Pensions Bill

House of Commons

Session 2007 - 08
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Pensions Bill

Pensions Bill
Schedule 3 — Additional pension consolidation
62

“the lower maximum revaluation rate”, in relation to the
second revaluation period, is—
(a)
if that period is a period of 12 months, 2.5%, and
(b)
in any other case, the percentage that would be the
inflation percentage had the general level of prices
5
in Great Britain increased at the rate of 2.5%
compound per annum during that period.

This is subject to paragraph 29 (power of Board to determine
maximum revaluation rates etc).”
7
In paragraph 29 (Board’s powers to alter rates of revaluation etc), for sub-
10
paragraph (1) substitute—
    “(1)
The Board may determine what is to be the higher maximum
revaluation rate or the lower maximum revaluation rate for the
purposes of paragraphs 12(4) and 17(4), and where it does so the
relevant definitions in paragraphs 12(5) and 17(5) do not apply.”
15
Part 3
Consequential amendments
8     (1)
Section 51ZA of the Pensions Act 1995 (c. 26) (meaning of “the appropriate
percentage”) is amended as follows.
      (2)
In subsection (1)—
20
(a)
in paragraph (a), for “revaluation percentage” substitute “higher
revaluation percentage”;
(b)
for paragraph (b) substitute—
“(b)
in the case of a category Y pension, means the lower
revaluation percentage for that period.”
25
      (3)
In subsection (2), for ““the revaluation percentage”” substitute ““the higher
revaluation percentage”, “the lower revaluation percentage””.
Schedule 3
Section 80

Additional pension consolidation

After Schedule 4B to the Social Security Contributions and Benefits Act 1992
30
(c. 4) insert—
“Schedule 4C
Section 45

Additional pension: consolidated amount for the purposes of section
45(2A)
1
For the purposes of this Schedule, the “consolidation date” in
35
relation to a pensioner means such date in the flat rate
introduction year, or in a later tax year before that in which the
pensioner attains pensionable age, as the Secretary of State may
determine.
2
The consolidated amount is the sum of—
40

Pensions Bill
Schedule 4 — Pension compensation payable on discharge of pension compensation credit
Part 1 — Introductory
63

(a)
the GRB amount, and
(b)
the section 45(2)(a), (b) and (c) amounts.
3
The GRB amount is the amount that would, on the pensioner
attaining pensionable age, be the increase in the weekly rate of
retirement benefit calculated under section 36(1) of the National
5
Insurance Act 1965 (c. 51) (graduated retirement benefit) if that
provision applied in the case of a pensioner attaining pensionable
age on or after 6th April 2020.
4     (1)
The section 45(2)(a), (b) and (c) amounts are the amounts that
would, on the pensioner attaining pensionable age, be the weekly
10
equivalents calculated under section 45(2)(a), (b) and (c) of this Act
if section 45(2) applied in the case of a pensioner attaining
pensionable age on or after 6th April 2020, but applying the
provisions of this Act with the following modifications.
      (2)
The following provisions apply as if a reference to the end of the
15
final relevant year were a reference to the consolidation date—
(a)
section 44(5A)(c);
(b)
in Schedule 4A, paragraphs 2(2)(b), 6(2)(a) and 7(2)(b).
5     (1)
This paragraph applies to any calculation under paragraph 3 or 4
above.
20
      (2)
The calculation is to be made in accordance with all relevant
provisions as they have effect on the consolidation date.
      (3)
For the purposes of the calculation, it is to be assumed that any
entitlement of the pensioner to graduated retirement benefit or to
a retirement pension is not deferred.
25
6
The uprated consolidated amount for the purposes of section
45(2A)(a) is the consolidated amount revalued annually under the
Administration Act.
Schedule 4
Section 90

Pension compensation payable on discharge of pension compensation credit
30
Part 1
Introductory
Introductory
1
This Schedule applies for the purposes of determining the compensation
payable to or in respect of a person entitled to compensation on the
35
discharge of a pension compensation credit in accordance with this Chapter.
Interpretation
2
In this Schedule—
“the initial annual rate of compensation” is the amount determined by
the Board under section 90(4);
40

Pensions Bill
Schedule 4 — Pension compensation payable on discharge of pension compensation credit
Part 2 — Transferee attains pension compensation age before or on transfer day
64

“the pension compensation age” of the transferee is the age determined
in accordance with paragraph 3.
Pension compensation age
3     (1)
This paragraph applies for the purpose of determining the transferee’s
“pension compensation age”.
5
      (2)
Sub-paragraphs (3) and (4) apply where the transferor’s PPF compensation,
or any of it, is determined under Schedule 7 to the Pensions Act 2004 (c. 35).
      (3)
Where the transferor’s right to PPF compensation arises by virtue of his or
her status as a member of a pension scheme for which the Board assumed
responsibility in accordance with Chapter 3 of Part 2 of that Act, the
10
transferee’s pension compensation age is the same as—
(a)
the normal pension age of the transferor, or
(b)
where the transferor was a pension credit member, the normal
benefit age of the transferor.
      (4)
Where the transferor’s right to PPF compensation arises by virtue of his or
15
her status as a widower, widow or dependant of a member of a scheme for
which the Board assumed responsibility in accordance with Chapter 3 of
Part 2 of that Act, the transferee’s pension compensation age is the same as—
(a)
the normal pension age of that member, or
(b)
where that member was a pension credit member, the normal benefit
20
age of that member.
      (5)
Sub-paragraph (6) applies where the transferor’s PPF compensation is
determined only under this Schedule.
      (6)
The transferee’s pension compensation age is the same as the pension
compensation age of the transferor.
25
      (7)
In this paragraph, “normal benefit age”, “normal pension age” and “pension
credit member” have the same meanings as in Schedule 7 to the Pensions Act
2004.
Part 2
Transferee attains pension compensation age before or on transfer day
30
Compensation payable to transferee
4     (1)
Compensation is payable in accordance with this paragraph where the
transferee attains pension compensation age before or on the transfer day.
      (2)
The transferee is entitled to periodic compensation commencing on the
transfer day and continuing for life.
35
      (3)
The annual rate of the periodic compensation is the appropriate percentage
of the aggregate of—
(a)
the initial annual rate of compensation, and
(b)
any increases under paragraph 12 (annual increases in periodic
compensation).
40
      (4)
In sub-paragraph (3) “the appropriate percentage” means—

Pensions Bill
Schedule 4 — Pension compensation payable on discharge of pension compensation credit
Part 3 — Transferee attains pension compensation age after transfer day
65

(a)
in a case in which, on the transfer day, the transferor is not entitled
to present payment of PPF compensation, 90%;
(b)
in any other case, 100%.
      (5)
This paragraph is subject to paragraph 13 (compensation cap).
Compensation payable to widow or widower
5
5     (1)
This paragraph applies where —
(a)
the transferee dies after liability in respect of the pension
compensation credit has been discharged under section 90,
(b)
the transferee was before death entitled under paragraph 4 to
periodic compensation commencing on the transfer day, and
10
(c)
the transferee is survived by a widow or widower.
      (2)
Subject to sub-paragraph (4), the widow or widower is entitled to periodic
compensation commencing on the day following the transferee’s death and
continuing for life.
      (3)
The annual rate of the periodic compensation at any time is half of the
15
annual rate of the periodic compensation (including any increases under
paragraph 12) to which the transferee would at that time have been entitled
under paragraph 4 had the transferee not died.
      (4)
The widow or widower is not entitled to periodic compensation under this
paragraph in such circumstances as may be prescribed.
20
Part 3
Transferee attains pension compensation age after transfer day
Compensation payable to transferee
6     (1)
Compensation is payable in accordance with this paragraph where the
transferee attains pension compensation age after the transfer day.
25
      (2)
The transferee is entitled to periodic compensation commencing at that age
and continuing for life.
      (3)
The annual rate of the periodic compensation is the appropriate percentage
of the aggregate of—
(a)
the initial annual rate of compensation,
30
(b)
the revaluation amount (see paragraph 8), and
(c)
any increases under paragraph 12 (annual increases in periodic
compensation).
      (4)
In sub-paragraph (3) “the appropriate percentage” means—
(a)
in a case in which, on the transfer day, the transferor is not entitled
35
to present payment of PPF compensation, 90%;
(b)
in any other case, 100%.
      (5)
This paragraph is subject to—
paragraph 9 (commutation),
paragraph 10 (early payment),
40
paragraph 11 (deferred payment), and
paragraph 13 (compensation cap).

Pensions Bill
Schedule 4 — Pension compensation payable on discharge of pension compensation credit
Part 3 — Transferee attains pension compensation age after transfer day
66

Compensation payable to widower or widow
7     (1)
This paragraph applies where—
(a)
the transferee dies after liability in respect of the pension
compensation credit has been discharged under section 90,
(b)
the transferee—
5
(i)
was, before death, entitled under paragraph 6 to periodic
compensation commencing at pension compensation age, or
(ii)
would have become so entitled had he or she not died, and
(c)
the transferee is survived by a widow or widower.
      (2)
Subject to sub-paragraph (4), the widow or widower is entitled to periodic
10
compensation commencing on the day following the transferee’s death and
continuing for life.
      (3)
The annual rate of the periodic compensation at any time is—
(a)
where the transferee dies after attaining pension compensation age,
half of the annual rate of the periodic compensation (including the
15
revaluation amount (see paragraph 8) and any increases under
paragraph 12) to which the transferee would at that time have been
entitled under paragraph 6 had the transferee not died;
(b)
where the transferee dies before attaining pension compensation
age, half of the annual rate of the periodic compensation (including
20
the revaluation amount (see paragraph 8) and any increases under
paragraph 12) to which the transferee would at that time have been
entitled under paragraph 6 if—
(i)
the transferee’s pension compensation age had been the
transferee’s actual age immediately before the date of the
25
transferee’s death, and
(ii)
the transferee had not died.
      (4)
The widow or widower is not entitled to periodic compensation under this
paragraph in such circumstances as may be prescribed.
Revaluation
30
8     (1)
This paragraph applies for the purpose of calculating the revaluation
amount mentioned in paragraph 6(3)(b).
      (2)
In this paragraph “the revaluation period” means the period—
(a)
beginning with the transfer day, and
(b)
ending with the day before the transferee attains pension
35
compensation age.
      (3)
The revaluation amount is—
(a)
in a case in which the revaluation period is less than a month, nil;
(b)
in any other case, the revaluation percentage of the initial annual rate
of compensation.
40
      (4)
For the purposes of sub-paragraph (3)(b) “the revaluation percentage”
means the lesser of—
(a)
the percentage increase in the general level of prices in Great Britain
during the revaluation period, determined in the prescribed manner,
and
45
(b)
the maximum revaluation rate.

Pensions Bill
Schedule 4 — Pension compensation payable on discharge of pension compensation credit
Part 3 — Transferee attains pension compensation age after transfer day
67

      (5)
For the purposes of sub-paragraph (4)(b) “the maximum revaluation rate”
is—
(a)
in a case in which the revaluation period is a period of 12 months,
2.5%, and
(b)
in any other case, the percentage that would be the percentage
5
mentioned in sub-paragraph (4)(a) had the general level of prices in
Great Britain increased at the rate of 2.5% compound per annum
during that period.

This is subject to paragraph 15 (power of Board to alter rates of revaluation
and indexation).
10
Commutation of periodic compensation
9     (1)
A transferee who is entitled to periodic compensation under paragraph 6
may, in prescribed circumstances, opt to commute for a lump sum a portion
of the periodic compensation with effect from the time it becomes payable.
      (2)
Except in such circumstances as may be prescribed, the portion commuted
15
under sub-paragraph (1) must not exceed 25%.
      (3)
Any reduction required to be made by virtue of paragraph 13 (compensation
cap) must be made before determining the amount of the transferee’s
periodic compensation which may be commuted under this paragraph.
      (4)
Where the transferee opts to commute any part of his or her periodic
20
compensation under this paragraph, the lump sum payable under sub-
paragraph (1) is the actuarial equivalent of the commuted portion of the
periodic compensation calculated from tables designated for this purpose by
the Board.
      (5)
The Board must publish in such manner as it considers appropriate the
25
tables designated by it for the purposes of sub-paragraph (4).
      (6)
Regulations may prescribe the manner in which an option to commute
periodic compensation under this paragraph may be exercised.
      (7)
The Secretary of State may, by order, amend sub-paragraph (2) so as to
substitute a different percentage for that for the time being specified there.
30
Early payment of compensation
10    (1)
Regulations may prescribe circumstances in which, and conditions subject
to which, the transferee may become entitled to periodic compensation
under paragraph 6 before attaining pension compensation age.
      (2)
The Board must determine the amount of the actuarial reduction to be
35
applied to compensation to which the transferee is entitled by virtue of this
paragraph.
      (3)
Where, by virtue of this paragraph, periodic compensation is payable to the
transferee before he or she attains pension compensation age, paragraph
8(2)(b) (end of revaluation period) applies as if the reference to the day
40
before the transferee attains pension compensation age were to the day on
which compensation is payable by virtue of this paragraph.

Pensions Bill
Schedule 4 — Pension compensation payable on discharge of pension compensation credit
Part 4 — Provisions applicable irrespective of age of transferee on transfer day
68

Deferral of compensation
11    (1)
Regulations may prescribe circumstances in which, and conditions subject
to which, the transferee may opt to defer entitlement to periodic
compensation under paragraph 6 until some time after attaining pension
compensation age.
5
      (2)
The Board must determine the amount of the actuarial increase to be applied
to compensation to which the transferee is entitled by virtue of this
paragraph.
      (3)
Where, by virtue of this paragraph, periodic compensation is payable to the
transferee after he or she attains pension compensation age, paragraph
10
8(2)(b) (end of revaluation period) applies as if the reference to the day
before the transferee attains pension compensation age were to the day on
which compensation is payable by virtue of this paragraph.
Part 4
Provisions applicable irrespective of age of transferee on transfer day
15
Annual increase in periodic compensation
12    (1)
This paragraph provides for annual increases to compensation payable to
the transferee.
      (2)
The transferee is entitled, on each indexation date, to an increase of the
appropriate percentage of the underlying rate.
20
      (3)
The increase to which the transferee is entitled on the first indexation date is
restricted to 1/12 of the amount calculated under sub-paragraph (2) for each
full month in the period beginning with the transfer day and ending with
that indexation date.
      (4)
For the purposes of sub-paragraph (2)—
25
“the appropriate percentage”, as at an indexation date, is the lesser of—
(a)
the percentage increase in the retail prices index for the
period of 12 months ending with the 31 May last falling
before that date, and
(b)
2.5%;
30
“the indexation date” means—
(a)
the 1 January next falling after the transferee first becomes
entitled to the periodic compensation, and
(b)
each subsequent 1 January during the transferee’s lifetime;
“the underlying rate”, as at an indexation date, is the aggregate of—
35
(a)
the indexed proportion (as determined under sub-paragraph
(5) or (6) below) of the aggregate of the initial annual rate of
compensation and (in the case of compensation payable
under paragraph 6) the revaluation amount, and
(b)
any annual increase to which the transferee is entitled under
40
this paragraph in respect of earlier indexation dates.
      (5)
Where the transferor’s PPF compensation is payable in accordance with
paragraph 3, 5, 8, 11, 15 or 22 of Schedule 7 to the Pensions Act 2004 (c. 35)
(“the relevant paragraph of Schedule 7”), “the indexed proportion” is the
proportion of the amount mentioned in sub-paragraph (3)(a) of the relevant
45