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
89

133
Consequences of the Board ceasing to be involved with a scheme
(1)
Where—
(a)
an assessment period comes to an end by virtue of the Board ceasing to
be involved with an eligible scheme, and
(b)
during the assessment period any amount of any benefit payable to a
5
member, or to a person in respect of a member, under the scheme was
not paid by reason of section 125 (requirement to pay benefits in
accordance with the pension compensation provisions),

that amount falls due to the member, or as the case may be, person at the end
of that period.
10
(2)
Regulations may provide that, in cases within paragraph (a) of subsection (1),
benefits are to accrue under the scheme, in such circumstances as may be
prescribed, to or in respect of members of the scheme in respect of any specified
period of service being service in employment which, but for section 120(5),
would have qualified the member in question for those benefits under the
15
scheme.
(3)
Regulations under subsection (2) may in particular make provision—
(a)
for benefits not to accrue to, or in respect of, a member unless
contributions are paid by or on behalf of the member towards the
scheme within a prescribed period;
20
(b)
for contributions towards the scheme which, but for section 120, would
have been payable by or on behalf of the employer (otherwise than on
behalf of an employee) during the assessment period, to fall due;
(c)
requiring that such contributions as are mentioned in paragraph (a) or
(b) are accepted for the assessment period or any part of that period.
25
(4)
In this section “contributions” means, in relation to an eligible scheme,
contributions payable towards the scheme by or on behalf of the employer or
the active members of the scheme in accordance with the schedule of
contributions maintained under section 208 in respect of the scheme.
Reconsideration
30
134
Application for reconsideration
(1)
Where subsection (2) or (3) applies in relation to an eligible scheme, the trustees
or managers of the scheme may make an application to the Board under this
section for it to assume responsibility for the scheme in accordance with this
Chapter.
35
(2)
This subsection applies where—
(a)
a notice confirming that a scheme rescue is not possible in relation to
the scheme has been issued under section 111(2) and the trustees or
managers have received a copy of that notice under section 111(6) (or,
in a case to which section 112 applies, under subsection (4) of that
40
section),
(b)
the valuation obtained by the Board under section 127 in respect of the
scheme has become binding, and
(c)
the Board would have been required to assume responsibility for the
scheme under section 114 but for the fact that the condition in
45
subsection (2)(a) of that section was not satisfied.

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Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
90

(3)
This subsection applies where—
(a)
the Board has issued a notice under subsection (2) of section 117
confirming that a scheme rescue is not possible in relation to the scheme
and the trustees or managers have received a copy of that notice under
subsection (4) of that section,
5
(b)
the valuation obtained by the Board under section 127 in respect of the
scheme has become binding, and
(c)
the Board would have been required to assume responsibility for the
scheme under section 115 but for the fact that the condition in
subsection (2)(a) of that section was not satisfied.
10
(4)
An application under this section must be in the prescribed form, contain the
prescribed information and be accompanied by—
(a)
a protected benefits quotation in the prescribed form, and
(b)
an auditor’s valuation of the scheme as at a date (“the reconsideration
date”) within the prescribed period ending with the day on which the
15
application is made.
(5)
An application under this section must be made within the authorised period.
(6)
In this section “the authorised period” means the prescribed period which
begins—
(a)
where subsection (2) applies, with the later of—
20
(i)
the day on which the trustees or managers received the copy
notice mentioned in paragraph (a) of that subsection, and
(ii)
the day on which they were notified of the binding valuation
mentioned in paragraph (b) of that section, and
(b)
where subsection (3) applies, with the later of—
25
(i)
the day on which the trustees or managers received the copy
notice mentioned in paragraph (a) of that subsection, and
(ii)
the day on which they were notified of the binding valuation
mentioned in paragraph (b) of that subsection.
(7)
For the purposes of this section—
30

“auditor’s valuation”, in relation to a scheme, means a written valuation
of the assets of the scheme (excluding any assets representing the value
of any rights in respect of money purchase benefits under the scheme),
prepared and signed by the auditor in relation to the scheme (within
the meaning given by section 47 of the Pensions Act 1995 (c. 26));
35

“protected benefits quotation”, in relation to a scheme, means a quotation
for one or more annuities from one or more insurers, being companies
willing to accept payment in respect of the members from the trustees
or managers of the scheme, which would provide in respect of each
member of the scheme from the reconsideration date—
40
(a)
benefits to or in respect of the member corresponding to the
compensation which would be payable to or in respect of the
member in accordance with the pension compensation
provisions if the Board assumed responsibility for the scheme
by virtue of this section, or
45
(b)
benefits in accordance with the member’s entitlement or
accrued rights (including pension credit rights within the
meaning of section 124(1) of the Pensions Act 1995)) under the
scheme rules (other than his entitlement or rights in respect of
money purchase benefits)
50

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Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
91


whichever benefits can, in the case of that member, be secured at the lower
cost;

‘”scheme rules”, in relation to a scheme, means—
(a)
the rules of the scheme, except so far as section 129 of the
Pension Schemes Act 1993 (c. 48), section 117 of the Pensions
5
Act 1995 (c. 26) or section 264 of this Act overrides them,
(b)
any provision of any of those Acts which overrides or modifies
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
10
which the scheme must contain if it is to conform with the
requirements of Chapter 1 of Part 4 of the Pension Schemes Act
1993 (preservation of benefit under occupational pension
schemes).
(8)
Subject to subsection (9), regulations under subsection (4) of section 127, and
15
guidance under subsection (5) of that section, apply to an auditor’s valuation
for the purposes of this section as they apply for the purposes of a valuation
under that section.
(9)
Regulations may provide for the purposes of an auditor’s valuation
accompanying an application under this section—
20
(a)
that the value assigned to assets of a prescribed description is to be the
value assigned to those assets in the binding valuation obtained under
section 127;
(b)
how the value to be assigned to such an asset is to be determined where
the asset has been acquired during the assessment period.
25
135
Duty to assume responsibility following reconsideration
(1)
This section applies where an application is made in respect of a scheme in
accordance with section 134.
(2)
The Board must assume responsibility for the scheme in accordance with this
Chapter if it is satisfied that the value of the assets of the scheme at the
30
reconsideration date is less than the aggregate of—
(a)
the amount quoted in the protected benefits quotation accompanying
the application,
(b)
the amount of the liabilities of the scheme which are not liabilities to, or
in respect of, members of the scheme, and
35
(c)
the estimated costs of winding up the scheme.
(3)
Where the Board makes a determination for the purposes of subsection (2), it
must issue a determination notice and give a copy of that notice to—
(a)
the trustees or managers of the scheme, and
(b)
the Regulator.
40
(4)
In subsection (3) “determination notice” means a notice which is in the
prescribed form and contains such information about the determination as
may be prescribed
(5)
The Board may, for the purposes of subsection (2), obtain its own valuation of
the assets of the scheme as at the reconsideration date and, where it does so,
45
section 134(8) and (9) apply as they apply in relation to the auditor’s valuation
under that section.

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Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
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(6)
The amount of the liabilities mentioned in subsection (2)(b) is to be taken to be
the amount assigned to those liabilities of the scheme which are not liabilities
to, or in respect of, members of the scheme in—
(a)
the binding valuation obtained under section 127, or
(b)
where a valuation of those liabilities at a more recent date (but not later
5
than the reconsideration date) has been obtained by the trustees or
managers of the scheme for the purposes of the audited scheme
accounts, that valuation.
(7)
In subsection (6) “audited scheme accounts”, in relation to a scheme, means
accounts, audited by the auditor of the scheme, which are obtained by the
10
trustees or managers of the scheme in accordance with a requirement under
section 41 of the Pensions Act 1995 (c. 26).
(8)
In this section references to the assets of the scheme do not include assets
representing the value of any rights in respect of money purchase benefits
under the scheme.
15
(9)
This section is subject to sections 130 and 131 (refusal to assume responsibility
for a scheme).
Closed schemes
136
Closed schemes
(1)
This section applies where section 134(2) or (3) (scheme rescue not possible but
20
scheme has sufficient assets to meet the protected liabilities) applies in relation
to an eligible scheme.
(2)
If the trustees or managers of the scheme are unable to obtain a full buy-out
quotation, they must, within the authorised period, apply to the Board for
authority to continue as a closed scheme.
25
(3)
For the purposes of determining whether they must make an application under
subsection (2), the trustees and managers of the scheme must take all
reasonable steps to obtain a full buy-out quotation in respect of the scheme.
(4)
An application under subsection (2) must—
(a)
be in the prescribed form and contain the prescribed information, and
30
(b)
be accompanied by evidence in the prescribed form which shows that
the trustees or managers of the scheme have complied with the
obligation under subsection (3) but were unable to obtain a full buy-out
quotation.
(5)
Where the Board receives an application under subsection (2), if it is satisfied
35
that the trustees or managers have complied with the obligation under
subsection (3) but were unable to obtain a full buy-out quotation, it must
authorise the scheme to continue as a closed scheme.
(6)
Where the Board determines an application in respect of a scheme under this
section, it must issue a determination notice and give a copy of that notice to—
40
(a)
the trustees or managers of the scheme, and
(b)
the Regulator.
(7)
In this section—

“authorised period” has the same meaning as in section 134;

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Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
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“determination notice” means a notice which is in the prescribed form and
contains such information about the determination as may be
prescribed;

“full buy-out quotation”, in relation to a scheme, means a quotation for
one or more annuities from one or more insurers (being companies
5
willing to accept payment in respect of the members from the trustees
or managers of the scheme) which would provide in respect of each
member of the scheme, from a relevant date, benefits in accordance
with the member’s entitlement or accrued rights, including pension
credit rights, under the scheme (other than his entitlement or rights in
10
respect of money purchase benefits);

“pension credit rights” has the meaning given in section 124(1) of the
Pensions Act 1995 (c. 26);

“relevant date” means a date within the authorised period.
(8)
If the trustees or managers of the scheme fail to comply with subsection (2) or
15
(3), 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.
Winding up
137
Requirement to wind up schemes with sufficient assets to meet protected
liabilities
20
(1)
Where, in relation to an eligible scheme, an assessment period within section
119(2) or (4) comes to an end because the conditions in subsection (2) of this
section are satisfied, the trustees or managers of the scheme must—
(a)
wind up the scheme, or
(b)
where the winding up of the scheme began before the assessment
25
period (whether by virtue of section 201 or otherwise), continue the
winding up of the scheme.
(2)
The conditions are—
(a)
that subsection (2) or (3) of section 134 (scheme rescue not possible but
scheme has sufficient assets to meet the protected liabilities) applies in
30
relation to the scheme,
(b)
that—
(i)
the trustees or managers did not make an application under that
section or section 136(2) within the authorised period (within
the meaning of section 134(6)) (or any such application has been
35
withdrawn), or
(ii)
if such an application was made, it has been finally determined,
and
(c)
that, if an application was made under section 134, the Board is not
required to assume responsibility for the scheme by virtue of section
40
135(2).
(3)
For the purposes of subsection (2)(b)(ii) an application is not finally
determined until—
(a)
the Board has issued a determination notice in respect of the
application under section 135 or, as the case may be, 136,
45
(b)
the period within which the issue of the notice may be reviewed by
virtue of Chapter 6 has expired, and

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Chapter 3 — Pension protection
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(c)
if the issue of the notice is so reviewed—
(i)
the review and any reconsideration,
(ii)
any reference to the PPF Ombudsman in respect of the
determination, and
(iii)
any appeal against his determination or directions,
5

has been finally disposed of.
(4)
Where, in relation to an eligible scheme, an assessment period within section
142(2) comes to an end because the conditions in subsection (5) of this section
are satisfied, the trustees or managers of the scheme must continue the
winding up of the scheme begun (whether in accordance with this section or
10
otherwise) before that assessment period.
(5)
The conditions are—
(a)
that an application is made by, or notice is given to, the trustees or
managers of the scheme under section 140,
(b)
that the valuation obtained by the Board in respect of the scheme under
15
section 141(3) has become binding, and
(c)
that the Board is not required to assume responsibility for the scheme
by virtue of section 141(1).
(6)
Where a scheme is wound up in accordance with subsection (1)(a), the winding
up is to be taken as beginning immediately before the assessment period.
20
(7)
Without prejudice to the power to give directions under section 121, the Board
may give the trustees or managers of the scheme directions relating to the
manner of the winding up of the scheme under this section (and may vary or
revoke any such direction given by it).
(8)
The winding up of a scheme under this section is as effective in law as if it had
25
been made under powers conferred by or under the scheme.
(9)
This section must be complied with in relation to a scheme—
(a)
in spite of any enactment or rule of law, or any rule of the scheme,
which would otherwise operate to prevent the winding up, and
(b)
without regard to any such enactment, rule of law or rule of the scheme
30
as would otherwise require or might otherwise be taken to require the
implementation of any procedure or the obtaining of any consent with
a view to the winding up.
(10)
Where a public service pension scheme is required to be wound up under this
section, provision may be made by order modifying any enactment in which
35
the scheme is contained or under which it is made.
Provisions applying to closed schemes
138
Treatment of closed schemes
(1)
In this section “closed scheme” means an eligible scheme which is authorised
under section 136 to continue as a closed scheme.
40
(2)
The provisions mentioned in subsection (3) apply in relation to a closed scheme
at any time when the trustees or managers of the scheme are required to wind
up or continue winding up the scheme under section 137 as if that time fell
within an assessment period in relation to the scheme.

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Chapter 3 — Pension protection
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(3)
The provisions are—
(a)
section 120 (admission of new members, payment of contributions etc);
(b)
section 121 (directions);
(c)
section 124 (Board to act as creditor of the employer).
(4)
Section 120, as it applies by virtue of subsection (2), does not preclude the
5
admission to a closed scheme of new pension credit members (within the
meaning of section 124(1) of the Pensions Act 1995 (c. 26)).
139
Valuations of closed schemes
(1)
Regulations may make provision requiring the trustees or managers of closed
schemes to obtain actuarial valuations of the scheme at such intervals as may
10
be prescribed for the purposes of enabling them to determine—
(a)
the benefits payable under the scheme;
(b)
whether to make an application under section 140.
(2)
Regulations under this section may prescribe how—
(a)
the assets, the full scheme liabilities and the protected liabilities in
15
relation to closed schemes, and
(b)
their amount or value,

are to be determined, calculated and verified.
(3)
Subject to any provision made under subsection (2), those matters are to be
determined, calculated and verified in accordance with guidance issued by the
20
Board.
(4)
In calculating the amount of any liabilities for the purposes of a valuation
required by virtue of this section, a provision of the scheme which limits the
amount of its liabilities by reference to the value of its assets is to be
disregarded.
25
(5)
In this section, in relation to a scheme—

“actuarial valuation” means a written valuation of—
(a)
the scheme’s assets,
(b)
the full scheme liabilities, and
(c)
the protected liabilities in relation to the scheme;
30

“the actuary” means—
(a)
the actuary appointed under section 47(1)(b) of the Pensions Act
1995 (professional advisers) in relation to the scheme, or
(b)
if no such actuary has been appointed, a person with prescribed
qualifications;
35

“assets” do not include assets representing the value of any rights in
respect of money purchase benefits under the scheme;

“closed scheme” has the same meaning as in section 138;

“full scheme liabilities” means—
(a)
the liabilities under the scheme to or in respect of members of
40
the scheme,
(b)
other liabilities of the scheme, and
(c)
the estimated cost of winding up the scheme;

“liabilities” does not include liabilities in respect of money purchase
benefits under the scheme.
45