Pensions Bill

House of Commons

Session 2003 - 04
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
96

Reconsideration of closed schemes
140
Applications and notifications where closed schemes have insufficient assets
(1)
If at any time the trustees or managers of a closed scheme become aware that
the value of the assets of the scheme is less than the amount of the protected
liabilities in relation to the scheme, they must, before the end of the prescribed
5
period beginning with that time, make an application to the Board for it to
assume responsibility for the scheme.
(2)
Where the Board receives an application under subsection (1), it must give a
copy of the application to the Regulator.
(3)
If at any time the Regulator becomes aware that the value of the assets of the
10
scheme is less than the amount of the protected liabilities in relation to the
scheme, it must give the Board a notice to that effect.
(4)
Where the Board receives a notice under subsection (3), it must give the
trustees or managers of the scheme a notice to that effect.
(5)
The duty imposed by subsection (1) does not apply where the trustees or
15
managers of an eligible scheme become aware as mentioned in that subsection
by reason of a notice given to them under subsection (4).
(6)
The duty imposed by subsection (3) does not apply where the Regulator
becomes aware as mentioned in that subsection by reason of a copy of an
application made by the trustees or managers of the eligible scheme being
20
given to it under subsection (2).
(7)
Regulations may require notices and applications under this section to be in the
prescribed form and contain the prescribed information.
(8)
If the trustees or managers of an eligible scheme fail to comply with subsection
(1), section 10 of the Pensions Act 1995 (c. 26) (civil penalties) applies to any
25
trustee or manager who has failed to take all reasonable steps to secure
compliance.
(9)
In this section closed scheme has the same meaning as in section 138.
141
Duty to assume responsibility for closed schemes
(1)
Where the trustees or managers of a closed scheme—
30
(a)
make an application under subsection (1) of section 140, or
(b)
receive a notice from the Board under subsection (4) of that section,

the Board must assume responsibility for the scheme in accordance with this
Chapter if the value of the assets of the scheme at the relevant time was less
than the amount of the protected liabilities at that time.
35
(2)
In subsection (1) 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.
(3)
For the purposes of determining whether the condition in subsection (1) is
satisfied, the Board must, as soon as reasonably practicable, obtain an actuarial
40
valuation (within the meaning of section 127(3)) of the scheme as at the
relevant time.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
97

(4)
Subject to subsection (5), the following provisions apply in relation to a
valuation obtained under subsection (3) as they apply in relation to a valuation
obtained under section 127—
(a)
subsections (4) to (6) and (8) of that section;
(b)
section 128 (approval of valuation), other than subsection (2)(b)(iii)
5
(duty to give copy of approved valuation to employer’s insolvency
practitioner);
(c)
section 129 (binding valuations), other than subsection (3)(b) (duty to
give copy of binding valuation to employer’s insolvency practitioner).
(5)
In the application of section 129 by virtue of subsection (4), subsection (2) of
10
that section applies as if the reference to section 115(2)(a) included a reference
to subsection (1) of this section.
(6)
In this section—

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

“the relevant time” means the time immediately before the application
15
mentioned in subsection (1)(a) was made, or (as the case may be) the
notice mentioned in subsection (1)(b) was received, by the trustees or
managers of the scheme.
142
Closed schemes: further assessment periods
(1)
This section applies where—
20
(a)
an application is made under subsection (1) of section 140 in relation to
a closed scheme, or
(b)
the trustees or managers of the scheme receive a notice under
subsection (4) of that section.
(2)
An assessment period —
25
(a)
begins when the application is made or the notice is received by the
trustees or managers of the scheme, and
(b)
ends when—
(i)
the trustees or managers receive a transfer notice under section
143, or
30
(ii)
the conditions in section 137(5) (closed scheme with sufficient
assets to meet protected liabilities etc) are satisfied in relation to
the scheme,

whichever first occurs.
(3)
In this section “closed scheme” has the same meaning as in section 138.
35
Assumption of responsibility for a scheme
143
Transfer notice
(1)
This section applies where the Board is required to assume responsibility for a
scheme under section 114, 115 , 135 or 141.
(2)
The Board must give the trustees or managers a notice (a “transfer notice”).
40
(3)
In a case to which section 114 or 115 applies, a transfer notice may not be given
until the valuation obtained under section 127 is binding.

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
98

(4)
In a case to which section 141 applies, a transfer notice may not be given until
the valuation obtained under subsection (3) of that section is binding
(5)
The Board must give a copy of any notice given under subsection (2) to—
(a)
the Regulator, and
(b)
any insolvency practitioner in relation to the employer or, if there is no
5
such insolvency practitioner, the employer.
(6)
This section is subject to section 155(1) and (2) (no transfer notice within first 12
months of assessment period or when fraud compensation application is
pending).
144
Effect of Board assuming responsibility for a scheme
10
(1)
Where a transfer notice is given to the trustees or managers of an eligible
scheme, the Board assumes responsibility for the scheme in accordance with
this Chapter.
(2)
The effect of the Board assuming responsibility for a scheme is that—
(a)
the property, rights and liabilities of the scheme are transferred to the
15
Board, without further assurance, with effect from the time the trustees
or managers receive the transfer notice,
(b)
the trustees or managers of the scheme are discharged from their
pension obligations from that time, and
(c)
from that time the Board is responsible for securing that compensation
20
is paid in accordance with the pension compensation provisions,

and, accordingly, the scheme is to be treated as having been wound up
immediately after that time.
(3)
In subsection (2)(a) the reference to liabilities of the scheme does not include
any liability to, or in respect of, any member of the scheme, other than liabilities
25
in respect of money purchase benefits.
(4)
In subsection (2)(b) “pension obligations” in relation to the trustees or
managers of the scheme means—
(a)
their obligations to provide pensions or other benefits to or in respect
of persons (including any obligation to provide guaranteed minimum
30
pensions within the meaning of the Pension Schemes Act 1993 (c. 48)),
and
(b)
their obligations to administer the scheme in accordance with the
scheme rules and this or any other enactment.
(5)
Schedule 6 makes provision in respect of the transfer of the property, rights
35
and liabilities of a scheme under subsection (2)(a).
(6)
Regulations may make further provision regarding such transfers.
145
The pension compensation provisions
(1)
Schedule 7 makes provision for pension compensation to be paid in relation to
a scheme for which the Board assumes responsibility under this Chapter,
40
including provision for—
(a)
periodic compensation to be paid to or in respect of members,
(b)
lump sum compensation to be paid to members,

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
99

(c)
a cap to be imposed on the periodic compensation and lump sum
compensation payable, and
(d)
annual increases to be made to periodic compensation.
(2)
In this Part references to the pension compensation provisions are to the
provisions of this section and section 144(2)(c), Schedule 7 and any regulations
5
made under section 151.

(Those references do not include section 153 (discharge of liabilities in respect
of money purchase benefits).)
146
Adjustments to be made where the Board assumes responsibility for a scheme
(1)
This section applies where the Board assumes responsibility for an eligible
10
scheme under this Chapter.
(2)
Any benefits (other than money purchase benefits) which—
(a)
were payable under the scheme to any member, or to any person in
respect of any member, during the assessment period, and
(b)
have been paid before the transfer notice is given,
15

are to be regarded as going towards discharging any liability of the Board to
pay compensation to the member or, as the case may be, person in accordance
with the pension compensation provisions.
(3)
The Board must—
(a)
if any amount paid, during the assessment period, by the trustees or
20
managers of the scheme to a member, or to a person in respect of a
member, exceeded the entitlement of that member or person under the
pension compensation provisions, take such steps as it considers
appropriate (including adjusting future compensation payments made
in accordance with those provisions) to recover an amount equal to the
25
aggregate of—
(i)
the amount of the excess, and
(ii)
interest on that amount, at the prescribed rate, for the period
which begins when the excess was paid by the trustees or
managers and ends with the recovery of the excess, and
30
(b)
if any amount so paid was less than that entitlement (or no amount was
paid in respect of that entitlement), pay an amount to the member or
person concerned equal to the aggregate of—
(i)
the amount of the shortfall, and
(ii)
interest on that amount, at the prescribed rate, for the period
35
which begins when the shortfall ought to have been paid by the
trustees or managers and ends with the payment of the shortfall
by the Board.
(4)
In subsection (3) references to an amount paid do not include an amount paid
in respect of any money purchase benefit.
40
(5)
Nothing in subsection (3) requires the Board to recover from any person any
amount which it considers to be trivial.
147
Postponement of compensation entitlement for the assessment period
(1)
Regulations may provide that, where the Board assumes responsibility for an
eligible scheme, the entitlement of any member of the scheme to compensation
45
under this Chapter is, in such circumstances as may be prescribed, postponed

Pensions Bill
Part 2 — The Board of the Pension Protection Fund
Chapter 3 — Pension protection
100

for the whole or any part of the assessment period for which he continued in
employment after attaining normal pension age.
(2)
Regulations under subsection (1) may provide that the postponement is on
such terms and conditions (including those relating to increments) as may be
prescribed.
5
(3)
In subsection (1) the reference to “normal pension age” is to normal pension
age, within the meaning of paragraph 30 of Schedule 7, in relation to the
pension or lump sum in respect of which the entitlement to compensation
arises.
148
Guaranteed minimum pensions
10
(1)
The Board must notify the Commissioners of Inland Revenue where, by reason
of it assuming responsibility for an eligible scheme under this Chapter, the
trustees or managers of the scheme are discharged from their liability to
provide a guaranteed minimum pension (within the meaning of the Pension
Schemes Act 1993 (c. 48)) to or in respect of a member of the scheme.
15
(2)
Notification under subsection (1) must be given as soon as reasonably
practicable.
(3)
In section 47 of the Pension Schemes Act 1993 (further provision concerning
entitlement to a guaranteed minimum pension for the purposes of section 46),
after subsection (7) insert—
20
“(8)
For the purposes of section 46, a person shall be treated as entitled to a
guaranteed minimum pension to which he would have been entitled
but for the fact that the trustees or managers were discharged from
their liability to provide that pension on the Board of the Pension
Protection Fund assuming responsibility for the scheme.”
25
149
Duty to pay scheme benefits unpaid at assessment date
(1)
Where the Board assumes responsibility for a scheme under this Chapter it
must pay any amount by way of pensions or other benefits under the scheme
to which a person had become entitled under the scheme rules before the
assessment date but which remained unpaid at the time the transfer notice was
30
received by the trustees or managers of the scheme.
(2)
If, immediately before the assessment date, the person is entitled to the amount
but has postponed payment of it, subsection (1) does not apply.
(3)
In this section “assessment date” and “scheme rules” are to be construed in
accordance with Schedule 7.
35
150
Modification of Chapter where liabilities discharged during assessment
period
Regulations may modify any of the provisions of this Chapter as it applies to
cases where any liability to provide pensions or other benefits to or in respect
of any member or members under a scheme is discharged during an
40
assessment period in relation to the scheme by virtue of—
(a)
regulations under section 122(4), or
(b)
the Board validating any action mentioned in section 122(5).