(53-59)

House of Commons

Session 2002 - 03
Internet Publications
Other Bills before Parliament

(  53  )

Clause 237
374
Page 161, line 17, leave out “scheme rules” and insert “rules of the scheme”
Clause 251
375
Page 171, line 14, leave out from “scheme” to “to” in line 15
376
Page 171, line 15, at end insert “other than a power conferred by—

(a)
a public service pension scheme, or

(b)
a prescribed scheme or a scheme of a prescribed description.”
377
Page 173, line 17, leave out “other entitlement to benefits” and insert “entitlement

to the present payment of a pension or other benefit”
378
Page 173, line 23, at end insert—

“( )
At any time when the pensionable service of a member of an occupational

pension scheme is continuing, his subsisting rights are to be determined as

if he had opted, immediately before that time, to terminate that service.”
379
Page 173, line 25, leave out from “as” to end of line 36 and insert “overridden by a

relevant legislative provision,

(b)
the relevant legislative provisions, to the extent that they have effect

in relation to the scheme and are not reflected in the rules of the

scheme, and”
380
Page 173, line 41, at end insert—

“(7A)
For the purposes of subsection (7)—

(a)
“relevant legislative provision” means any provision contained in

any of the following provisions—

(i)
Schedule 5 to the Social Security Act 1989 (equal treatment

for men and women);

(ii)
Chapters 2 to 5 of Part 4 of the Pension Schemes Act 1993

(certain protection for early leavers) or regulations made

under any of those Chapters;

(iii)
Part 4A of that Act (requirements relating to pension credit

benefit) or regulations made under that Part;

(iv)
section 110(1) of that Act (requirement as to resources for

annual increase of guaranteed minimum pensions);

(v)
this Part of this Act (occupational pensions) or subordinate

legislation made or having effect as if made under this Part;

(vi)
section 31 of the Welfare Reform and Pensions Act 1999

(pension debits: reduction of benefit);

(vii)
any provision mentioned in section 292(2) of the Pensions

Act 2004;

(b)
a relevant legislative provision is to be taken to override any of the

provisions of the scheme if, and only if, it does so by virtue of any

of the following provisions—

(i)
paragraph 3 of Schedule 5 to the Social Security Act 1989;

(ii)
section 129(1) of the Pension Schemes Act 1993;

(iii)
section 117(1) of this Act;

(iv)
section 31(4) of the Welfare Reform and Pensions Act 1999;

(v)
section 292(1) of the Pensions Act 2004.”

(  54  )
381
Page 174, line 37, leave out from beginning to “if” in line 40 and insert—

“(5)
If—

(a)
the modification is not a protected modification, and

(b)
before the modification is made the trustees notify an affected

member in writing that—

(i)
”
382
Page 174, line 43, leave out “(b)” and insert “(ii)”
383
Page 174, line 44, at end insert—


“the trustees are to be taken to have complied with subsection (4)(a)(iv) in

respect of him.”
384
Page 175, line 43, leave out “of a prescribed description” and insert “with

prescribed qualifications or experience or who is approved by the Secretary of

State”
385
Page 177, line 11, after “not” insert “a protected modification”
Clause 253
386
Page 186, line 23, leave out from “as” to end of line 35 and insert “overridden by a

relevant legislative provision,

(b)
the relevant legislative provisions, to the extent that they have effect

in relation to the scheme and are not reflected in the rules of the

scheme, and”
387
Page 186, line 46, at end insert—

“(8)
For the purposes of subsection (7)—

(a)
“relevant legislative provision” means any provision contained in

any of the following provisions—

(i)
Schedule 5 to the Social Security Act 1989 (equal treatment

for men and women);

(ii)
this Chapter or Chapters 2, 3 or 4 of this Part of this Act or

regulations made under this Chapter or any of those

Chapters;

(iii)
Part 4A of this Act or regulations made under that Part;

(iv)
section 110(1) of this Act;

(v)
Part 1 of the Pensions Act 1995 (occupational pensions) or

subordinate legislation made or having effect as if made

under that Part;

(vi)
section 31 of the Welfare Reform and Pensions Act 1999

(pension debits: reduction of benefit);

(vii)
any provision mentioned in section 292(2) of the Pensions

Act 2004;

(b)
a relevant legislative provision is to be taken to override any of the

provisions of the scheme if, and only if, it does so by virtue of any

of the following provisions—

(i)
paragraph 3 of Schedule 5 to the Social Security Act 1989;

(ii)
section 129(1) of this Act;

(iii)
section 117(1) of the Pensions Act 1995;

(iv)
section 31(4) of the Welfare Reform and Pensions Act 1999;

(v)
section 292(1) of the Pensions Act 2004.”

(  55  )

After Clause 258
388
Insert the following new Clause—


“Winding up

(1)
For section 73 of the Pensions Act 1995 (c. 26) (preferential liabilities on

winding up) substitute—

“73
Preferential liabilities on winding up

(1)
This section applies where an occupational pension scheme to

which this section applies is being wound up to determine the order

in which the assets of the scheme are to be applied towards

satisfying the liabilities of the scheme in respect of pensions and

other benefits.

(2)
This section applies to an occupational pension scheme other than

a scheme which is—

(a)
a money purchase scheme, or

(b)
a prescribed scheme or a scheme of a prescribed description.

(3)
The assets of the scheme must be applied first towards satisfying

the amounts of the liabilities mentioned in subsection (4) and, if the

assets are insufficient to satisfy those amounts in full, then—

(a)
the assets must be applied first towards satisfying the

amounts of the liabilities mentioned in earlier paragraphs of

subsection (4) before the amounts of the liabilities

mentioned in later paragraphs, and

(b)
where the amounts of the liabilities mentioned in one of

those paragraphs cannot be satisfied in full, those amounts

must be satisfied in the same proportions.

(4)
The liabilities referred to in subsection (3) are—

(a)
where—

(i)
the trustees or managers of the scheme are entitled

to benefits under a relevant pre-1997 contract of

insurance entered into in relation to the scheme, and

(ii)
either that contract may not be surrendered or the

amount payable on surrender does not exceed the

liability secured by the contract,


the liability so secured;

(b)
any liability for pensions or other benefits to the extent that

the amount of the liability does not exceed the

corresponding PPF liability, other than a liability within

paragraph (a);

(c)
any liability for pensions or other benefits which, in the

opinion of the trustees or managers, are derived from the

payment by any member of voluntary contributions, other

than a liability within paragraph (a) or (b);

(d)
any other liability in respect of pensions or other benefits.

(5)
For the purposes of subsection (4)—


“corresponding PPF liability” in relation to any liability for

pensions or other benefits means—

(  56  )

(a)
where the liability is to a member of the scheme, the

cost of securing benefits for 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 of the Pension Protection

Fund assumed responsibility for the scheme in

accordance with Chapter 3 of Part 2 of the Pensions

Act 2004 (pension protection), and

(b)
where the liability is to another person in respect of

a member of the scheme, the cost of securing benefits

for that person corresponding to the compensation

which would be payable to that person in respect of

the member in accordance with the pension

compensation provisions if the Board assumed

responsibility for the scheme in accordance with that

Chapter;


“relevant pre-1997 contract of insurance” means a contract of

insurance which was entered into before 6th April 1997 with

a view to securing the whole or part of the scheme’s liability

for—

(a)
any pension or other benefit payable to or in respect

of one particular person whose entitlement to

payment of a pension or other benefit has arisen, and

(b)
any benefit which will be payable in respect of that

person on his death.

(6)
For the purposes of this section, when determining the

corresponding PPF liability in relation to any liability of a scheme

to, or in respect of, a member for pensions or other benefits, the

pension compensation provisions apply with such modifications as

may be prescribed.

(7)
Regulations may modify subsection (4).

(8)
For the purposes of that subsection—

(a)
regulations may prescribe how it is to be determined

whether a liability for pensions or other benefits which, in

the opinion of the trustees or managers of the scheme, are

derived from the payment by any member of voluntary

contributions falls within paragraph (a) or (b) of that

subsection;

(b)
no pension or other benefit which is attributable (directly or

indirectly) to a pension credit is to be regarded for the

purposes of paragraph (c) of that subsection as derived from

the payment of voluntary contributions.

(9)
Where, on the commencement of the winding up period, a member

becomes a person to whom Chapter 5 of Part 4 of the Pension

Schemes Act 1993 (early leavers: cash transfer sums and

contribution refunds) applies, that Chapter applies in relation to

him with such modifications as may be prescribed.

(10)
For the purposes of this section—


“assets” of a scheme to which this section applies do not

include any assets representing the value of any rights in

respect of money purchase benefits under the scheme rules;

(  57  )


“liabilities” of such a scheme do not include any liabilities in

respect of money purchase benefits under the scheme rules;


“the pension compensation provisions” has the same meaning

as in Part 2 of the Pensions Act 2004 (see section 153 of that

Act);


“scheme rules” has the same meaning as in the Pensions Act

2004 (see section 303 of that Act);


“winding up period”, in relation to an occupational pension

scheme to which this section applies, means the period

which—

(a)
begins with the day on which the time immediately

after the beginning of the winding up of the scheme

falls, and

(b)
ends when the winding up of the scheme is

completed.

73A
Operation of scheme during winding up period

(1)
This section applies where an occupational pension scheme to

which section 73 applies is being wound up.

(2)
During the winding up period, the trustees or managers of the

scheme—

(a)
must secure that any pensions or other benefits (other than

money purchase benefits) paid to or in respect of a member

are reduced, so far as necessary, to reflect the liabilities of

the scheme to or in respect of the member which will be

satisfied in accordance with section 73, and

(b)
may, for the purposes of paragraph (a), take such steps as

they consider appropriate (including steps adjusting future

payments) to recover any overpayment or pay any shortfall.

(3)
During the winding up period—

(a)
no benefits may accrue under the scheme rules to, or in

respect of, members of the scheme, and

(b)
no new members of any class may be admitted to the

scheme.

(4)
Subsection (3) does not prevent any increase, in a benefit, which

would otherwise accrue in accordance with the scheme or any

enactment.

(5)
Subsection (3) 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 are made by,

or in respect of, a member of the scheme.

(6)
Where a person is entitled to a pension credit derived from another

person’s shareable rights under the scheme, subsection (3) does not

prevent the trustees or managers of the scheme discharging their

liability in respect of the credit under Chapter 1 of Part 4 of the

Welfare Reform and Pensions Act 1999 (sharing of rights under

pension arrangements) by conferring appropriate rights under the

scheme on that person.

(  58  )

(7)
Regulations may require the trustees or managers of the scheme, in

prescribed circumstances—

(a)
to adjust the entitlement of a person to a pension or other

benefit under the scheme rules where the entitlement arises

as a result of a discretionary award which takes effect

during the winding up period;

(b)
to adjust the entitlement of a person (“the survivor”) to a

pension or other benefit under the scheme rules where—

(i)
a member of the scheme, or a person who was (or

might have become) entitled to a pension or other

benefit in respect of a member, dies during the

winding up period, and

(ii)
the survivor’s entitlement is to a pension or other

benefit in respect of the member (whether arising on

the date of that death or subsequently).

(8)
Regulations under subsection (7) may, in particular—

(a)
prescribe how the required adjustments to entitlement are

to be determined and the manner in which they are to be

made;

(b)
in a case where the commencement of the winding up of the

scheme is backdated (whether in accordance with section

145 of the Pensions Act 2004 (requirement to wind up

schemes with sufficient assets to meet protected liabilities)

or otherwise), require any adjustment to a person’s

entitlement to be made with effect from the time the award

takes effect;

(c)
without prejudice to sections 10(3) to (9), 73B(2) and 116,

make provision about the consequences of breaching the

requirements of the regulations.

(9)
If the scheme confers power on any person other than the trustees

or managers of the scheme to apply the assets of the scheme in

respect of pensions or other benefits (including increases in

pensions or benefits), it cannot be exercised by that person but may,

subject to the provisions made by or by virtue of this section and

sections 73 and 73B, be exercised instead by the trustees or

managers.

(10)
For the purposes of this section—


“appropriate rights” has the same meaning as in paragraph 5

of Schedule 5 to the Welfare Reform and Pensions Act 1999

(pension credits: mode of discharge);


“discretionary award” means an award of a prescribed

description;


“shareable rights” has the same meaning as in Chapter 1 of

Part 4 of the Welfare Reform and Pensions Act 1999 (sharing

of rights under pension arrangements);

and subsection (10) of section 73 applies as it applies for the

purposes of that section.

73B
Sections 73 and 73A: supplementary

(1)
Any action taken in contravention of section 73A(3) is void.

(  59  )

(2)
If any provision made by or by virtue of the winding up provisions

is not complied with in relation to a scheme to which section 73

applies, section 10 applies to any trustee or manager of the scheme

who has failed to take all reasonable steps to secure compliance.

(3)
For the purposes of subsection (2), when determining whether

section 73A(3) has been complied with subsection (1) of this section

is to be disregarded.

(4)
Regulations may—

(a)
prescribe how, for the purposes of the winding up

provisions—

(i)
the assets and liabilities of a scheme to which section

73 applies, and

(ii)
their value or amount,


are to be determined, calculated and verified;

(b)
modify any of the winding up provisions as it applies—

(i)
to prescribed schemes or prescribed descriptions of

schemes;

(ii)
in relation to a scheme where only part of the

scheme is being wound up;

(iii)
in relation to a case where any liability of the scheme

in respect of a member has been discharged by

virtue of regulations under section 127(4) of the

Pensions Act 2004 (power to make regulations

permitting discharge of scheme’s liabilities during

an assessment period).

(5)
Without prejudice to the generality of subsection (4), regulations

under paragraph (b)(i) of that subsection may, in particular, modify

any of the winding up provisions as it applies in relation to a

scheme in relation to which there is more than one employer.

(6)
The winding up provisions do not apply—

(a)
in relation to any liability for an amount by way of pensions

or other benefits which a person became entitled to payment

of, under the scheme rules, before commencement of the

winding up period,

(b)
in prescribed circumstances, in relation to any liability in

respect of rights of a prescribed description to which a

member of the scheme became entitled under the scheme

rules by reason of his pensionable service under the scheme

terminating before the commencement of the winding up

period,

(c)
in relation to any liability in respect of rights of prescribed

descriptions to which a member of the scheme had become

entitled under the scheme rules before the commencement

of the winding up period, or

(d)
in relation to any liability the discharge of which is

validated under section 128 of the Pensions Act 2004 (power

to validate actions taken during an assessment period to

discharge liabilities of a scheme).

(7)
But nothing in subsection (6) prevents the winding up provisions

applying in relation to a liability under Chapter 4 of Part 4 of the

Pension Schemes Act 1993 (transfer values) which—