Pensions Bill

House of Commons

Session 2003 - 04
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Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
79

117
Board’s duty where application or notification received under section 116
(1)
This section applies where the Board—
(a)
receives an application under subsection (1) of section 116 and is
satisfied that paragraphs (a) and (b) of that subsection are satisfied in
relation to the application, or
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(b)
is notified by the Regulator under section 116(4).
(2)
If the Board is able to confirm that a scheme rescue is not possible, it must as
soon as reasonably practicable issue a notice to that effect.
(3)
If the Board is able to confirm that a scheme rescue has occurred, it must as
soon as reasonably practicable issue a withdrawal notice.
10
(4)
The Board must, as soon as reasonably practicable, give a copy of any notice
issued under subsection (2) or (3) to—
(a)
the Regulator,
(b)
the trustees or managers of the scheme, and
(c)
the employer.
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(5)
For the purposes of this section—
(a)
the Board is able to confirm that a scheme rescue has occurred in
relation to an occupational pension scheme if, and only if, it is able to
confirm such matters as are prescribed for the purposes of this
paragraph, and
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(b)
the Board is able to confirm that a scheme rescue is not possible in
relation to such a scheme if, and only if, it is able to confirm such
matters as are prescribed for the purposes of this paragraph.
(6)
In this section “withdrawal notice” means a notice in the prescribed form
which—
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(a)
states the time from which the Board ceases to be involved with the
scheme, and
(b)
contains such other information as may be prescribed.
118
Protected liabilities
(1)
For the purposes of this Chapter the protected liabilities, in relation to an
30
eligible scheme, at a particular time (“the relevant time”) are—
(a)
the cost of securing benefits for and in respect of members of the
scheme which are equivalent to the compensation which would be
payable, in relation to the scheme, in accordance with the pension
compensation provisions (see section 145) if the Board assumed
35
responsibility for the scheme under this Chapter,
(b)
liabilities of the scheme which are not liabilities to, or in respect of, its
members, and
(c)
the estimated cost of winding up the scheme.
(2)
For the purposes of determining the cost of securing benefits within subsection
40
(1)(a), references in Schedule 7 (pension compensation provisions) to the
assessment date are to be read as references to the day on which the time
immediately after the relevant time falls.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
80

Restrictions on schemes during the assessment period
119
Assessment periods
(1)
In this Part references to an assessment period are to be construed in
accordance with this section.
(2)
Where, in relation to an eligible scheme, a qualifying insolvency event occurs
5
in relation to the employer, an assessment period—
(a)
begins with the occurrence of that event, and
(b)
ends when—
(i)
the Board ceases to be involved with the scheme (see section
132),
10
(ii)
the trustees or managers of the scheme receive a transfer notice
under section 143, or
(iii)
the conditions in section 137(2) (no scheme rescue but sufficient
assets to meet protected liabilities etc) are satisfied in relation to
the scheme,
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whichever first occurs.
(3)
In subsection (2) “qualifying insolvency event” has the meaning given by
section 114(3).
(4)
Where, in relation to an eligible scheme, an application is made under section
116(1) or a notification is received under section 116(5)(a), an assessment
20
period—
(a)
begins when the application is made or the notification is received, and
(b)
ends when—
(i)
the Board ceases to be involved with the scheme (see section
132),
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(ii)
the trustees or managers of the scheme receive a transfer notice
under section 143, or
(iii)
the conditions in section 137(2) (no scheme rescue but sufficient
assets to meet protected liabilities etc) are satisfied in relation to
the scheme,
30

whichever first occurs.
(5)
For the purposes of subsection (4) an application under section 116(1) or
notification under section 116(5)(a) is to be disregarded if it is made or given
during an assessment period in relation to the scheme which began before the
application was made or notification was given.
35
(6)
This section is subject to section 142 (which provides for further assessment
periods to begin in certain circumstances where schemes are required to wind
up or continue winding up under section 137).
120
Admission of new members, payment of contributions etc
(1)
This section applies where there is an assessment period in relation to an
40
eligible scheme.
(2)
No new members may be admitted to the scheme during the assessment
period.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
81

(3)
Except in prescribed circumstances and subject to prescribed conditions, no
further contributions (other than those due to be paid before the beginning of
the assessment period) may be paid towards the scheme during the assessment
period.
(4)
Any obligation to pay contributions towards the scheme during the assessment
5
period (including any obligation under section 49(8) of the Pensions Act 1995
(c. 26) to pay amounts deducted corresponding to such contributions) is to be
read subject to subsection (3) and section 133 (obligation to pay contributions
when assessment period ends).
(5)
No benefits may accrue under the scheme to, or in respect of, members of the
10
scheme during the assessment period.
(6)
Subsection (5) does not prevent any increase, in a benefit, which would
otherwise accrue in accordance with the scheme or any enactment.

This subsection is subject to section 125 (which limits the scheme benefits
payable during an assessment period).
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(7)
Subsection (5) does not prevent the accrual of money purchase benefits to the
extent that they are derived from income or capital gains arising from the
investment of payments which—
(a)
are made by, or in respect of, a member of the scheme, and
(b)
relate to periods of pensionable service (within the meaning of section
20
124(1) and (3) of the Pensions Act 1995) prior to the assessment period.
(8)
Any action taken in contravention of this section is void.
(9)
Disregarding subsection (8), section 10 of the Pensions Act 1995 (civil penalties)
applies to any trustee or manager of a scheme who fails to take all reasonable
steps to secure compliance with this section.
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121
Directions
(1)
This section applies where there is an assessment period in relation to an
eligible scheme.
(2)
With a view to ensuring that the scheme’s protected liabilities do not exceed its
assets or, if they do exceed its assets, that the excess is kept to a minimum, the
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Board may give a relevant person in relation to the scheme directions
regarding the exercise during that period of his powers in respect of—
(a)
the investment of the scheme’s assets,
(b)
the incurring of expenditure,
(c)
the instigation or conduct of legal proceedings, and
35
(d)
such other matters as may be prescribed.
(3)
In subsection (2)—
(a)
“relevant person” in relation to a scheme means—
(i)
the trustees or managers of the scheme,
(ii)
the employer in relation to the scheme, or
40
(iii)
such other persons as may be prescribed, and
(b)
the reference to the assets of the scheme is a reference to those assets
excluding any assets representing the value of any rights in respect of
money purchase benefits under the scheme.
(4)
The Board may revoke or vary any direction under this section.
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Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
82

(5)
Where a direction under this section given to the trustees or managers of a
scheme is not complied with section 10 of the Pensions Act 1995 (c. 26) (civil
penalties) applies to any such trustee or manager who has failed to take all
reasonable steps to secure compliance with the direction.
(6)
That section also applies to any other person who, without reasonable excuse,
5
fails to comply with a direction given to him under this section.
122
Restrictions on winding up, discharge of liabilities etc
(1)
This section applies where there is an assessment period in relation to an
eligible scheme.
(2)
Subject to subsection (3), the winding up of the scheme must not begin during
10
the assessment period.
(3)
Subsection (2) does not apply to the winding up of the scheme in pursuance of
an order by the Regulator under section 11(3A) of the Pensions Act 1995
(Regulator’s powers to wind up occupational pension schemes to protect
Pension Protection Fund) directing the scheme to be wound up (and section
15
201 makes provision for the backdating of the winding up).
(4)
During the assessment period—
(a)
except in prescribed circumstances and subject to prescribed
conditions, no transfers of, or transfer payments in respect of, any
member’s rights under the scheme are to be made from the scheme,
20
and
(b)
no other steps may be taken to discharge any liability of the scheme to
or in respect of a member of the scheme in respect of pensions or other
benefits.

This subsection applies whether or not the scheme was being wound up
25
immediately before the assessment period or began winding up by virtue of
subsection (3).
(5)
Any action taken in contravention of this section is void, except to the extent
that the Board validates the action (see section 123).
(6)
Disregarding subsection (5), where there is a contravention of this section,
30
section 10 of the Pensions Act 1995 (civil penalties) applies to any trustee or
manager who has failed to take all reasonable steps to secure compliance with
this section.
(7)
The Regulator may not make a freezing order (see section 20) in relation to the
scheme during the assessment period.
35
123
Power to validate contraventions of section 122
(1)
The Board may validate an action for the purposes of section 122(5) only if it is
satisfied that to do so is consistent with the objective of ensuring that the
scheme’s protected liabilities do not exceed its assets or, if they do exceed its
assets, that the excess is kept to a minimum.
40
(2)
Where the Board determines to validate, or not to validate, any action of the
trustees or managers for those purposes, it must issue a notice to that effect and
give a copy of that notice to—
(a)
the Regulator,
(b)
the trustees or managers of the scheme,
45

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
83

(c)
any insolvency practitioner in relation to the employer or, if there is no
such insolvency practitioner, the employer, and
(d)
any other person who appears to the Board to be directly affected by the
determination.
(3)
A notice under subsection (2) must contain a statement of the Board’s reasons
5
for the determination.
(4)
The validation of an action does not take effect—
(a)
until—
(i)
the Board has issued a notice under subsection (2) relating to the
determination, and
10
(ii)
the period within which the issue of that notice may be
reviewed by virtue of Chapter 6 has expired, and
(b)
if the issue of the notice is so reviewed, until—
(i)
the review and any reconsideration,
(ii)
any reference to the PPF Ombudsman in respect of the issue of
15
the notice, and
(iii)
any appeal against his determination or directions,

has been finally disposed of.
124
Board to act as creditor of the employer
(1)
Subsection (2) applies where there is an assessment period in relation to an
20
eligible scheme.
(2)
During the assessment period, the rights and powers of the trustees or
managers of the scheme in relation to any debt (including any contingent debt)
owed to them by the employer, whether by virtue of section 75 of the Pensions
Act 1995 (c. 26) (deficiencies in the scheme assets) or otherwise, are exercisable
25
by the Board to the exclusion of the trustees or managers.
(3)
Where, by virtue of subsection (2), any amount is paid to the Board in respect
of such a debt, the Board must pay that amount to the trustees or managers of
the scheme.
(4)
Where an insolvency arrangement is made in respect of the employer, the
30
Board is not bound by the terms of that arrangement if, and to the extent that,
the arrangement relates to a debt which, at the time the arrangement was
made, was a contingent debt of the employer in respect of the scheme under
section 75 of the Pensions Act 1995.
(5)
Subsection (4) does not apply where, before the arrangement was made, the
35
Board consented to be so bound.
(6)
In subsection (4) “insolvency arrangement” means—
(a)
a voluntary arrangement under Part 1 or 8 of the Insolvency Act 1986
(c. 45);
(b)
an arrangement which has effect under section 425 of the Companies
40
Act 1985 (c. 6);
(c)
a deed of arrangement registered in accordance with the Deeds of
Arrangement Act 1914 (c. 47);
(d)
a trust deed executed for the employer’s creditors or a composition
contract entered into by the employer.
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