this purpose, “right” includes a pension credit right.
(7)
“Scheme rules”, in relation to a scheme, means—
(a)
the rules of the scheme, except so far as—
(i)
paragraph 3 of Schedule 5 to the Social Security Act
1989,
15
(ii)
section 129 of the Pension Schemes Act 1993,
(iii)
section 117 of this Act, or
(iv)
section 264 of the Pensions Act 2004,

overrides them,
(b)
any provision of any of those Acts which overrides or modifies
20
any of the rules of the scheme by virtue of one of the provisions
mentioned in paragraph (a), and
(c)
any provision which the rules of the scheme do not contain but
which the scheme must contain if it is to conform with the
requirements of Chapter 1 of Part 4 of the Pension Schemes Act
25
1993 (preservation of benefit under occupational pension
schemes).
(8)
For the purposes of this section—
(a)
“survivor”, in relation to a member of an occupational pension
scheme, means a person who—
30
(i)
is the widow or widower of the member, or
(ii)
has survived the member and has any entitlement to
benefit, or right to future benefits, under the scheme
rules in respect of the member, and
(b)
a modification would or might adversely affect a person’s
35
subsisting right if it would alter the nature or extent of the
entitlement or right so that the benefits, or future benefits, to
which the entitlement or right relates would or might be less
generous.
(9)
In the subsisting rights provisions, in relation to—
40
(a)
the exercise of a power to modify an occupational pension
scheme to which the subsisting rights provisions apply, or
(b)
a modification made, or to be made, in exercise of such a power,

references to “the scheme” are to be read as references to the scheme
mentioned in paragraph (a).
45
67B
The consent requirements
(1)
References in the subsisting rights provisions to the consent
requirements, in respect of a regulated modification, are to be read in
accordance with this section.

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
158

(2)
The consent requirements apply in the case of an affected member—
(a)
if the modification is a protected modification;
(b)
if it is not a protected modification, unless the actuarial
equivalence requirements apply in his case.
(3)
The consent requirements consist of—
5
(a)
the informed consent requirement (see subsection (4)), and
(b)
the timing requirement (see subsection (6)).
(4)
The informed consent requirement is satisfied in the case of an affected
member if before the modification is made—
(a)
the trustees have—
10
(i)
given him information in writing adequate to explain
the nature of the modification and its effect on him,
(ii)
notified him in writing that he may make
representations to the trustees about the modification,
(iii)
afforded him a reasonable opportunity to make such
15
representations, and
(iv)
notified him in writing that the consent requirements
apply in his case in respect of the modification, and
(b)
after the trustees have complied with paragraph (a)(i), (ii) and
(iv), the affected member has given his consent in writing to the
20
modification.
(5)
The trustees are to be taken to have notified an affected member as
mentioned subsection (4)(a)(iv) if they have notified him in writing
that—
(a)
if he gives his consent to the modification for the purposes of the
25
consent requirements, those requirements apply in his case in
respect of the modification, but
(b)
otherwise, the actuarial equivalence requirements apply in his
case in respect of the modification.
(6)
The timing requirement is satisfied in the case of an affected member if
30
the modification takes effect within a reasonable period after the
member has given his consent to the modification in accordance with
subsection (4)(b).
67C
The actuarial equivalence requirements
(1)
References in the subsisting rights provisions to the actuarial
35
equivalence requirements, in respect of a detrimental modification
which is not a protected modification, are to be read in accordance with
this section and section 67D.
(2)
The actuarial equivalence requirements apply in the case of an affected
member only if—
40
(a)
the modification is not a protected modification, and
(b)
the trustees of the scheme determine that they are to apply in his
case.
(3)
The actuarial equivalence requirements consist of—
(a)
the information requirement (see subsection (4)),
45
(b)
the actuarial value requirement (see subsection (5)), and

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
159

(c)
the actuarial equivalence statement requirement (see subsection
(6)).
(4)
The information requirement is satisfied in the case of an affected
member if before the modification is made the trustees have taken all
reasonable steps to—
5
(a)
give him information in writing adequate to explain the nature
of the modification and its effect on him,
(b)
notify him in writing that he may make representations to the
trustees about the modification,
(c)
afford him a reasonable opportunity to make such
10
representations, and
(d)
notify him in writing that the actuarial equivalence
requirements apply in his case in respect of the modification.
(5)
The actuarial value requirement is satisfied in the case of an affected
member if before the modification is made the trustees have made such
15
arrangements, or taken such steps, as are adequate to secure that
actuarial value will be maintained.
(6)
The actuarial equivalence statement requirement is satisfied in the case
of an affected member if the trustees have, within a reasonable period
beginning with the date on which the modification takes effect,
20
obtained an actuarial equivalence statement relating to the affected
member in respect of the modification.
(7)
For the purposes of subsection (6) “actuarial equivalence statement”
means a statement in writing which—
(a)
is given by—
25
(i)
the actuary appointed in relation to the scheme under
section 47(1)(b), or
(ii)
a person of a prescribed description, and
(b)
certifies that actuarial value has been maintained.
(8)
For the purposes of subsections (5) and (7) as they apply in relation to
30
an affected member, actuarial value is maintained if the actuarial value,
immediately after the time at which the modification takes effect, of the
affected member’s subsisting rights is equal to or greater than the
actuarial value of his subsisting rights immediately before that time.
67D
The actuarial equivalence requirements: further provisions
35
(1)
This section applies for the purposes of section 67C.
(2)
Where—
(a)
the information requirement has been satisfied in the case of an
affected member in respect of a proposed modification (“the
original modification”),
40
(b)
before the trustees have made a determination, or given their
consent, for the purposes of section 67E(1) in relation to the
original modification, the original modification has been
revised, and
(c)
the modification as so revised (“the revised modification”) does
45
not differ from the original modification in any material respect,

the information requirement is to be taken to have been satisfied in
relation to the revised modification.

Pensions Bill
Part 5 — Occupational and personal pension schemes: miscellaneous provisions
160

(3)
The trustees are to be regarded as having taken all reasonable steps to
notify an affected member as mentioned in section 67C(4)(d) in respect
of a modification if they have taken all reasonable steps to notify him in
writing that—
(a)
if he gives his consent to the modification for the purposes of the
5
consent requirements, those requirements apply in his case in
respect of the modification, but
(b)
otherwise, the actuarial equivalence requirements apply in his
case in respect of the modification.
(4)
Any calculation for the purposes of section 67C of the actuarial value of
10
an affected member’s subsisting rights at any time must conform with
such requirements as may be prescribed.
(5)
Requirements prescribed by regulations under subsection (4) may
include requirements for any such calculation to be made in accordance
with guidance that—
15
(a)
is prepared and from time to time revised by a prescribed body,
and
(b)
if the regulations so provide, is approved by the Secretary of
State.
(6)
Nothing in subsections (6) and (7) of section 67C precludes actuarial
20
equivalence statements relating to—
(a)
two or more affected members, or
(b)
affected members of any particular description,

in respect of a modification being given in a single document.
67E
The trustee approval requirement
25
(1)
For the purposes of section 67(2)(b), the trustee approval requirement
is satisfied in relation to the exercise of a power to make a regulated
modification if—
(a)
the trustees of the scheme have determined to exercise the
power to make the modification, or
30
(b)
if the power is exercised by another person, the trustees have
consented to the exercise of the power to make the modification,

and the making of the determination, or giving of consent, complies
with subsections (2) and (3).
(2)
The trustees must not make a determination, or give their consent, for
35
the purposes of subsection (1) unless, in the case of each affected
member—
(a)
if the modification is a protected modification, the informed
consent requirement is satisfied (within the meaning of section
67B), or
40
(b)
if it is not—
(i)
the informed consent requirement is satisfied, or
(ii)
the information and actuarial value requirements are
satisfied (within the meaning of section 67C),

in respect of the modification.
45
(3)
The trustees must not make a determination, or give their consent, for
the purposes of subsection (1) more than a reasonable period after the