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
11

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Quality requirement: personal pension schemes
(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.
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(3)
The second condition is that, in relation to the jobholder, there is an agreement
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.
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(4)
In subsection (5), “shortfall” means the difference (if any) between—
(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
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the scheme and the jobholder under which the jobholder must pay
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.
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(7)
The Secretary of State may by regulations provide that, where the scheme is an
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.
(8)
A scheme does not fail to satisfy the quality requirement under this section
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merely because the trustees or managers of the scheme may on any occasion
refuse to accept a contribution below an amount prescribed for the purposes of
this section on the grounds that it is below that amount.
Transitional
26
Transitional periods for money purchase and personal pension schemes
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(1)
During the first transitional period for money purchase and personal pension
schemes—
(a)
sections 19(1)(b) and 25(3)(b) have effect as if for “3%” there were
substituted “1%”;
(b)
sections 19(1)(c) and 25(4)(b) have effect as if for “8%” there were
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substituted “2%”.
(2)
The first transitional period is a prescribed period of at least one year,
beginning with the coming into force of section 19.
(3)
During the second transitional period for money purchase and personal
pension schemes—
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(a)
sections 19(1)(b) and 25(3)(b) have effect as if for “3%” there were
substituted “2%”;

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
12

(b)
sections 19(1)(c) and 25(4)(b) have effect as if for “8%” there were
substituted “5%”.
(4)
The second transitional period is a prescribed period of at least one year,
beginning with the end of the first transitional period.
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Transitional period for defined benefits and hybrid schemes
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(1)
Subsection (3) applies if, in relation to a person who on the employer’s first
enrolment date is a jobholder to whom section 3 applies, the conditions in
subsection (2) are satisfied, and continue to be satisfied during the transitional
period for defined benefits and hybrid schemes.
(2)
The conditions are that—
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(a)
the jobholder has been employed by the employer for a continuous
period beginning before the employer’s first enrolment date,
(b)
at a time in that period before the employer’s first enrolment date, the
jobholder became entitled to become an active member of a defined
benefits scheme or a hybrid scheme,
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(c)
the jobholder is, and has always since that time been, entitled to become
an active member of a defined benefits scheme or a hybrid scheme, and
(d)
the scheme to which that entitlement relates is a qualifying scheme, and
any scheme to which it has related on or after the employer’s first
enrolment date has been a qualifying scheme.
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(3)
Where this subsection applies, section 3 has effect in relation to the jobholder
with the substitution for subsection (2) of the following subsection—
“(2)
The employer must make prescribed arrangements by which the
jobholder becomes an active member, with effect from the end of the
transitional period for defined benefits and hybrid schemes, of an
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automatic enrolment scheme which is a defined benefits scheme or a
hybrid scheme.”
(4)
If at any time in the transitional period for defined benefits and hybrid schemes
the condition in subsection (2)(c) or (d) of this section ceases to be satisfied,
subsection (5) applies instead of subsection (3) (and the day after the last day
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on which that condition is satisfied is referred to as “the closure date”).
(5)
Where this subsection applies, section 3 has effect in relation to the jobholder
with the substitution for subsection (2) of the following subsection—
“(2)
The employer must make prescribed arrangements by which the
jobholder either—
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(a)
becomes an active member, with effect from the closure date, of
an automatic enrolment scheme which is a defined benefits
scheme or a hybrid scheme, or
(b)
becomes an active member, with effect from the automatic
enrolment date, of an automatic enrolment scheme which is a
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money purchase scheme.”
(6)
If the jobholder becomes a member of a scheme under arrangements made
under subsection (2)(b) of that section (as substituted by subsection (5))—
(a)
the employer’s contributions are payable with effect from the
automatic enrolment date;
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Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
13

(b)
any requirement of the scheme rules (in accordance with section 19(1))
for contributions to be payable by the jobholder does not apply in
respect of the period of the jobholder’s membership before the closure
date;
(c)
regulations made for the purposes of section 3(2)(b) must secure that
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the jobholder may pay, within a period prescribed by the regulations,
any contributions which would have been payable by the jobholder but
for paragraph (b) of this subsection.
(7)
Where subsection (3) or (5) of this section applies, section 3(3) and (4) apply as
if references to the automatic enrolment date were references to the day on
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which arrangements would by virtue of this section fall to be made in respect
of the jobholder.
(8)
The transitional period for defined benefits and hybrid schemes is a prescribed
period beginning with the day on which section 3 comes into force.
(9)
In this section the “employer’s first enrolment date” means the first day on
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which section 3 applies in the case of the employer (where that date falls within
the transitional period for defined benefits and hybrid schemes).
Miscellaneous
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Power of trustees to modify by resolution
(1)
The trustees of an occupational pension scheme may by resolution modify the
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scheme with a view to enabling the scheme to comply with the conditions in
section 16(2).
(2)
No modification may be made by virtue of subsection (1) without the consent
of the employer in relation to the scheme.
(3)
In the application of subsection (2) to a scheme in relation to which there is
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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.
(4)
Regulations may provide that this section does not apply to occupational
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pension schemes within a prescribed class or description.
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Deduction of contributions
An employer who arranges for a person to become a member of an
occupational pension scheme in accordance with section 3(2), 5(2), 6(3) or 8(2)
may deduct the person’s contributions to the scheme from the person’s
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remuneration and pay them to the trustees or managers of the scheme.

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

Chapter 2
Compliance
Effect of failure to comply
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Effect of failure to comply
(1)
Contravention of any of the employer duty provisions does not give rise to a
5
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 10 or of regulations under those sections.
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(4)
In relation to section 8 this Chapter applies as if references to a jobholder
included references to a worker to whom that section applies.
Compliance notices and unpaid contributions notices
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Compliance notices
(1)
The Pensions Regulator (referred to in this Chapter as the “Regulator”) may
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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.
(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—
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(a)
state the period within which any step must be taken or must cease to
be taken;
(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,
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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
notice, the Regulator may issue a fixed penalty notice under section 35.
(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
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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
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
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employer had complied with that duty.
(6)
The Secretary of State may by regulations make provision about the
application of sections 2 to 9 in relation to an employer to whom a compliance
notice is issued in respect of a failure to comply with an enrolment duty.