Rights of Savers Bill

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Rights of Savers Bill

Rights of Savers Bill
Part 1 — Savings and Retirement Account schemes
1

A
Bill
To
Make provision about the rights and choices of savers in relation to pensions
and pension schemes, annuities and savings; and for connected purposes.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—
Part 1
Savings and Retirement Account schemes
General
1
Meaning of “Savings and Retirement Account (SaRA) schemes”
(1)
A pension scheme is a Savings and Retirement Account (SaRA) scheme for the
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purposes of this Part if it is registered as such a scheme under section 2 and
each of the following is fulfilled, namely—
(a)
the conditions set out in subsections (2) to (11), and
(b)
such other conditions as may be prescribed.
(2)
The first condition is that the scheme is established under a trust or in such
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other way as may be prescribed.
(3)
The second condition is that the provisions made by the instruments
establishing the scheme comply with such requirements as may be prescribed.
(4)
The third condition is that the scheme complies with the investment
requirements set out in section 4.
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(5)
The fourth condition is that the scheme complies with the drawdown
requirements set out in section 5.
(6)
The fifth condition is that the scheme complies with such requirements as may
be prescribed as regards the extent to which, and the circumstances in which—
(a)
any payment made to the scheme by, or on behalf or in respect of, a
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member of the scheme,

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Rights of Savers Bill
Part 1 — Savings and Retirement Account schemes
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(b)
any income or capital gain arising from the investment of such a
payment, or
(c)
the value of rights under the scheme,

may be used to defray the administrative expenses of the scheme, to pay
commission or in any other way which does not result in the provision of
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benefits for or in respect of members.
(7)
The sixth condition is that the scheme complies with such of the requirements
of regulations under section 113 of the 1993 Act (disclosure of information
about schemes to members etc.) and of regulations under section 237 of the
2004 Act (combined pension forecasts) as are applicable to it.
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(8)
The seventh condition is that, subject to such minimum contribution levels and
other restrictions as may be prescribed, members of the scheme may make such
contributions to the scheme as they think appropriate.
(9)
The eighth condition is that, except in so far as is necessary to ensure that the
scheme has tax-exemption or tax-approval (within the meaning of the 1993
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Act), the scheme accepts transfer payments in respect of members’ rights
under—
(a)
other pension schemes,
(b)
contracts and schemes approved under Chapter 3 of Part 14 of the
Income and Corporation Taxes Act 1988 (c. 1) (retirement annuity
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contracts);
(c)
annuities and insurance policies purchased or transferred for the
purpose of giving effect to rights under pension schemes; and
(d)
annuities purchased or entered into for the purpose of discharging
liability in respect of pension credits under section 29(1)(b) of the 1999
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Act or under corresponding Northern Ireland legislation.
(10)
The ninth condition is that the scheme has such exemption or approval as is
mentioned in subsection (9).
(11)
The tenth condition is that—
(a)
if the scheme is an occupational pension scheme, it is specified in a
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contracting-out certificate in relation to all categories of employment to
which the scheme relates, and
(b)
if the scheme is a personal pension scheme, it is an appropriate scheme
within the meaning of section 7(4) of the 1993 Act.
2
Registration of SaRA schemes
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(1)
The Authority shall keep a register of SaRA schemes.
(2)
Subject to subsection (3), the Authority shall register a pension scheme under
this section if the trustees of the scheme, or any person or persons prescribed
in relation to the scheme—
(a)
make an application for the purpose and pay such fee as the Authority may
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determine; and
(b)
declare that each of the following is fulfilled in relation to the scheme,
namely—
(i)
the conditions set out in subsections (2) to (11) of section 1; and
(ii)
such other conditions as may be prescribed under subsection (1)
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of that section.

Rights of Savers Bill
Part 1 — Savings and Retirement Account schemes
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(3)
Where the Authority are satisfied on reasonable grounds that any of those
conditions is not fulfilled in relation to a pension scheme, the Authority may
by direction—
(a)
refuse to register the scheme; or
(b)
where the scheme is registered under this section, remove it from the
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register.
(4)
Section 10 of the 1995 Act (civil penalties) applies to any trustee of a pension
scheme which is or has been registered under this section, and to any person
prescribed in relation to such a scheme, if—
(a)
he fails to take all such steps as are reasonable to secure that each of
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those conditions is fulfilled in relation to the scheme or (as the case may
be) while the scheme was so registered he failed to take all such steps
as were reasonable to secure that each of those conditions was so
fulfilled; or
(b)
where the scheme was registered on his application, any of those
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conditions was not fulfilled in relation to the scheme at the time of the
application.
(5)
The Secretary of State may by regulations make provision—
(a)
for the register, or extracts from the register, or for copies of the register
or of extracts from the register, to be open to inspection by, and
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(b)
for copies of the register, or of extracts from it, to be supplied to,

such persons, in such manner, at such times, on payment of such fees, and
subject to such other terms and conditions, as may be prescribed.
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Duty of employers to facilitate access to SaRA schemes
(1)
Except in so far as regulations otherwise provide, it shall be the duty of an
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employer of relevant employees to comply with the requirements set out
below.
(2)
The first requirement is that the employer shall ensure that at all times there is
at least one scheme designated by him for the purposes of this subsection
which is registered under section 2 and offers membership to all his relevant
30
employees (whether or not any other scheme registered under that section
which does not offer membership to all those employees is for the time being
designated by him for those purposes).
(3)
Before designating a scheme for the purposes of subsection (2) the employer
shall consult with his relevant employees and any organisations representing
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them.
(4)
The second requirement is that the employer shall supply his relevant
employees with—
(a)
the name and address of the designated scheme or, as the case may be,
of each of the designated schemes; and
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(b)
such other information as may be prescribed.
(5)
The third requirement is that the employer shall allow representatives of the
designated scheme or schemes reasonable access to his relevant employees for
the purpose of supplying them with information about the scheme or schemes.
(6)
The fourth requirement is that, subject to such exceptions and qualifications as
45
may be prescribed, the employer shall, if he is requested to do so by a relevant
employee of his who is a member of a qualifying scheme—

Rights of Savers Bill
Part 1 — Savings and Retirement Account schemes
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(a)
deduct the employee’s contributions to the scheme from his
remuneration; and
(b)
pay them to the trustees or managers of the scheme or, if regulations so
provide, to a prescribed person.
(7)
The fifth requirement is that the employer shall, if any scheme designated by
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him for the purposes of subsection (2) ceases to be registered under section 2,
withdraw his designation of the scheme (but this requirement is not to be taken
as implying that he cannot withdraw his designation of a scheme in other
circumstances).
(8)
Section 10 of the 1995 Act (civil penalties) applies to an employer who fails to
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comply with any of the requirements set out above.
(9)
An employer is not, whether before designating a scheme for the purposes of
subsection (2) or at any time while a scheme is designated by him for those
purposes, under any duty—
(a)
to make any enquiries, or act on any information, about the scheme for
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any purpose not connected with—
(i)
ascertaining whether the scheme is for the time being registered
under section 2,
(ii)
ascertaining the persons to whom it offers membership, or
(iii)
enabling him to comply with subsection (4), or
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(b)
in particular, to investigate or monitor, or make any judgment as to, the
past, present or future performance of the scheme.
(10)
In this section—
“employer” means any employer, whether or not resident or incorporated
in any part of the United Kingdom;
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“qualifying scheme”, in relation to an employer, means—
(a)
the designated scheme or one of the designated schemes;
(b)
if regulations so provide, any other SaRA scheme; or
(c)
if regulations so provide, any other personal pension as defined
in subsection (1) of section 1 of the 1993 Act (categories of
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pension scheme);
“relevant employees”, in relation to an employer, means all employees of
his employed in Great Britain and also, in the case of an employer
resident or incorporated in any part of Great Britain, all employees of
his employed outside the United Kingdom, but with the exception, in
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the case of any employer, of any employees of his—
(a)
whose employment qualifies them for membership of an
occupational pension scheme of the employer;
(b)
whose earnings fall below the lower earnings limit as defined in
section 181 of the 1993 Act; or
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(c)
who are of such other description as may be prescribed.
Investment rules
4
Investment requirements for SaRA schemes
(1)
A SaRA scheme is a scheme of investment, to which an individual may
subscribe, and in respect of which the following requirements must be met—
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(a)
the requirements set out in subsections (2) to (4), and

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Part 1 — Savings and Retirement Account schemes
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(b)
such other requirements as may be prescribed.
(2)
The first requirement is that the account is made up of investments of the kinds
specified by the Treasury by regulations.
(3)
The second requirement is that each account is an account to which only one
individual subscribes.
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(4)
The third requirement is that each account must at all times be managed by an
account manager and under terms agreed in a recorded form between the
account manager and the account investor.
(5)
The terms agreed to which subsection (4) refers shall include the following
conditions—
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(a)
that the account investments shall be in the beneficial ownership of the
account investor;
(b)
that the title to all account investments shall be vested in the account
manager or his nominee or jointly in one of them and the account
investor;
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(c)
that, where a share certificate or other document evidencing title to an
account investment is issued, it shall be held by the account manager or
as he may direct; and
(d)
that the account manager shall satisfy himself that any person to whom
he delegates any of his functions or responsibilities under the terms
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agreed with the account investor is competent to carry out those
functions or responsibilities.
(6)
In this section—
“account investment” is an investment under an account which is a
qualifying investment for a stocks and shares component or a cash
25
component, as the case may be;
“account manager” means a person who is approved for the purposes of
this section by the Authority.
Drawdown
5
Drawdown requirements for SaRA schemes
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(1)
In respect of any SaRA scheme the following drawdown requirements must be
met—
(a)
the requirements set out in subsections (2) to (6), and
(b)
such other requirements as may be prescribed.
(2)
The first requirement is that the total sum to be taken out of the account
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amounts to no more than 60 per cent of the value of the account at the time of
drawdown.
(3)
The second requirement is that the total sum to be taken out of the account does
not exceed £40,000.
(4)
The third requirement is that the value of the amount that is drawn down is
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required to be paid into the account by the account investor within such period
as the Treasury may by regulations specify; but the period so specified may not
be required to begin within four years of the date of the drawdown.

Rights of Savers Bill
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(5)
The fourth requirement is that any amount which has been drawn down and
not paid into the account by the account investor within the period specified
by regulations made under subsection (4) shall not be exempt from taxation.
(6)
The fifth requirement is that drawdown takes place for one of the following
purposes—
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(a)
the purpose of providing financial assistance to the account investor in
making his first house purchase for his occupation as his principal
residence,
(b)
the purpose of providing financial assistance to a child in making the
child’s first house purchase for his occupation as his principal
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residence,
(c)
the purpose of providing financial assistance to the account investor
when he is undertaking—
(i)
an apprenticeship of a prescribed description, or
(ii)
a course of higher or further education at a publicly-funded
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institution or such class of institution as may be prescribed,
(d)
such other purpose as may be prescribed.
(7)
The Secretary of State shall by regulations amend the amount specified in
subsection (3) for the purpose of ensuring that the amount rises annually in line
with the retail prices index.
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(8)
In this section—
“child” means—
(a)
a son or daughter of the account investor, or
(b)
a person in respect of whom the account investor had parental
responsibility when that person reached the age of 16;
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“financial assistance” has the prescribed meaning;
“first house purchase for his occupation as his principal residence” has the
prescribed meaning;
“parental responsibility”—
(a)
in relation to England and Wales, has the meaning given by
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section 3 of the Children Act 1989 (c. 41), and
(b)
in relation to Scotland, shall be construed as a reference to
“parental responsibilities” within the meaning given by section
1(3) of the Children (Scotland) Act 1995 (c. 36);
“publicly-funded institution” means—
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(a)
any university or other institution receiving grants, loans or
other payments under section 65 of the Further and Higher
Education Act 1992 (c. 13), or under section 5 of the Education
Act 1994 (c. 30), any institution maintained by a local education
authority in the exercise of their further and higher education
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functions, any institution receiving a recurrent grant towards its
costs under regulations made under section 485 of the
Education Act 1996 (c. 56) or any institution receiving financial
resources under section 5 or 34 of the Learning and Skills Act
2000 (c. 21);
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(b)
any institution within the higher education sector for the
purposes of the Further and Higher Education (Scotland) Act
1992 (c. 37), any college of further education within the meaning
of section 36(1) of that Act or any central institution within the

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Part 1 — Savings and Retirement Account schemes
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meaning of section 135(1) of the Education (Scotland) Act 1980
(c. 44);
(c)
the Queen’s University of Belfast, the University of Ulster, a
college of education in Northern Ireland within the meaning of
Article 2(2) of the Education and Libraries (Northern Ireland)
5
Order 1986 (S.I. 1986/594 (N.I. 3)) or any institution providing
in Northern Ireland further education as defined in Article 3 of
the Further Education (Northern Ireland) Order 1997 (S.I. 1997/
1772 (N.I. 15));
“the retail prices index” means—
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(a)
the general index of retail prices (for all items) published by the
Office for National Statistics, or
(b)
where that index is not published for a month, any substituted
index or figures published by that Office.
Miscellaneous
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6
Application of Employment Rights Act 1996
(1)
Sections 46 and 102 of the Employment Rights Act 1996 (c. 18) (occupational
pension scheme trustees: protection from unfair dismissal and other
detriment) shall apply in relation to an employee who is (or is a director of a
company which is) a trustee of a scheme designated by his employer under
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section 3(2) as they apply in relation to an employee who is (or is a director of
a company which is) a trustee of a relevant occupational pension scheme which
relates to his employment.
(2)
Section 58 of that Act (occupational pension scheme trustees: time off) shall
apply to the employer in relation to a designated scheme as it applies to the
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employer in relation to a relevant occupational pension scheme.
(3)
In this section “relevant occupational pension scheme” has the meaning given
by section 46 of the Employment Rights Act 1996.
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Application of 1993, 1995 and 2004 Acts to SaRA schemes
(1)
Schedule 1 to the 1999 Act (application of 1993 and 1995 Acts to registered
30
schemes) is amended in accordance with subsection (2).
(2)
In paragraph 1(1)(b), at the end, insert the words “of this Act or under section
2 of the Rights of Savers Act 2005”.
(3)
The provisions of Schedule 1 to the 1999 Act (as amended by subsection (2) of
this section) shall have effect subject to the provisions of sections 4 and 5 of this
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Act.
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Interpretation and application of Part 1
(1)
In this Part—
“the 1993 Act” means the Pension Schemes Act 1993 (c. 48);
“the 1995 Act means the Pensions Act 1995 (c. 26);
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“the 1999 Act” means the Welfare Reform and Pensions Act 1999 (c. 30);
“the 2004 Act” means the Pensions Act 2004 (c. 35);
“account” means an account which is within a SaRA scheme;