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
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Duty in relation to workers without qualifying earnings
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Workers without qualifying earnings
(1)
This section applies to a worker—
(a)
to whom paragraphs (a) and (b) of section 1(1) apply (working in Great
Britain and aged between 16 and 75),
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(b)
to whom paragraph (c) of section 1(1) does not apply (qualifying
earnings), and
(c)
who is not an active member of a pension scheme that satisfies the
requirements of this section.
(2)
The worker may by notice require the employer to arrange for the worker to
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become an active member of a pension scheme that satisfies the requirements
of this section.
(3)
The Secretary of State may by regulations make provision—
(a)
about the form and content of the notice;
(b)
about the arrangements that the employer is required to make;
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(c)
for determining the date with effect from which the worker is (subject
to compliance with any requirements of the scheme rules) to become an
active member under the arrangements.
(4)
Subsections (5) and (6) apply where a worker becomes an active member of a
pension scheme in pursuance of a notice under this section and, within the
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period of 12 months beginning with the day on which that notice was given—
(a)
ceases to be an active member of that scheme because of any action or
omission by the worker, and
(b)
gives the employer a further notice under this section.
(5)
The further notice does not have effect to require the employer to arrange for
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the worker to become an active member of a pension scheme.
(6)
But any arrangements the employer makes for the worker to become, within
that period, an active member of a pension scheme that satisfies the
requirements of this section must be made in accordance with regulations
under this section.
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(7)
A pension scheme satisfies the requirements of this section if—
(a)
it is an occupational pension scheme or a personal pension scheme,
(b)
it is registered under Chapter 2 of Part 4 of the Finance Act 2004 (c. 12),
and
(c)
in the case of a personal pension scheme, there are, in relation to the
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worker concerned, direct payment arrangements (within the meaning
of section 111A of the Pension Schemes Act 1993 (c. 48)) between the
worker and the employer.
Supplementary provision about the duties
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Information to be given to jobholders
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(1)
The Secretary of State must make provision by regulations—
(a)
for all jobholders to be given information about the effect of sections 2
to 7 in relation to them;

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
6

(b)
for all workers to whom section 8 applies to be given information about
the effect of that section in relation to them;
(c)
for a prescribed person to be required to provide the information.
(2)
Regulations under this section must state—
(a)
what information must be given;
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(b)
in what circumstances it must be given;
(c)
how and when it must be given.
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Information to be given to the Pensions Regulator
(1)
The Secretary of State may make regulations requiring employers to provide
the Pensions Regulator with information about action they have taken or
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intend to take for the purposes of any provision of, or of regulations under,
sections 2 to 9.
(2)
The regulations may in particular—
(a)
require an employer to provide information about pension schemes to
which any action relates;
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(b)
require an employer to identify which of any prescribed descriptions a
scheme falls within;
(c)
require an employer to provide information that appears to the
Secretary of State to be required for the performance by the Pensions
Regulator of its functions under Chapter 2 of this Part;
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(d)
make provision about how and in what form any information is to be
provided.
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Introduction of employers’ duties
The Secretary of State may by regulations provide that sections 2 to 8 do not
apply in the case of an employer of any description until such date after the
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commencement of those sections as is prescribed in relation to employers of
that description.
Qualifying earnings
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Qualifying earnings
(1)
A person’s qualifying earnings at any time in a pay reference period are the
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part (if any) of the gross earnings payable to that person in that period that is—
(a)
more than £5,035, and
(b)
not more than £33,540.
(2)
In the case of a pay reference period of less or more than 12 months, subsection
(1) applies as if the amounts in paragraphs (a) and (b) were proportionately less
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or more.
(3)
In this section, “earnings”, in relation to a person, means sums of any of the
following descriptions that are payable to the person in connection with the
person’s employment—
(a)
salary, wages, commission, bonuses and overtime;
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(b)
statutory sick pay under Part 11 of the Social Security Contributions
and Benefits Act 1992 (c. 4);

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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(c)
statutory maternity pay under Part 12 of that Act;
(d)
ordinary statutory paternity pay or additional statutory paternity pay
under Part 12ZA of that Act;
(e)
statutory adoption pay under Part 12ZB of that Act;
(f)
sums prescribed by regulations for the purposes of this section.
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Review of qualifying earnings band
(1)
The Secretary of State must in each tax year determine whether the amounts in
section 12(1)(a) and (b) have maintained their value.
(2)
Changes in their value are to be assessed in any way that the Secretary of State
considers appropriate.
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(3)
The Secretary of State may in particular make a determination under
subsection (1) by reference to a review under section 148 of the Social Security
Administration Act 1992 (review of general level of earnings for revaluation of
earnings factors).
(4)
If the Secretary of State determines under this section that the amounts in
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section 12(1)(a) and (b) have not maintained their value, the Secretary of State
may make an order substituting in those provisions the amounts that the
Secretary of State considers appropriate for maintaining their value.
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Pay reference period
(1)
In relation to any person a pay reference period is—
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(a)
the period prescribed;
(b)
if no period is prescribed, twelve months.
(2)
The Secretary of State may by regulations—
(a)
make provision for determining a person’s earnings in any pay
reference period;
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(b)
make provision for determining the first date of each pay reference
period in relation to a person.
Qualifying schemes and automatic enrolment schemes
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Qualifying schemes
(1)
A pension scheme is a qualifying scheme in relation to a jobholder (J) if—
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(a)
the scheme is an occupational pension scheme or a personal pension
scheme,
(b)
the scheme is registered under Chapter 2 of Part 4 of the Finance Act
2004 (c. 12),
(c)
while J is an active member, the scheme satisfies the quality
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requirement in relation to J.
(2)
The Secretary of State may by regulations provide that a scheme is not a
qualifying scheme in relation to J if—
(a)
while J is an active member, the payments that must be made to the
scheme by, or on behalf or in respect of, J for purposes other than the
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provision of benefits exceed a prescribed amount,

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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(b)
while J is an active member, the contributions that must be paid to the
scheme by, or on behalf or in respect of, J exceed a prescribed amount,
or
(c)
the scheme provides for average salary benefits to be provided to or in
respect of J and contains prescribed features.
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Automatic enrolment schemes
(1)
A pension scheme is an automatic enrolment scheme in relation to a jobholder
(J) if—
(a)
the scheme is an occupational pension scheme which is a qualifying
scheme in relation to J, and
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(b)
the scheme satisfies the conditions in subsection (2).
(2)
The conditions are that—
(a)
no provision of the scheme prevents the employer from making
arrangements prescribed by regulations under section 3(2), 5(2) or 6(4)
for J to become an active member of the scheme;
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(b)
no provision of the scheme requires J to express a choice in relation to
any matter, or to provide any information, in order to remain an active
member.
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Occupational pension schemes
For the purposes of this Part, each of these is an occupational pension
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scheme—
(a)
an occupational pension scheme within the meaning of section 1(1) of
the Pension Schemes Act 1993 (c. 48) that has its main administration in
the United Kingdom;
(b)
an institution for occupational retirement provision within the
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meaning of Article 6(a) of the IORP Directive, that has its main
administration in an EEA State other than the United Kingdom;
(c)
a pension scheme that is prescribed or is of a prescribed description and
that has its main administration elsewhere than in an EEA State.
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Personal pension schemes
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For the purposes of this Part, a personal pension scheme is a pension scheme
that—
(a)
is not an occupational pension scheme, and
(b)
is established by a person within section 154(1)(b) of the Finance Act
2004 (c. 12).
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Quality requirements
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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—
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(a)
the jobholder’s employer must pay contributions in respect of the
jobholder;

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

(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
employer must be at least 8% of the amount of the jobholder’s
qualifying earnings in the pay reference period.
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(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
reference to the scheme, paragraphs (b) and (c) of subsection (1) have effect
with prescribed modifications.
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(3)
A scheme does not fail to satisfy the quality requirement under this section
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.
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Quality requirement: UK defined benefits schemes
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(1)
Subject to subsection (3), a defined benefits scheme that has its main
administration in the United Kingdom satisfies the quality requirement in
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
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in contracted out employment if it satisfies the test scheme standard in relation
to that jobholder.
(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
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jobholder, with the substitution of a higher fraction, not exceeding 1/80th, for
the fraction of 1/120th in section 22(3)(a).
(4)
In relation to any scheme, a jobholder is in contracted-out employment for the
purposes of this section and section 21 if a certificate has been issued in respect
of the jobholder under section 7(1) of the Pension Schemes Act 1993 stating that
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the employment of the jobholder is contracted-out employment by reference to
the scheme.
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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
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equivalent to, or better than, the pensions which would be provided for such
persons under a test scheme.
(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
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employer as J;
(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
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be considered as a whole.

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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(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
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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.
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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.
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Quality requirement: UK hybrid schemes
(1)
An occupational pension scheme which is a hybrid scheme and has its main
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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 19;
(b)
the requirements for a defined benefits scheme under section 20.
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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.
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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 17(b) or (c).
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