Pensions Bill

House of Commons

Session 2003 - 04
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Schedule 7 — Pension compensation provisions
236

      (3)
The annual rate of the periodic compensation at any time is half of the
annual rate of the periodic compensation (including any increases under
paragraph 27) to which the active member would at that time have been
entitled under paragraph 8 in respect of the pension had the member not
died.
5
      (4)
In this paragraph “the pension” and “the active member” are to be construed
in accordance with paragraph 8.
10    (1)
Compensation is payable in accordance with this paragraph where an active
member of the scheme has, before the assessment date, attained normal
pension age in respect of his rights under the admissible rules of the scheme
10
to a lump sum (“the scheme lump sum”).
      (2)
The active member is entitled to compensation of an amount equal to 100%
of the aggregate of—
(a)
the accrued amount, and
(b)
any increases to which the active member would have been entitled
15
under the admissible rules (by virtue of the fact that the lump sum
was not paid at normal pension age) had the active member ceased
to be an active member immediately before the assessment date.
      (3)
The compensation is payable at the assessment date.
      (4)
Subject to sub-paragraphs (5) and (6), the accrued amount is—
20

where—
AR is the active member’s annual accrual rate in respect of the scheme
lump sum under the admissible rules,
PE is the active member’s annual pensionable earnings in respect of
the scheme lump sum under the admissible rules, and
25
PS is the active member’s pensionable service in respect of the scheme
lump sum, under the admissible rules, in years (including any
fraction of a year).
      (5)
If the accrual rates or pensionable earnings differ in respect of different parts
of the active member’s pensionable service relating to the scheme lump sum,
30
an amount is calculated in accordance with the formula in sub-paragraph (4)
in respect of each of those parts and the accrued amount is the aggregate of
those amounts.

For this purpose the references in that sub-paragraph to the active member’s
pensionable service, accrual rate and pensionable earnings are to be read as
35
references to the part of his pensionable service in question and to his accrual
rate and pensionable earnings in respect of that part.
      (6)
In any case where the Board is satisfied that it is not possible to identify one
or more of the elements of the formula in sub-paragraph (4), the Board may,
having regard to the admissible scheme rules, determine how the accrued
40
amount is to be calculated.
      (7)
This paragraph does not apply in relation to a lump sum to which a person
is entitled by reason of commuting any part of a pension under the scheme.

Pensions Bill
Schedule 7 — Pension compensation provisions
237

      (8)
This paragraph is subject to paragraph 29 (power of Secretary of State to
change percentage rates by order).
Active members who have not attained normal pension age at assessment date
11    (1)
Compensation is payable in accordance with this paragraph where a person
who, under the admissible rules, is (immediately before the assessment
5
date) an active member of the scheme has not, before that date, attained
normal pension age in respect of his rights under the admissible rules of the
scheme to a pension.
      (2)
If the active member survives to attain normal pension age in respect of that
pension (“the pension”), he is entitled to periodic compensation in respect of
10
the pension commencing at that age and continuing for life.
      (3)
The annual rate of the periodic compensation is 90% of the aggregate of—
(a)
the protected notional pension, and
(b)
any increases under paragraph 27 (annual increases in periodic
compensation).
15
      (4)
In sub-paragraph (3) “the protected notional pension” means the aggregate
of—
(a)
the accrued amount, and
(b)
the revaluation amount for the revaluation period (see paragraph
12).
20
      (5)
Subject to sub-paragraphs (6) and (7), the accrued amount is—

where—
AR is the active member’s annual accrual rate in respect of the pension
under the admissible rules,
PE is the active member’s annual pensionable earnings in respect of
25
the pension under the admissible rules, and
PS is the active member’s pensionable service in respect of the pension
under the admissible rules in years (including any fraction of a
year).
      (6)
If the accrual rates or pensionable earnings differ in respect of different parts
30
of the active member’s pensionable service relating to the pension, an
amount is calculated in accordance with the formula in sub-paragraph (5) in
respect of each of those parts and the accrued amount is the aggregate of
those amounts.

For this purpose the references in sub-paragraph (5) to the active member’s
35
pensionable service, accrual rate and pensionable earnings are to be read as
references to the part of his pensionable service in question and to his accrual
rate and pensionable earnings in respect of that part.
      (7)
In any case where the Board is satisfied that it is not possible to identify one
or more of the elements of the formula in sub-paragraph (5), the Board may,
40
having regard to the admissible scheme rules, determine how the accrued
amount is to be calculated.
      (8)
This paragraph is subject to—

Pensions Bill
Schedule 7 — Pension compensation provisions
238

paragraph 23 (commutation)
paragraph 25 (compensation cap), and
paragraph 29 (Secretary of State’s power to change percentage rates
by order).
12    (1)
This paragraph applies for the purposes of paragraph 11(4)(b).
5
      (2)
The revaluation period is the period which—
(a)
begins with the assessment date, and
(b)
ends with the day before the day on which the active member attains
normal pension age in respect of the pension.
      (3)
The revaluation amount for the revaluation period is—
10
(a)
in a case where the revaluation period is less than one month, nil, and
(b)
in any other case, the revaluation percentage of the accrued amount.
      (4)
In sub-paragraph (3) “the revaluation percentage” means the lesser of—
(a)
the percentage increase in the general level of prices in Great Britain
during the revaluation period determined in the prescribed manner,
15
and
(b)
the maximum revaluation rate.
      (5)
For the purposes of sub-paragraph (4)(b) “the maximum revaluation rate” in
relation to the revaluation period is—
(a)
if that period is a period of 12 months, 5%, and
20
(b)
in any other case, the percentage that would be the percentage
mentioned in sub-paragraph (4)(a) had the general level of prices in
Great Britain increased at the rate of 5% compound per annum
during that period.

This is subject to paragraph 28 (power of Board to determine maximum
25
revaluation rate etc).
      (6)
In this paragraph “the active member”, “the accrued amount” and “the
pension” are to be construed in accordance with paragraph 11.
13    (1)
This paragraph applies where the active member dies on or after the
assessment date.
30
      (2)
The widow or widower of the active member is entitled to periodic
compensation commencing on the day following the active member’s death
and continuing for life.
      (3)
The annual rate of the periodic compensation at any time is—
(a)
where the active member died after attaining normal pension age,
35
half of the annual rate of the periodic compensation (including any
increases under paragraph 27) to which the member would at that
time have been entitled under paragraph 11 in respect of the pension
had the member not died, and
(b)
where the active member died before attaining normal pension age,
40
half of the annual rate of the periodic compensation (including any
increases under paragraph 27) to which the member would have
been entitled at normal pension age under that paragraph if—
(i)
normal pension age had been the member’s actual age
immediately before the date of the member’s death, and
45
(ii)
the member had not died.
      (4)
In this paragraph “the pension” and “the active member” are to be construed
in accordance with paragraph 11.

Pensions Bill
Schedule 7 — Pension compensation provisions
239

14    (1)
Compensation is payable in accordance with this paragraph where
immediately before the assessment date, under the admissible rules of the
scheme, an active member of the scheme has not attained normal pension
age in respect of his rights to a lump sum (“the scheme lump sum”).
      (2)
If the active member survives to attain normal pension age in respect of the
5
scheme lump sum, he is entitled to compensation in respect of the scheme
lump sum when he attains that age.
      (3)
The compensation is a lump sum equal to 90% of the protected amount.
      (4)
In sub-paragraph (3) “the protected amount” means the aggregate of—
(a)
the accrued amount, and
10
(b)
the revaluation amount for the revaluation period.
      (5)
Subject to sub-paragraphs (6) and (7), the accrued amount is—

where—
AR is the active member’s annual accrual rate in respect of the scheme
lump sum under the admissible rules,
15
PE is the active member’s annual pensionable earnings in respect of
the scheme lump sum under the admissible rules, and
PS is the active member’s pensionable service in respect of the scheme
lump sum, under the admissible rules, in years (including any
fraction of a year).
20
      (6)
If the accrual rates or pensionable earnings differ in respect of different parts
of the active member’s pensionable service relating to the scheme lump sum,
an amount is calculated in accordance with the formula in sub-paragraph (5)
in respect of each of those parts and the accrued amount is the aggregate of
those amounts.
25

For this purpose the references in that sub-paragraph to the active member’s
pensionable service, accrual rate and pensionable earnings are to be read as
references to the part of his pensionable service in question and to his accrual
rate and pensionable earnings in respect of that part.
      (7)
In any case where the Board is satisfied that it is not possible to identify one
30
or more of the elements of the formula in sub-paragraph (5), the Board may,
having regard to the admissible scheme rules, determine how the accrued
amount is to be calculated.
      (8)
Paragraph 12 applies for the purpose of determining the revaluation amount
except that in sub-paragraph (6) of that paragraph the reference to
35
paragraph 11 is to be read as a reference to this paragraph.
      (9)
This paragraph is subject to—
(a)
paragraph 25 (compensation cap), and
(b)
paragraph 29 (power to change percentage rates by order).
Deferred members who have not attained normal pension age at assessment date
40
15    (1)
Compensation is payable in accordance with this paragraph where, under
the admissible rules of the scheme, a person who is a deferred member

Pensions Bill
Schedule 7 — Pension compensation provisions
240

immediately before the assessment date has not attained normal pension
age, in respect of his rights to a pension under the scheme, before that date.
      (2)
If that person (“the deferred member”) survives to attain normal pension age
in respect of that pension (“the pension”), he is entitled to periodic
compensation in respect of the pension commencing at that age and
5
continuing for life.
      (3)
The annual rate of the periodic compensation is 90% of the aggregate of—
(a)
the protected pension rate, and
(b)
any increases under paragraph 27 (annual increases in periodic
compensation).
10
      (4)
In sub-paragraph (3) “the protected pension rate” means the aggregate of—
(a)
the accrued amount,
(b)
the revaluation amount for the first revaluation period (see
paragraph 16), and
(c)
the revaluation amount for the second revaluation period (see
15
paragraph 17).
      (5)
In sub-paragraph (4) “the accrued amount” means an amount equal to the
initial annual rate of the pension to which the deferred member would have
been entitled in accordance with the admissible rules had he attained normal
pension age when the pensionable service relating to the pension ended.
20
      (6)
This paragraph is subject to—
paragraph 23 (commutation),
paragraph 25 (compensation cap), and
paragraph 29 (Secretary of State’s power to change percentage rates
by order).
25
16    (1)
This paragraph applies for the purposes of paragraph 15(4)(b).
      (2)
The first revaluation period is the period which—
(a)
begins with the day after the day on which the deferred member’s
pensionable service under the scheme in respect of the pension
ended, and
30
(b)
ends with the day before the assessment date.
      (3)
The revaluation amount for the first revaluation period is—
(a)
where that period is less than one month, nil, and
(b)
in any other case, the amount determined in the prescribed manner.
      (4)
In this paragraph “the deferred member” and “the pension” are to be
35
construed in accordance with paragraph 15.
17    (1)
This paragraph applies for the purposes of paragraph 15(4)(c).
      (2)
The second revaluation period is the period which—
(a)
begins with the assessment date, and
(b)
ends with the day before the day on which the deferred member
40
attains normal pension age in respect of the pension.
      (3)
The revaluation amount for the second revaluation period is—
(a)
where that period is less than one month, nil, and
(b)
in any other case the revaluation percentage of the aggregate of—
(i)
the accrued amount, and
45
(ii)
the revaluation amount for the first revaluation period (see
paragraph 16).

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Schedule 7 — Pension compensation provisions
241

      (4)
In sub-paragraph (3) “the revaluation percentage” means the lesser of—
(a)
the percentage increase in the general level of prices in Great Britain
during the second revaluation period determined in the prescribed
manner, and
(b)
the maximum revaluation rate.
5
      (5)
For the purposes of sub-paragraph (4)(b) “the maximum revaluation rate”,
in relation to the second revaluation period, is—
(a)
if that period is a period of 12 months, 5%, and
(b)
in any other case, the percentage that would be the percentage
mentioned in sub-paragraph (4)(a) had the general level of prices in
10
Great Britain increased at the rate of 5% compound per annum
during that period.

This is subject to paragraph 28 (power of Board to determine maximum
revaluation rate).
      (6)
In this paragraph “the deferred member”, “the accrued amount” and “the
15
pension” are to be construed in accordance with paragraph 15.
18    (1)
This paragraph applies where—
(a)
the deferred member dies on or after the assessment date, and
(b)
the pension was attributable to the deferred member’s pensionable
service under the scheme or another scheme.
20
      (2)
The widow or widower of the deferred member is entitled to periodic
compensation commencing on the day following the deferred member’s
death and continuing for life.
      (3)
The annual rate of the periodic compensation at any time is—
(a)
where the deferred member died after attaining normal pension age,
25
half of the annual rate of the periodic compensation (including any
increases under paragraph 27) to which the deferred member would
at that time have been entitled under paragraph 15 in respect of the
pension had the member not died,
(b)
where the deferred member died before attaining normal pension
30
age, half of the annual rate of the periodic compensation (including
any increases under paragraph 27) to which the deferred member
would have been entitled at that time under paragraph 15 if—
(i)
normal pension age had been the deferred member’s actual
age immediately before the date of the deferred member’s
35
death, and
(ii)
the deferred member had not died.
      (4)
In this paragraph “the deferred member” and “the pension” are to be
construed in accordance with paragraph 15.
19    (1)
Compensation is payable in accordance with this paragraph where, under
40
the admissible rules of the scheme, a deferred member has not attained
normal pension age in respect of his rights to a lump sum under the scheme
(“the scheme lump sum”) before the assessment date.
      (2)
If the deferred member survives to attain normal pension age in respect of
the scheme lump sum, he is entitled to compensation under this paragraph
45
on attaining that age.
      (3)
The compensation is a lump sum equal to 90% of the protected amount.
      (4)
In sub-paragraph (3) “the protected amount” means the aggregate of—
(a)
the accrued amount,

Pensions Bill
Schedule 7 — Pension compensation provisions
242

(b)
the revaluation amount for the first revaluation period, and
(c)
the revaluation amount for the second revaluation period.
      (5)
In sub-paragraph (4) “the accrued amount” means an amount equal to the
amount of the scheme lump sum to which the deferred member would have
been entitled in accordance with the admissible rules had normal pension
5
age been the actual age attained by the deferred member when the
pensionable service relating to the lump sum ended.
      (6)
Paragraphs 16 and 17 apply in relation to this paragraph as if in those
paragraphs—
(a)
references to the pension were to the scheme lump sum, and
10
(b)
“the deferred member” and “the accrued amount” had the same
meaning as in this paragraph.
      (7)
This paragraph does not apply in relation to a lump sum to which a person
is entitled by reason of commuting any part of a pension under the scheme.
      (8)
This paragraph is subject to—
15
(a)
paragraph 25 (compensation cap), and
(b)
paragraph 29 (power to change percentage rates).
Pension credit members who have not attained normal benefit age at assessment date
20    (1)
Paragraphs 15, 18 and 19 apply in relation to a pension credit member of the
scheme who has not attained normal benefit age at the assessment date as
20
they apply to a deferred member who has not attained normal pension age
at that date, subject to the modifications in sub-paragraph (2).
      (2)
The modifications are as follows—
(a)
in paragraph 15(4) for the words from “the aggregate of” to the end
substitute “the accrued amount”,
25
(b)
for paragraph 15(5) substitute—
     “(5)
In sub-paragraph (4) “the accrued amount” means an
amount equal to the initial annual rate of the pension
which, under the admissible rules of the scheme, the
deferred member is entitled to receive at normal benefit
30
age by virtue of his pension credit rights.”,
(c)
for paragraph 18(1)(b) substitute—
“(b)
the pension was attributable (directly or indirectly)
to a pension credit to which the deferred pensioner
became entitled under section 29(1)(b) of the
35
Welfare Reform and Pensions Act 1999 (c. 30).”,
(d)
in paragraph 19(1), (2) and (5) the references to normal pension age
are to be read as references to normal benefit age, and
(e)
paragraph 19(6) does not apply.
Survivors who do not meet conditions for scheme benefits at assessment date
40
21    (1)
Compensation is payable in accordance with this paragraph where—
(a)
a member of the scheme has died before the assessment date,
(b)
as a result of that death, a pension, which is attributable to the
member’s pensionable service, is payable to that person’s widow or
widower or any other person (“the survivor”) if conditions specified
45
in the scheme rules are met, and