Pensions Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
8

Quality requirements
18
Quality requirement: UK money purchase schemes
(1)
A money purchase scheme that has its main administration in the United
Kingdom satisfies the quality requirement in relation to a jobholder if under
the scheme rules—
5
(a)
the jobholder’s employer must pay contributions in respect of the
jobholder;
(b)
the employer’s contribution must be at least 3% of the amount of the
jobholder’s qualifying earnings in the pay reference period;
(c)
the total amount of contributions paid by the jobholder and the
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employer must be at least 8% of the amount of the jobholder’s
qualifying earnings in the pay reference period.
(2)
The Secretary of State may by regulations provide that, where a certificate has
been issued under section 7(1) of the Pension Schemes Act 1993 (c. 48) stating
that the employment of the jobholder is contracted-out employment by
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reference to the scheme, paragraphs (b) and (c) of subsection (1) have effect
with prescribed modifications.
19
Quality requirement: UK defined benefits schemes
(1)
Subject to subsection (3), a defined benefits scheme that has its main
administration in the United Kingdom satisfies the quality requirement in
20
relation to a jobholder if the jobholder is in contracted-out employment.
(2)
A defined benefits scheme that has its main administration in the United
Kingdom satisfies the quality requirement in relation to a jobholder who is not
in contracted out employment if it satisfies the test scheme standard in relation
to that jobholder.
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(3)
The Secretary of State may by order provide that a scheme does not satisfy the
quality requirement in relation to a jobholder who is in contracted-out
employment unless it satisfies the test scheme standard in relation to that
jobholder, with the substitution of a higher fraction, not exceeding 1/80th, for
the fraction of 1/120th in section 21(3)(a).
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(4)
In relation to any scheme, a jobholder is in contracted-out employment for the
purposes of this section and section 20 if a certificate has been issued in respect
of the jobholder under section 7(1) of the Pension Schemes Act 1993 stating that
the employment of the jobholder is contracted-out employment by reference to
the scheme.
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20
Test scheme standard
(1)
A scheme satisfies the test scheme standard in relation to a jobholder (J) if the
pensions to be provided for the relevant members of the scheme are broadly
equivalent to, or better than, the pensions which would be provided for such
persons under a test scheme.
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(2)
Subject to subsection (3), the relevant members are—
(a)
if J is not in contracted-out employment, all active members who are
not in contracted-out employment and are jobholders of the same
employer as J;

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
9

(b)
if J is in contracted-out employment, all active members who are in
contracted-out employment and are jobholders of the same employer
as J.
(3)
In applying this section the pensions to be provided for relevant members must
be considered as a whole.
5
(4)
The Secretary of State may by regulations make provision for the manner of,
and criteria for, determining whether the pensions to be provided for the
relevant members under a scheme are broadly equivalent to, or better than, the
pensions which would be provided for them under a test scheme.
(5)
Regulations under subsection (4) may provide for the determination to be
10
made in accordance with guidance issued from time to time by the Secretary of
State.
(6)
The Secretary of State may by regulations provide that a scheme only satisfies
the test scheme standard if the scheme actuary certifies that it does.
(7)
Except in prescribed circumstances, the scheme actuary is the actuary
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appointed under section 47(1)(b) of the Pensions Act 1995 (c. 26) (professional
advisers) in relation to the scheme.
21
Test scheme
(1)
A test scheme is an occupational pension scheme which satisfies—
(a)
the requirements of subsections (2) and (3), and
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(b)
any prescribed requirements.
(2)
The scheme must provide for a member to be entitled to a pension
commencing at the age of 65 and continuing for life.
(3)
The annual rate of the pension at that age must be—
(a)
1/120th of average qualifying earnings in the last three tax years
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preceding the end of pensionable service,
multiplied by
(b)
the number of years of pensionable service, up to a maximum of 40.
22
Quality requirement: UK hybrid schemes
(1)
An occupational pension scheme which is a hybrid scheme and has its main
30
administration in the United Kingdom satisfies the quality requirement in
relation to a jobholder if it satisfies the requirements mentioned in whichever
of these is the appropriate paragraph—
(a)
the requirements for a money purchase scheme under section 18;
(b)
the requirements for a defined benefits scheme under section 19.
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(2)
Which paragraph of subsection (1) is appropriate for any hybrid scheme is to
be determined by rules made by the Secretary of State.
(3)
The rules may provide for different paragraphs to be appropriate for different
provisions of a scheme.
(4)
The rules may provide for the paragraphs to be appropriate as alternatives, for
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any scheme or any provisions of a scheme.

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
10

23
Quality requirement: non-UK occupational pension schemes
The Secretary of State may by regulations make provision as to the quality
requirement to be satisfied in the case of an occupational pension scheme
within section 16(b) or (c).
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Quality requirement: personal pension schemes
5
(1)
A personal pension scheme satisfies the quality requirement in relation to a
jobholder if the following conditions are satisfied.
(2)
The first condition is that all of the benefits that may be provided to the
jobholder under the scheme are money purchase benefits.
(3)
The second condition is that, in relation to the jobholder, there is an agreement
10
between the scheme and the employer under which—
(a)
the employer must pay contributions in respect of the jobholder;
(b)
the employer’s contribution must be at least 3% of the amount of the
jobholder’s qualifying earnings in the pay reference period.
(4)
In subsection (5), “shortfall” means the difference (if any) between—
15
(a)
the employer’s contribution in respect of the jobholder, and
(b)
8% of the amount of the jobholder’s qualifying earnings in the pay
reference period.
(5)
The third condition is that if there is a shortfall there is an agreement between
the scheme and the jobholder under which the jobholder must pay
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contributions which at least equal the shortfall.
(6)
The fourth condition is that, in relation to the jobholder, there are direct
payment arrangements (within the meaning of section 111A of the Pension
Schemes Act 1993 (c. 48)) between the jobholder and the employer.
(7)
The Secretary of State may by regulations provide that, where the scheme is an
25
appropriate scheme within the meaning of section 7(5) of the Pension Schemes
Act 1993, subsections (3)(b) and (4)(b) have effect with prescribed
modifications.
Miscellaneous
25
Power of trustees to modify by resolution
30
(1)
The trustees of an occupational pension scheme may by resolution modify the
scheme with a view to enabling the scheme to comply with the conditions in
section 15(2).
(2)
No modification may be made by virtue of subsection (1) without the consent
of the employer in relation to the scheme.
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(3)
In the application of subsection (2) to a scheme in relation to which there is
more than one employer, references to the employer have effect as if they were
references to a person nominated by the employers, or by the rules of the
scheme, to act as the employers’ representative for the purposes of this section
or, if no such nomination is made, to all of the employers.
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(4)
Regulations may provide that this section does not apply to occupational
pension schemes within a prescribed class or description.

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 2 — Compliance
11

26
Deduction of contributions
An employer who arranges for a jobholder to become a member of a scheme in
accordance with section 3(2), 5(2) or 6(3) may deduct the jobholder’s
contributions to the scheme from the jobholder’s remuneration and pay them
to the trustees or managers of the scheme.
5
Chapter 2
Compliance
Effect of failure to comply
27
Effect of failure to comply
(1)
Contravention of any of the employer duty provisions does not give rise to a
10
right of action for breach of statutory duty.
(2)
But nothing in the employer duty provisions or this Chapter affects any right
of action arising apart from those provisions.
(3)
In this Chapter, references to the employer duty provisions are references to
any provision of sections 2 to 9 or of regulations under those sections.
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Compliance notices and unpaid contributions notices
28
Compliance notices
(1)
The Pensions Regulator (referred to in this Chapter as the “Regulator”) may
issue a compliance notice to an employer if the Regulator is of the opinion that
the employer has contravened one or more of the employer duty provisions.
20
(2)
A compliance notice is a notice directing the employer to take, or refrain from
taking, the steps specified in the notice in order to remedy the contravention.
(3)
A compliance notice may, in particular—
(a)
state the period within which any step must be taken or must cease to
be taken;
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(b)
require the employer to provide within a specified period specified
information relating to the contravention;
(c)
require the employer to inform the Regulator, within a specified period,
how the employer has complied or is complying with the notice;
(d)
state that, if the employer fails to comply with the requirements of the
30
notice, the Regulator may issue a fixed penalty notice under section 32.
(4)
The steps specified in the notice may, in particular, include such steps as the
Regulator thinks appropriate for placing the jobholder in the same position (as
nearly as possible) as if the contravention had not occurred.
(5)
If the compliance notice is issued in respect of a failure to comply with an
35
enrolment duty and the specified steps relate to membership of a defined
benefits scheme, the notice may, in particular, require the employer to ensure
that the jobholder is entitled to the same benefits under the scheme as if the
employer had complied with that duty.

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 2 — Compliance
12

(6)
The Secretary of State may by regulations make provision about the
application of sections 2 to 8 in relation to an employer to whom a compliance
notice is issued in respect of a failure to comply with an enrolment duty.
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Third party compliance notices
(1)
The Regulator may issue a third party compliance notice if it is of the opinion
5
that—
(a)
an employer has contravened one or more of the employer duty
provisions,
(b)
the contravention is or was, wholly or partly, a result of a failure of
another person (the “third party”) to do any thing, and
10
(c)
that failure is not itself a contravention of any of the employer duty
provisions.
(2)
A third party compliance notice is a notice directing the third party to take, or
refrain from taking, the steps specified in the notice in order to remedy the
contravention or prevent a recurrence of the failure.
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(3)
A third party notice may, in particular—
(a)
state the period within which any step must be taken;
(b)
require the third party to inform the Regulator, within a specified
period, how the third party has complied or is complying with the
notice.
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(4)
A third party notice may give the third party a choice between different ways
of remedying or preventing the recurrence of the third party’s failure.
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Unpaid contributions notices
(1)
The Regulator may issue an unpaid contributions notice to an employer if it is
of the opinion that relevant contributions have not been paid on or before the
25
due date.
(2)
An unpaid contributions notice is a notice requiring an employer to pay into a
pension scheme by a specified date an amount in respect of unpaid relevant
contributions.
(3)
Relevant contributions are contributions payable to a pension scheme by or on
30
behalf of an employer—
(a)
on the employer’s own account (but in respect of the jobholder), or
(b)
on behalf of the jobholder out of deductions from the jobholder’s
earnings.
(4)
“Due date” has the meaning prescribed by regulations.
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(5)
An unpaid contributions notice may, in particular—
(a)
specify the scheme to which the contributions are due;
(b)
specify the jobholders, or category of jobholders, in respect of whom
the contributions are due;
(c)
state the period in respect of which the contributions are due;
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(d)
state the due date in respect of the contributions;
(e)
require the employer to take such other steps in relation to remedying
the failure to pay the contributions as the Regulator considers
appropriate;

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 2 — Compliance
13

(f)
state that if the employer fails to comply with the notice, the Regulator
may issue a fixed penalty notice under section 32.
31
Calculation and payment of contributions
(1)
This section applies to—
(a)
a compliance notice issued to an employer in respect of a failure to
5
comply with an enrolment duty;
(b)
an unpaid contributions notice.
(2)
The notice may, in particular, include—
(a)
a requirement to calculate the amount of relevant contributions that
have not been paid to the scheme;
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(b)
if the contributions are being paid within the prescribed period after the
due date, a requirement to pay an amount equal to the amount of
unpaid relevant contributions within section 30(3)(a);
(c)
if the contributions are not being paid within the prescribed period
after the due date, a requirement to pay (on the employer’s own
15
account) an amount equal to the amount of unpaid relevant
contributions;
(d)
if paragraph (b) applies, a requirement to ensure—
(i)
that the jobholder is not required to pay an amount equal to the
balance of the unpaid relevant contributions during the
20
prescribed period, and
(ii)
that, if the jobholder chooses to pay that amount, it may be paid
in instalments.
(3)
The Secretary of State may by regulations make provision about the way in
which the Regulator may (without prejudice to subsection (2)(a)) estimate the
25
amount of contributions that an employer has failed to pay in respect of a
jobholder.
(4)
Regulations under subsection (3) may include, in particular, provision about
the sources of information that the Regulator may use in estimating that
amount, other than information provided by the employer.
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Penalty notices
32
Fixed penalty notices
(1)
The Regulator may issue a fixed penalty notice to a person if it is of the opinion
that the person has failed to comply with—
(a)
a compliance notice under section 28,
35
(b)
a third party compliance notice under section 29,
(c)
an unpaid contributions notice under section 30, or
(d)
a notice issued under section 72 of the Pensions Act 2004 (c. 35)
(provision of information).
(2)
The Regulator may issue a fixed penalty notice to a person if it is of the opinion
40
that the person has contravened—
(a)
any provision of regulations under section 3(2) or 5(2) (prescribed
arrangements for automatic enrolment or re-enrolment),

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 2 — Compliance
14

(b)
any provision of regulations under section 6(5) (prescribed
arrangements: jobholder’s right to opt in),
(c)
section 7(3) and (4) (refund of contributions if jobholder opts out of
scheme membership), and any provision of regulations under those
subsections,
5
(d)
section 8 (requirement to give information to jobholders), and any
provision of regulations under that section, or
(e)
any provision of regulations under section 40 (requirement to keep
records).
(3)
A fixed penalty notice is a notice requiring the person to whom it is issued to
10
pay a penalty within the period specified in the notice.
(4)
The penalty—
(a)
is to be determined in accordance with regulations, and
(b)
must not exceed £50,000.
(5)
A fixed penalty notice must—
15
(a)
state the amount of the penalty;
(b)
state the date, which must be at least 4 weeks after the date on which
the notice is issued, by which the penalty must be paid;
(c)
state the period to which the penalty relates;
(d)
if the notice is issued under subsection (1), specify the failure to which
20
the notice relates;
(e)
if the notice is issued under subsection (2), specify the provision or
provisions that have been contravened;
(f)
if the notice is issued under subsection (1), state that, if the failure to
comply continues, the Regulator may issue an escalating penalty notice
25
under section 33;
(g)
notify the employer of the review process under section 35 and the right
of appeal under section 36.
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Escalating penalty notices
(1)
The Regulator may issue an escalating penalty notice to a person if it is of the
30
opinion that the person has failed to comply with—
(a)
a compliance notice under section 28,
(b)
a third party compliance notice under section 29,
(c)
an unpaid contributions notice under section 30, or
(d)
a notice under section 72 of the Pensions Act 2004 (c. 35) (provision of
35
information).
(2)
But the Regulator may not issue an escalating penalty notice if—
(a)
it relates to failure to comply with a notice within subsection (1)(a), (b)
or (c), the person to whom that notice was issued has applied for a
review of it under section 35, and any review has not been completed;
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(b)
it relates to failure to comply with any notice within subsection (1), the
person has exercised the right of appeal under section 36 against a fixed
penalty notice issued in relation to that notice, and the appeal has not
been determined.
(3)
An escalating penalty notice is a notice requiring a person to pay an escalating
45
penalty if the person fails to comply with a notice referred to in subsection (1)
before a specified date.