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Rights of Savers Bill


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

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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—

(a)   

the requirements set out in subsections (2) to (4), and

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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

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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

35

(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.

 
 

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

6

 

(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

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

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be required to begin within four years of the date of the drawdown.

(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

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purposes—

(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 or grandchild in

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making the child’s first house purchase for his occupation as his

principal residence,

(c)   

the purpose of providing financial assistance to the account investor

when he is undertaking—

(i)   

an apprenticeship of a prescribed description, or

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(ii)   

a course of accredited higher or further education at a publicly-

funded 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

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subsection (3) for the purpose of ensuring that the amount rises annually in line

with the retail prices index.

(8)   

In this section—

“child” means—

(a)   

a son or daughter of the account investor, or

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(b)   

a person in respect of whom the account investor had parental

responsibility when that person reached the age of 16;

“financial assistance” has the prescribed meaning;

“first house purchase for his occupation as his principal residence” has the

prescribed meaning;

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“grandchild” means—

(a)   

a grandson or granddaughter of the account investor, or

(b)   

a person in respect of whom the account investor’s child had

parental responsibility when that person reached the age of 16;

“parental responsibility”—

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(a)   

in relation to England and Wales, has the meaning given by

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);

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“publicly-funded institution” means—

(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

 
 

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

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Act 1994 (c. 30), any institution maintained by a local education

authority in the exercise of their further and higher education

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

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resources under section 5 or 34 of the Learning and Skills Act

2000 (c. 21);

(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

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of section 36(1) of that Act or any central institution within the

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

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Article 2(2) of the Education and Libraries (Northern Ireland)

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));

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“the retail prices index” means—

(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.

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Miscellaneous

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

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company which is) a trustee of a scheme designated by his employer under

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

35

apply to the employer in relation to a designated scheme as it applies to the

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.

7       

Application of 1993, 1995 and 2004 Acts to SaRA schemes

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(1)   

Schedule 1 to the 1999 Act (application of 1993 and 1995 Acts to registered

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”.

 
 

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

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(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

Act.

8       

Interpretation and application of Part 1

(1)   

In this Part—

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“the 1993 Act” means the Pension Schemes Act 1993 (c. 48);

“the 1995 Act means the Pensions Act 1995 (c. 26);

“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;

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“account investor” means the individual who subscribes to an account;

“the Authority” means the Pensions Regulator established under section

1 of the 2004 Act;

“designated scheme”, in relation to an employer, means a scheme

designated by him for the purposes of section 3(2);

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“drawdown” means the withdrawal of cash from an account prior to

retirement;

“employee” has the meaning given by section 181(1) of the 1993 Act;

“occupational pension scheme” and “personal pension scheme” have the

meanings given by section 1 of the 1993 Act;

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“pension scheme” means an occupational pension scheme or a personal

pension scheme;

“prescribed” means prescribed by regulations made by the Secretary of

State;

“SaRA scheme” shall be construed in accordance with section 1.

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(2)   

The Secretary of State may by regulations make provision for a SaRA scheme

which—

(a)   

is prescribed or is of a prescribed description, and

(b)   

would (apart from the regulations) be an occupational pension scheme,

   

to be treated for all purposes, or for such purposes as may be prescribed, as if

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it were a personal pension scheme and not an occupational pension scheme.

(3)   

This Part applies to a pension scheme managed by or on behalf of the Crown

as it applies to other pension schemes; and, accordingly, references in this Part

to a person in his capacity as a trustee or manager of, or person prescribed in

relation to, a pension scheme include the Crown, or a person acting on behalf

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of the Crown, in that capacity.

(4)   

This Part applies to persons employed by or under the Crown in like manner

as if such persons were employed by a private person; and references in this

Part to a person in his capacity as an employer include the Crown, or a person

acting on behalf of the Crown, in that capacity.

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(5)   

Subsections (3) and (4) do not apply to any provision of this Part under or by

virtue of which a person may be prosecuted for an offence; but such a provision

applies to persons in the public service of the Crown as it applies to other

persons.

(6)   

Nothing in this Part applies to Her Majesty in Her private capacity (within the

45

meaning of the Crown Proceedings Act 1947 (c. 44)).

 
 

Rights of Savers Bill
Part 2 — Retirement income reform

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Part 2

Retirement income reform

9       

Retirement Income Funds

(1)   

The Finance Act 2004 (c. 12) is amended as follows.

(2)   

After section 152 (meaning of “arrangement”), insert—

5

“152A   

Meaning of ‘Retirement Income Fund’

(1)   

In this Part, a Retirement Income Fund means a scheme for the

reinvestment of savings in retirement which—

(a)   

is operated by or on behalf of a person authorised to operate a

registered pension scheme,

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(b)   

is a scheme in which investments are approved by the Inland

Revenue, and

(c)   

meets the conditions set out in subsections (2) to (9).

(2)   

The first condition is that, subject to the other conditions in this section,

funds held in the Retirement Income Fund may be invested and

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withdrawn by the member as and when he elects.

(3)   

The second condition is that an authorised Retirement Income Fund

provider must set an annual maximum withdrawal allowance for each

member, based on an annual assessment of each member’s life

expectancy, and a member’s withdrawals from the fund in any one

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year must not exceed that allowance.

(4)   

The third condition is that, in setting annual maximum withdrawal

allowances, an authorised provider must ensure that no member’s total

future annual income falls below the Minimum Retirement Income

level (as set under section 11 of the Rights of Savers Act 2005) except in

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the circumstances provided for in the sixth condition.

(5)   

The fourth condition is that an authorised provider must set an annual

minimum withdrawal allowance so that each member’s total income is

at least equivalent to the Minimum Retirement Income level, except in

the circumstances provided for in the sixth condition.

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(6)   

The fifth condition is that if a member chooses not to declare his total

annual income to the authorised provider he must withdraw funds

equivalent to the level of the Minimum Retirement Income level or his

annual maximum withdrawal allowance, whichever is the lower.

(7)   

The sixth condition is that, where there are insufficient funds to enable

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the annual minimum withdrawal allowance to be set so that a

member’s total income is at least equivalent to the Minimum

Retirement Income level, the allowance should be set at the highest

level consistent with the assessment of the member’s life expectancy.

(8)   

The seventh condition is that the maximum and minimum withdrawal

40

allowances must be set at the same level if a member’s total annual

income, including his maximum withdrawal allowance, is lower than

the Minimum Retirement Income level.

 
 

Rights of Savers Bill
Part 2 — Retirement income reform

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(9)   

The eighth condition is that a Retirement Income Fund, and any income

derived from it, must not be capable of assignment or surrender by the

member.”

(10)   

The ninth condition is that each member’s life expectancy is re-assessed

at an interval not exceeding twelve months.

5

(11)   

A SaRA may be converted into a Retirement Income Fund at the

account holder’s sole discretion, providing that he is either—

(a)   

over the age of 60, or

(b)   

in receipt of Incapacity Benefit, Disability Living Allowance or

their successors.

10

(12)   

Section 109(1)(b) of the Employment Rights Act 1996 (c. 18) shall not

apply to the holder of a SaRA.

10      

Amendment of the pension rules

(1)   

Section 165 of the Finance Act 2004 (c. 12) (pension rules) is amended as

follows.

15

(2)   

In subsection (1) (which sets out the pension rules)—

(a)   

in Pension Rule 4, after paragraph (a), insert—

“(aa)   

a withdrawal from a Retirement Income Fund,”;

(b)   

in Pension Rule 4, after the second appearance of the words “scheme

pension”, insert the words “a withdrawal from a Retirement Income

20

Fund”;

(c)   

in Pension Rule 6, after paragraph (a), insert—

“(aa)   

a withdrawal from a Retirement Income Fund,”;

(d)   

in Pension Rule 6, after the second appearance of the words “scheme

pension”, insert the words “a withdrawal from a Retirement Income

25

Fund”.

11      

Minimum Retirement Income

(1)   

The amount of the Minimum Retirement Income in respect of each tax year

shall be set by the Chancellor of the Exchequer by order at the level of the

standard minimum guarantee prescribed under section 2 of the State Pension

30

Credit Act 2002 (c. 16).

(2)   

Before making an order under subsection (1), the Chancellor of the Exchequer

shall consult such persons as he considers appropriate.

(3)   

An order under this section (other than the order that applies to the first tax

year during which this section is in force) must be made on or before 31st

35

January of the tax year before the tax year to which the order applies.

12      

Removal of age limit for annuity protection lump sum death benefit

(1)   

Schedule 29 to the Finance Act 2004 is amended as follows.

(2)   

In paragraph 16(1) (definition of annuity protection lump sum death benefit),

paragraph (a) shall cease to have effect.

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Rights of Savers Bill
Part 4 — Miscellaneous and final provisions

11

 

Part 3

Promotion of personal pension schemes

13      

Duty of employers to facilitate access to personal pension schemes

(1)   

Section 3 of the Welfare Reform and Pensions Act 1999 (c. 30) (duty of

employers to facilitate access to stakeholder pension schemes) is amended as

5

follows.

(2)   

In subsection (9), in the definition of “qualifying scheme”, at the end of

paragraph (b), insert “or

(c)   

if regulations so provide, any other personal pension as defined

in subsection (1) of section 1 of the Pension Schemes Act 1993

10

(categories of pension scheme);”.

Part 4

Miscellaneous and final provisions

14      

Consequential amendments and repeals

(1)   

Schedule 1 (which contains consequential amendments) shall have effect.

15

(2)   

Schedule 2 (which contains repeals) shall have effect.

15      

Regulations and orders

(1)   

Any power of a Minister of the Crown or the Treasury under this Act to make

regulations or an order is exercisable by statutory instrument.

(2)   

Any regulations or order made under this Act (other than an order made under

20

section 17) shall be laid before Parliament after being made and is subject to

annulment in pursuance of a resolution of either House of Parliament.

(3)   

Every power conferred by this Act on a Minister of the Crown or the Treasury

to make regulations or an order includes power—

(a)   

to make different provision for different cases (including different

25

provision in respect of different areas);

(b)   

to make provision subject to such exemptions and exceptions as the

person making the regulations or order thinks fit; and

(c)   

to make such incidental, supplemental, consequential and transitional

provision as the person making the regulations or order thinks fit.

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16      

Financial provisions

There shall be paid out of money provided by Parliament—

(a)   

any expenditure incurred by a Minister of the Crown or government

department under this Act; and

(b)   

any increase attributable to this Act in the sums which under any other

35

Act are payable out of sums so provided.

17      

Short title, commencement and extent

(1)   

This Act may be cited as the Rights of Savers Act 2005.

 
 

 
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Revised 15 December 2005