‘(1) In the Pension Schemes Act 1993, in section 182 (orders and regulations: general provisions), after subsection (1) insert—
“(1A) Subsection (1) does not apply to the power of the Scottish Ministers to make regulations under section 97B(11).”
(2) In that Act, in section 185 (consultations about other regulations), after subsection (5) insert—
“(5A) Subject to subsection (5C), before the Treasury (acting alone) make any regulations under section 95, 97A or 97C they shall consult such persons as they may consider appropriate.
(5B) Subject to subsection (5C), before the Scottish Ministers make any regulations under section 97B(11) they shall consult such persons as they may consider appropriate.
(5C) Subsections (5A) and (5B) do not apply to regulations in the case of which the Treasury or (as the case may be) the Scottish Ministers consider consultation inexpedient because of urgency or to regulations of the type described in subsection (2)(b) or (e)).”
(3) In that Act, in section 186 (Parliamentary control of orders and regulations)—
(a) in subsection (1) (negative procedure), after “Secretary of State” insert “or the Treasury”;
(b) in subsection (3) (affirmative procedure), after paragraph (e) insert “, or
(f) regulations made under section 97A(11)”;
(c) after subsection (5) insert—
“(6) Regulations made by the Scottish Ministers under section 97B(11) are subject to the affirmative procedure (see Part 2 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10)).”
(4) In the Pensions Act 2004, in section 18 (pension liberation: interpretation), in subsection (4)(a) (meaning of “authorised way”), omit “subsection (2) or, as the case may be, subsection (3) of”.
(5) The consultation requirement in section 185(5A) of the Pension Schemes Act 1993 (inserted by subsection (2)) may be satisfied by things done before the day on which this Act is passed.”.—(Steve Webb.)
This amendment makes amendments to pensions legislation that are consequential on NC25 and NC26.
Brought up, read the First and Second time, and added to the Bill.
Restriction on transfers out of public service defined benefits schemes: Northern Ireland
‘(1) The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
25 Nov 2014 : Column 847
(2) In section 91(2), after “occupational pension scheme” insert “that is not an unfunded public service defined benefits scheme”.
(3) In section 91, after subsection (2) insert—
“(2A) In the case of a member of an occupational pension scheme that is an unfunded public service defined benefits scheme, the ways referred to in subsection (1) are—
(a) for acquiring transfer credits allowed under the rules of another occupational pension scheme if—
(i) the benefits that may be provided under the other scheme by virtue of the transfer credits are not flexible benefits,
(ii) the trustees or managers of the other scheme are able and willing to accept payment in respect of the member’s transferrable rights, and
(iii) the other scheme satisfies requirements prescribed in regulations made by the Department or the Department of Finance and Personnel;
(b) for acquiring rights allowed under the rules of a personal pension scheme if—
(i) the benefits that may be provided under the personal pension scheme by virtue of the acquired rights are not flexible benefits,
(ii) the trustees or managers of the personal pension scheme are able and willing to accept payment in respect of the member’s transferrable rights, and
(iii) the personal pension scheme satisfies requirements prescribed in regulations made by the Department or the Department of Finance and Personnel;
(c) for purchasing from one or more insurers such as are mentioned in section 15(4)(a), chosen by the member and willing to accept payment on account of the member from the trustees or managers, one or more annuities which satisfy requirements prescribed in regulations made by the Department or the Department of Finance and Personnel;
(d) for subscribing to other pension arrangements which satisfy requirements prescribed in regulations made by the Department or the Department of Finance and Personnel.
(2B) The Department of Finance and Personnel may by regulations provide for sub-paragraph (i) of subsection (2A)(a) or (b) not to apply in specified circumstances or in relation to specified schemes or schemes of a specified description.
(2C) In subsection (2A) “unfunded public service defined benefits scheme” means a public service pension scheme that—
(a) is a defined benefits scheme within the meaning given by section 34 of the Public Service Pensions Act (Northern Ireland) 2014, and
(b) meets some or all of its liabilities otherwise than out of a fund accumulated for the purpose during the life of the scheme.”
(4) In section 91(5)(a), for “subsection (2) is” substitute “subsections (2) and (2A) are”.
(a) after “subsections (2)” insert “, (2A)”;
(b) after “subsection (2)” insert “or (2A)”.
(6) In section 92 (further provisions concerning exercise of option under section 91), in subsection (2)(b), after “subsection (2)” insert “, subsection (2A)”.
(7) In section 96 (withdrawal of applications), in subsection (2), after “subsection (2)” insert “, subsection (2A)”.
(8) The amendments made by this section have no effect in relation to an application made under section 91 of the Pension Schemes (Northern Ireland) Act 1993 before 6 April 2015.
(9) Until the coming into force of the first regulations made under a provision of section 91(2A) of the Pension Schemes (Northern Ireland) Act 1993 specified in the first column of the table, regulations made under the provision of section 91(2) of
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that Act specified in the corresponding entry in the second column apply (with any necessary modifications) for the purposes of the provision specified in the first column—
| Provision of section 91(2A) | Provision of section 91(2) |
| Paragraph (a)(iii) | Paragraph (a)(ii) |
| Paragraph (b)(iii) | Paragraph (b)(ii) |
| Paragraph (c) | Paragraph (c) |
| Paragraph (d) | Paragraph (d).” |
This amendment makes for Northern Ireland provision parallel to that made by NC25.
—
(Steve Webb.)
Brought up, read the First and Second time, and added to the Bill.
Reduction of cash equivalents: funded public service defined benefits schemes: Northern Ireland
‘(1) The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
(2) In section 93 (calculation of cash equivalents), in subsection (1)—
(a) after “verified” insert “—
(b) where a designation has been made under section 93A, in accordance with regulations under section 93B.”
“93A Designation of funded public service defined benefits schemes
(1) The relevant Department may designate a funded public service defined benefits scheme as a scheme to which regulations under section 93B are to apply for a specified period of no more than 2 years.
(2) The power under subsection (1) may be exercised only if the relevant person considers that—
(a) there is an increased likelihood of payments out of public funds, or increased payments out of public funds, having to be made into the scheme so that it can meet its liabilities, and
(b) the increased likelihood is connected with the exercise or expected future exercise of rights to take a cash equivalent acquired under section 90.
(3) The power under subsection (1) may be exercised in relation to the whole or any part of a scheme.
(4) In the application of subsection (2) to part of a scheme, paragraph (a) is to be read as if it referred to the scheme’s liabilities relating to that part.
(5) A designation under subsection (1)—
(a) may be extended (on more than one occasion) for a period of no more than 2 years;
(6) The relevant Department must give notice in writing of a designation or its extension or revocation to the trustees or managers of the scheme (except in a case where the relevant Department is the trustees or managers).
(7) If the trustees or managers of a funded public service defined benefits scheme, or part of such a scheme, that is not designated under this section consider that the conditions in paragraphs (a) and (b) of subsection (2) are met in relation to the scheme or part they must notify—
(a) the Department of Finance and Personnel, and
(b) (where relevant) each Northern Ireland department by whom, or with whose approval, the scheme was established.
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(8) If the trustees or managers of a scheme, or part of a scheme, that is designated under this section consider that the conditions in paragraphs (a) and (b) of subsection (2) are no longer met in relation to the scheme or part they must notify—
(a) the Department of Finance and Personnel, and
(b) (where relevant) each Northern Ireland department by whom, or with whose approval, the scheme was established.
“funded public service defined benefits scheme” means a public service pension scheme that—
(a) is a defined benefits scheme within the meaning given by section 34 of the Public Service Pensions Act (Northern Ireland) 2014, and(b) meets its liabilities out of a fund accumulated for the purpose during the life of the scheme;
“local authority” means a district council constituted under section 1 of the Local Government Act (Northern Ireland) 1972;
“payment out of public funds” means a payment provided directly or indirectly—
(a) out of the Northern Ireland Consolidated Fund;(b) by a local authority;
“the relevant Department”, in relation to a funded public service defined benefits scheme, means either of the following—
(a) the Department of Finance and Personnel, or(b) any Northern Ireland department by whom, or with whose approval, the scheme was established.
(10) The Department of Finance and Personnel may by regulations make modifications of the definition of “the relevant Department” in subsection (9).”
(4) After section 93A (inserted by subsection (3)) insert—
“93B Reduction of cash equivalents in case of section 93A designated schemes
(1) The Department of Finance and Personnel may by regulations provide that where, under section 91(1), a member of a designated scheme requires the trustees or managers to use a cash equivalent for acquiring flexible benefits under the rules of another pension scheme the cash equivalent must be reduced by an amount determined in accordance with the regulations.
(2) Regulations under subsection (1) may not require a reduction in cases where a scheme ceases to be a designated scheme before the date on which the trustees or managers do what is needed to carry out what the member requires.
(3) Regulations under subsection (1) may produce the result (alone or in conjunction with regulations under section 93) that the amount by which a cash equivalent is to be reduced is such an amount that a member has no right to receive anything.
(4) In subsection (1), “designated scheme” means a funded public service defined benefits scheme, or part of such a scheme, that (on the date of the application under section 91(1)) is designated under section 93A.””.—(Steve Webb.)
This amendment makes for Northern Ireland provision parallel to that made by NC26.
Brought up, read the First and Second time, and added to the Bill.
Public service defined benefits schemes: consequential amendments: Northern Ireland
‘(1) In the Pension Schemes (Northern Ireland) Act 1993, in section 176 (general interpretation), in subsection (1), in the definition of “regulations”, after “means” insert “, unless the context otherwise requires,”.
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(2) In that Act, in section 181 (Assembly etc control of regulations and orders)—
(a) in subsection (2) (regulations and orders subject to confirmatory procedure), at the end insert “and to regulations made by the Department of Finance and Personnel under section 93A(10)”;
(b) in subsection (4) (regulations and orders subject to negative resolution), for “shall” substitute “and regulations made by the Department of Finance and Personnel under section 91 or 93B shall”.
(3) In the Pensions (Northern Ireland) Order 2005 (S.I. 2005/255 (N.I. 1)), in Article 14 (pension liberation: interpretation), in paragraph (4)(a) (meaning of “authorised way”), omit “subsection (2) or, as the case may be, subsection (3) of”.”.—(Steve Webb.)
This amendment makes amendments to pensions legislation that are consequential on NC28 and NC29.
Brought up, read the First and Second time, and added to the Bill.
Meaning of “flexible benefit”
In this Part “flexible benefit”, in relation to a member of a pension scheme, means—
(b) a cash balance benefit, or
(c) a benefit, other than a money purchase benefit or cash balance benefit, calculated by reference to an amount available for the provision of benefits to or in respect of the member (whether the amount so available is calculated by reference to payments made by the member or any other person in respect of the member or any other factor).”.—(Steve Webb.)
This is to be added to Part 4 of the Bill. The definitions are intended to govern the interpretation of the new clauses about independent advice, drawdown and lump sums (also to be added to Part 4). The definitions are also applied by some of the amendments to other legislation.
Brought up, read the First and Second time, and added to the Bill.
Meaning of “cash balance benefit
‘(1) In this Part “cash balance benefit”, in relation to a member of a pension scheme, means a benefit calculated by reference to an amount available for the provision of benefits to or in respect of the member (“the available amount”) where there is a promise about that amount.
(2) But a benefit is not a “cash balance benefit” if, under the scheme—
(a) a pension may be provided from the available amount to or in respect of the member, and
(b) there is a promise about the rate of that pension.
(3) The promise mentioned in subsection (1) includes, in particular, a promise about the change in the value of, or the return from, payments made by the member or any other person in respect of the member. The promise mentioned in subsection (2)(b) includes a promise that—
(a) the available amount will be sufficient to provide a pension of a particular rate;
(b) the rate of a pension will represent a particular proportion of the available amount.
(4) A benefit is not excluded from the definition of “cash balance benefit” by subsection (2) merely because under the scheme there is a promise that—
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(a) the rate or amount of the benefit payable in respect of a deceased member will be a particular proportion of the rate or amount of the benefit which was (or would have been) payable to the member, or
(b) the amount of a lump sum payable to a member, or in respect of a deceased member, will represent a particular proportion of the available amount.”.—(Steve Webb.)
This is to be added to Part 4 of the Bill. The definitions are intended to govern the interpretation of the new clauses about independent advice, drawdown and lump sums (also to be added to Part 4). The definitions are also applied by some of the amendments to other legislation.
Brought up, read the First and Second time, and added to the Bill.
Interpretation of Part 4
‘(1) In this Part— In any provision of this Part as it extends to England and Wales and Scotland— In any provision of this Part as it extends to Northern Ireland—
“cash balance benefit” has the meaning given by section (Meaning of “cash balance benefit”);
“dependants’ drawdown pension”, in relation to a member, has the meaning given by paragraph 18 of Schedule 28 to the Finance Act 2004;
“drawdown pension”, in relation to a survivor, has the meaning given by paragraph 4 of Schedule 28 to the Finance Act 2004;
“flexible benefit” has the meaning given by section (Meaning of “flexible benefit”);
“normal pension age”, in relation to a benefit for a member of a pension scheme or a survivor of a member, means—
(a) the earliest age at which, or earliest occasion on which, the member or survivor is entitled to receive the benefit without adjustment for taking it early or late (disregarding any special provision as to early payment on the grounds of ill health or otherwise), or(b) if there is no such age or occasion, normal minimum pension age as defined by section 279(1) of the Finance Act 2004;
(a) in relation to a member of a pension scheme means—(b) in relation to a survivor of a member of a pension scheme, means any right to future benefits, or entitlement to benefits, which the survivor has under the scheme in respect of the member;
“survivor”, in relation to a member of an occupational pension scheme, means a person who has survived the member and has a right to future benefits, or is entitled to benefits, under the scheme in respect of the member;
(a) in relation to a scheme established under a trust, the trustees, and(b) in relation to any other scheme, the managers.
Great Britain only definitions
“money purchase benefits” has the meaning given by section 181 of the Pension Schemes Act 1993;
“occupational pension scheme” has the meaning given by section 1 of the Pension Schemes Act 1993;
“pension scheme” has the meaning given by section 1(5) of the Pension Schemes Act 1993.
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Northern Ireland only definitions
“money purchase benefits” has the meaning given by section 176 of the Pension Schemes (Northern Ireland) Act 1993;
“occupational pension scheme” has the meaning given by section 1 of the Pension Schemes (Northern Ireland) Act 1993;
“pension scheme” has the meaning given by section 1(5) of the Pension Schemes (Northern Ireland) Act 1993.”.—(Steve Webb.)
This is expected to be added to Part 4 of the Bill and is intended to govern the interpretation of the new clauses about independent advice, drawdown and lump sums (which are also expected to be added to Part 4).
Brought up, read the First and Second time, and added to the Bill.
Defined Benefits scheme
Amendment made: 2, page 2, line 2, at end insert “, and
(d) such other requirements as may be specified in regulations are met.”
.
—
(Steve Webb.)
This amendment enables the Secretary of State to make regulations to prescribe additional requirements which must be met in order for a scheme to fall within the defined benefit scheme definition.)
Meanings of “Pensions Promise”
Amendment made: 3, page 3, line 4, at end insert—
‘( ) A promise about the level of retirement income is not to be treated as a pensions promise if—
(a) the promise is conditional on the retirement income coming into payment by a particular date,
(b) the scheme provides for the member to be first given the promise during such period ending on that date as may be specified in regulations, and
(c) the promise is not of a description specified in regulations.”—(Steve Webb.)
Under clause 5 a pensions promise is a promise made at a time before the benefit comes into payment. This amendment makes an exception to that provision.
Interpretation of Part 1
Amendment made: 4, page 4, line 5 at end insert—
““regulations” means regulations made by the Secretary of State;”—(Steve Webb.)
This amendment is consequential on amendment 34. Provision about by whom regulations may be made is now to be dealt with in the relevant Part or clause.
Policy for Dealing with a Deficit or Surplus
Amendments made: 5, page 8, line 29, at end insert—
“() set out matters that the trustees or managers must take into account, or principles they must follow, in formulating the policy;”
The amendment allows regulations which require trustees or managers to have a policy relating to a deficit or surplus to make provision about matters to take into account and principles they must follow.
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Amendment 6, page 8, line 36, after “policy” insert “, or any requirements imposed by regulations under section (Power to impose requirements about dealing with a deficit or surplus),”—(Steve Webb.)
This amendment allows regulations to require that the policy on deficits and surpluses explains the possible effect on members of any requirements imposed by regulations made under NC3.)
.
Transfer Value: Policy for Calculating Cash Equivalent of Benefits
Amendments made: 7, page 9, line 24, after “in” insert “the following—
This is one of a group of amendments to ensure the policy on calculating cash equivalents applies in all cases where trustees or managers need to calculate a cash equivalent for the member’s benefits.
Amendment 8, page 9, line 25, leave out “93A(1ZB)” and insert “93A(3)”
This is consequential on NS1, which replaces the provision mentioned in clause 22(2).
Amendment 9, page 9, line 25, at end insert—
“(b) section 101H(1) of that Act;
(c) section 29(2) and (3) of the Welfare Reform and Pensions Act 1999;
(d) any other provision specified in regulations.”
This amendment extends the scope of the policy on calculating cash equivalents to cover cash equivalents calculated for the purposes of provisions about transfers of pension credit rights and pension sharing on divorce and for other purposes specified in regulations.
Amendment 10, page 9, line 26, leave out “The regulations” and insert “Regulations under subsection (1)”
This is consequential on amendment 9.
Amendment 11, page 9, line 29, after “97” insert “or 101I”
This is consequential on amendment 9.
Amendment 12, page 9, line 30, at end insert “or section 30 of the Welfare Reform and Pensions Act 1999 or any other specified requirements”
This is consequential on amendment 9.
Amendment 13, page 9, line 31, at end insert—
“() set out matters that the trustees or managers must take into account, or principles they must follow, in formulating the policy;”—(Steve Webb.)
The amendment allows regulations which require trustees or managers to have a policy on calculating cash equivalents to make provision about matters to take into account and principles they must follow.)
Winding up
Amendments made: 14, page 9, line 34, at end insert—
‘( ) Regulations may make provision about the winding up of a pension scheme under which collective benefits may be provided or part of such a scheme.
( ) The regulations may, in particular, make provision about—
(a) the distribution of assets (including any order of priority);
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(b) the operation of the scheme during winding up;
(c) the discharge of liabilities;
(d) excess assets on winding up.”
This confers a broader power to make provision about the winding up of schemes that provide collective benefits or parts of those schemes. Where appropriate, this will enable provision to be made that is neither corresponding nor similar to the provisions currently listed in clause 23.
Amendment 15, page 9, line 35, at the beginning insert “The”
This is consequential on amendment 14.
Amendment 16, page 9, line 35, after “may” insert “, in particular”
This is consequential on amendment 14.
Amendment 17, page 9, line 36, leave out “modify” and insert “amend or otherwise modify”
This allows the provisions listed in clause 23 to be amended.
Amendment 18, page 9, line 36, after “sections” insert “38,”
This adds to the list of winding up provisions that may be disapplied or modified etc under clause 23.
Amendment 19, page 9, line 36, leave out “and 74” and insert “, 74 and 76”
This adds to the list of winding up provisions that may be disapplied or modified etc under clause 23.
Amendment 20, page 9, line 37, leave out “in relation to collective benefits”
This amendment and amendment 21 broaden the power to make provision about winding up. In a case where a scheme contains a mixture of benefits, it might be necessary to make provision about the non-collective benefits as well as the collective benefits.
Amendment 21, page 9, line 39, leave out “in relation to collective benefits”—(Steve Webb.)
See Member’s explanatory statement for amendment 20.
Requirements to Obtain Actuarial Advice
Amendment made: 22, page 10, line 5, leave out “required by regulations under this Part”—(Steve Webb.)
This amendment extends the power to specify when trustees and managers must seek actuarial advice so that it can relate to decisions and actions that are beyond the scope of regulations made under Part 2 of the Bill.
Interpretation of Part 2
Amendments made: 23, page 10, line 34, at end insert—
““deficit”, in respect of a collective benefit, has the meaning given by section19 (but this definition does not apply in section20, which contains its own definition);”
This amendment inserts a definition of “deficit” into clause 29, and gives it the same meaning as the definition included in clause 19.
Amendment 24, page 10, line 38, at end insert—
““regulations” means regulations made by the Secretary of State;”
See Member’s explanatory statement for amendment 4.
Amendment 25, page 11, line, at end insert—
““surplus”, in respect of a collective benefit, has the meaning given by section19;”—(Steve Webb.)
This amendment inserts a definition of “surplus” into clause 29, and gives it the same meaning as the definition included in clause 19.
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Pensions promise obtained from third party
Amendment made: 26, page 11, line 17, leave out “Regulations may” and insert “The Secretary of State may by regulations” .—(Steve Webb.)
See Member’s explanatory statement for amendment 4.
Duty to act in the best interests of members
Amendment made: 27, page 11, line 40, leave out “Regulations may” and insert “The Secretary of State may by regulations” .—(Steve Webb.)
See Member’s explanatory statement for amendment 4
Amendments made: 28, page 14, line 26 leave out Clause 35
Clause 35 and Schedule 2 are superseded by NC24 and NS1.
Amendment 29, page 14, line 28,leave out Clause 36.—(Steve Webb.)
This amendment removes clause 36. For the replacement provision imposing restrictions on transfers out of public service defined benefits schemes in Great Britain, see NC25
Pensions guidance
Amendment made: 30, page 17, line 32, leave out “cash balance benefits or other money purchase” and insert “flexible”.—(Steve Webb.)
This amendment is consequential on amendment 56
Pension Scheme for Fee-paid Judges
Amendment made: 31, page 18, line 24, at end insert—
‘( ) The power under section 18(5) of the Public Service Pensions Act 2013 is to include power to provide for exceptions in the case of a person who—
(a) served as a fee-paid judge before 1 April 2012, and
(b) has been notified by the appropriate Minister that he or she will potentially be eligible for benefits under a scheme under this section in relation to that service,
(and section 18(6) to (8) of the 2013 Act apply accordingly).
( ) The power under section 18(5) of the Public Service Pensions Act (Northern Ireland) 2014 is to include power to provide for exceptions in the case of a person who—
(a) served as a fee-paid judge before 1 April 2012, and
(b) has been notified by the appropriate Minister that he or she will potentially be eligible for benefits under a scheme under this section in relation to that service,
(and section 18(7) to (9) of the 2014 Act apply accordingly).”—(Steve Webb.)
Among other things this amendment would allow regulations to be made ensuring that fee-paid judges who are subsequently appointed to the salaried judiciary are extended the same transitional protection rights as members moving between existing public service pension schemes.
Amendment made: 32, page 19, line 37, leave out clause 49—(Steve Webb.)
The purpose behind this amendment and amendments 43, 47, 51, 52, 53, 54 and 55 is to move the text of clause 49 into Schedule 3 to the Bill. This is desirable because of structural changes made to the Bill as amended in Public Bill Committee.
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Power to make consequential amendments
Amendment made: 33, page 20, line 21, after “State” insert “or the Treasury”.—(Steve Webb.)
This gives the Treasury power to make consequential amendments etc under clause 50.
Regulations
Amendments made: 34, page 20, line 30, leave out subsection (1)
See Member’s explanatory statement for amendment 4.
Amendment 35, page 20, line 32, after “Regulations” insert “made by the Secretary of State or the Treasury”
This amendment is consequential upon amendment 33.
Amendment 36, page 20, line 32, at end insert—
‘( ) A power of the Department for Social Development in Northern Ireland to make regulations under this Act is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).”
This amendment is consequential on the new clauses to do with independent advice and drawdown.
Amendment 37, page 20, line 40, at end insert—
‘( ) Regulations made by the Department for Social Development in Northern Ireland under this Act are subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.)).”.—(Steve Webb.)
This amendment is consequential on the new clauses to do with independent advice and drawdown.
Crown application
Amendment made: 38, page 21, line 7, at end insert—
This amendment ensures that clause 31 applies to schemes managed by or on behalf of the Crown.
Amendment made: 39, page 21, line 7, at end insert—
“() section (Independent advice in respect of conversions and transfers: Great Britain),
() section (Power to require employer to arrange advice for purposes of section (Independent advice in respect of conversions and transfers: Great Britain)),
() section (Independent advice in respect of conversions and transfers: Northern Ireland),
() section (Power to require employer to arrange advice for purposes of section (Independent advice in respect of conversions and transfers: Northern Ireland)),
“() section (Sums or assets that may be designated as available for drawdown: Great Britain),
() section (Provision about conversion of certain benefits for drawdown: Great Britain),
() section (Provision about calculation of lump sums: Great Britain),
() section (Sums or assets that may be designated as available for drawdown: Northern Ireland),
() section (Provision about conversion of certain benefits for drawdown: Northern Ireland), and
() section (Provision about calculation of lump sums: Northern Ireland).”.—(Steve Webb.)
This amendment ensures that the provisions listed in the amendment apply to schemes managed by or on behalf of the Crown.
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Extent
Amendments made: 40, page 21, line 24, leave out subsection (4) and insert—
‘( ) The following extend also to Northern Ireland—
(a) section (Independent advice: income tax exemption)(3);
(b) section (Meaning of “flexible benefit”);
(c) section (Meaning of “cash balance benefit”);
(d) section (Interpretation of Part 4);
This amendment ensures that the provisions listed have UK extent. It also replicates the effect of the subsection left out by the amendment, whilst taking account of the changes described in the Member’s explanatory statement for amendment 32.
Amendment 41, page 21, line 24, at end insert—
‘( ) The following extend to Northern Ireland only—
(a) section (Independent advice in respect of conversions and transfers: Northern Ireland);
(b) section (Power to require employer to arrange advice for purposes of section (Independent advice in respect of conversions and transfers: Northern Ireland));
(c) section (Sums or assets that may be designated as available for drawdown: Northern Ireland);
(d) section (Provision about conversion of certain benefits for drawdown: Northern Ireland);
(e) section (Provision about calculation of lump sums: Northern Ireland);
(f) section (Restriction on transfers out of public service defined benefits schemes: Northern Ireland)(8) and (9).”.—(Steve Webb.)
This amendment provides for the provisions listed in the amendment to extend to Northern Ireland only.
Commencement
Amendments made: 42, page 21, line 26, at end insert—
() section (Independent advice: income tax exemption);
() section (Provision about conversion of certain benefits for drawdown: Great Britain);
() section (Provision about calculation of lump sums: Great Britain);
() section (Provision about conversion of certain benefits for drawdown: Northern Ireland);
() section (Provision about calculation of lump sums: Northern Ireland);
() section (Rights to transfer benefits);
“() section (Reduction of cash equivalents: funded public service defined benefits schemes: Great Britain)(1) and (4);
() section (Public service defined benefits schemes: consequential amendments: Great Britain);
() section (Reduction of cash equivalents: funded public service defined benefits schemes: Northern Ireland)(1) and (4);
() section (Public service defined benefits schemes: consequential amendments: Northern Ireland);
() section (Meaning of “flexible benefit”);
() section (Meaning of “cash balance benefit”);
() section (Interpretation of Part 4);
() Schedule (Rights to transfer benefits);”
This amendment provides the provisions listed in the amendment to come into force on Royal Assent. The Bill currently provides for clause 43 and Schedule 4 (which are about the giving of pensions guidance) to be brought into force by regulations.
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Amendment 44, page 21, line 29, at end insert—
‘( ) The following come into force on 6 April 2015—
(a) section (Independent advice in respect of conversions and transfers: Great Britain);
(b) section (Power to require employer to arrange advice for purposes of section (Independent advice in respect of conversions and transfers: Great Britain));
(c) section (Independent advice: consequential amendments - Great Britain);
(d) section (Independent advice in respect of conversions and transfers: Northern Ireland);
(e) section (Power to require employer to arrange advice for purposes of section (Independent advice in respect of conversions and transfers: Northern Ireland));
(f) section (Independent advice: consequential amendments - Northern Ireland);
(g) section (Sums or assets that may be designated as available for drawdown: Great Britain);
(h) section (Restrictions on conversion of benefits during winding up etc: Great Britain);
(i) section (Restriction on payment of lump sums during PPF assessment period: Great Britain);
(j) section (Sums or assets that may be designated as available for drawdown: Northern Ireland);
(k) section (Restrictions on conversion of benefits during winding up etc: Northern Ireland);
(l) section (Restriction on payment of lump sums during PPF assessment period: Northern Ireland);
(m) section (Restriction on transfers out of public service defined benefits schemes: Great Britain);
(n) section (Reduction of cash equivalents: funded public service defined benefits schemes: Great Britain)(2) and (3);
(o) section (Restriction on transfers out of public service defined benefits schemes: Northern Ireland);
(p) section (Reduction of cash equivalents: funded public service defined benefits schemes: Northern Ireland)(2) and (3).”
This amendment provides for the provisions listed in the amendment to come into force on 6 April 2015.
Amendment 45, page 21, line 31, after “regulations” insert “made by the Secretary of State”
See Member’s explanatory statement for amendment 4.
Amendment 46, page 21, line 32, leave out “4” and insert “3”
This amendment is consequential on amendment 42.
Amendment 48, page 21, line 36, leave out “Regulations may” and insert “The Secretary of State or the Department for Social Development in Northern Ireland may by regulations”.—(Steve Webb.)
See Member’s explanatory statement for amendment 4.
Rights to Transfer Benefits
Part 1
Great Britain amendments
Pension Schemes Act 1993 (c. 48)
1 The Pension Schemes Act 1993 is amended as follows.
2 (1) Chapters 4 and 5 of Part 4 of the Act become Chapters 1 and 2 of a new Part 4ZA.
(a) before section 93 (and before the Chapter heading above it) insert—
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Transfers and contribution refunds”;
(b) for the Chapter heading above section 93 substitute—
“Chapter 1
(c) for the Chapter heading above section 101AA substitute—
Early leavers: cash transfer sums and contribution refunds”.
3 Until the coming into force of its repeal by Schedule 13 to the Pensions Act 2014, section 56 of the Pension Schemes Act 1993 (payment of state scheme premiums on termination of certified status: supplementary) has effect as if, in subsection (4)(b), for “Chapter 5 of Part 4” there were substituted “Chapter 2 of Part 4ZA”.4 In section 73 (form of short service benefit and its alternatives), in subsection (3), for “Chapter IV of this Part” substitute “Chapter 1 of Part 4ZA”.5 For sections 93 to 94 substitute—
(1) This Chapter applies to a member of a pension scheme if all of the following conditions are met.
(2) Condition 1 is that the member has accrued rights to any category of benefits under the scheme rules.
(3) Condition 2 is that no crystallisation event has occurred in relation to the member’s accrued rights to benefits in that category (see subsection (7)).
(a) the member is no longer accruing rights to benefits in that category (see subsection (8)), and
(b) in the case of benefits that are not flexible benefits, the member stopped accruing those rights at least one year before normal pension age.
(5) But this Chapter does not apply to—
(a) a member of a salary related occupational pension scheme whose pensionable service terminated before 1 January 1986 and in respect of whom prescribed requirements are satisfied;
(b) a member of a personal pension scheme which is comprised in an annuity contract made before 4 January 1988.
(6) In this Chapter a reference to a “category” of benefits is to one of the following three categories—
(b) flexible benefits other than money purchase benefits;
(c) benefits that are not flexible benefits.
(7) For the purposes of Condition 2 a crystallisation event occurs in relation to a member’s accrued rights to benefits in a category when—
(a) payment of a pension in respect of any of the benefits has begun,
(b) in the case of money purchase benefits, sums or assets held for the purpose of providing any of the benefits are designated as available for the payment of drawdown pension (as defined by paragraph 4 of Schedule 28 to the Finance Act 2004), or
(c) in the case of a personal pension scheme, sums or assets held for the purpose of providing any of the benefits are applied for purchasing an annuity or insurance policy.
(8) For the purposes of Condition 3 a member stops accruing rights to a category of benefits when there are no longer arrangements in place for the accrual of rights to benefits in that category for or in respect of the member.
(9) In this section a reference to accrued rights does not include pension credit rights.
(a) provide for this Chapter not to apply in relation to a person of a prescribed description;
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(b) modify the application of this Chapter in relation to a member who has accrued rights to benefits of a prescribed description.
(11) In the following provisions of this Chapter—
(a) a reference to a “member” of a pension scheme is a reference to a member to whom this Chapter applies, and
(b) a reference to a member’s “transferrable rights” are to any rights in relation to a category of benefits by virtue of which this Chapter applies to the member.
93A Right to statement of entitlement: benefits other than money purchase
‘(1) The trustees or managers of a pension scheme must, on the application of any member, provide the member with a statement of entitlement in respect of the member’s transferrable rights in relation to categories of benefits other than money purchase benefits.
(2) In the case of a member with transferrable rights in relation to two categories of benefits other than money purchase benefits, the application may relate to transferrable rights in relation to either or both of those categories.
(3) For the purposes of this Chapter a member’s “statement of entitlement” is a written statement of the amount of the cash equivalent at the guarantee date of the transferrable rights to which the application under subsection (1) relates.
(4) In this Chapter “the guarantee date” means the date by reference to which the value of the cash equivalent is calculated, and must be—
(a) within the prescribed period beginning with the date of the application, and
(b) within the prescribed period ending with the date on which the statement of entitlement is provided to the member.
(5) Regulations may make provision in relation to applications under this section and may, in particular, restrict the making of successive applications.
(6) If the trustees or managers of a pension scheme fail to comply with subsection (1), section 10 of the Pensions Act 1995 (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.
(1) A member of a pension scheme who has received a statement of entitlement under section 93A acquires a right to take the cash equivalent shown in that statement in accordance with this Chapter.
(2) A member of a pension scheme who has transferrable rights in relation to money purchase benefits acquires a right to take their cash equivalent in accordance with this Chapter.”
6 (1) Section 95 (ways of taking right to cash equivalent) is amended as follows.
(2) For subsection (1) substitute—
“(1) A member of a pension scheme who has acquired a right to take a cash equivalent in accordance with this Chapter may only take it by making an application in writing to the trustees or managers of the scheme requiring them to use the cash equivalent in one of the ways specified below.
(1A) In the case of a right acquired under section 94(1), the application must be made—
(a) within the period of 3 months beginning with the guarantee date shown in the relevant statement of entitlement, and
(b) if the cash equivalent relates to benefits that are not flexible benefits, by no later than the date that falls one year before the member attains normal pension age.”
(3) In subsections (2)(a)(i) and (b)(i) and (3)(a)(i) and (b)(i), for “accrued rights” substitute “transferrable rights”.
(4) Omit subsections (7) and (8).
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7 (1) Section 96 (further provisions concerning exercise of option under section 95) is amended as follows.
(2) For subsection (1) substitute—
“(1) A member who has acquired a right to take a cash equivalent under section 94(1) or (2) may exercise the option conferred by section 95(1) in relation to different portions of that cash equivalent in different ways, but a member who exercises that option must do so—
(a) in relation to the whole of that cash equivalent, or
(b) if subsection (2) applies, in relation to the whole of the balance mentioned in subsection (3).”
(3) For subsection (4) substitute—
“(4) Where a member of a pension scheme—
(a) is entitled to make an application under section 95(1) in relation to any category of benefits, and
(b) is also entitled to give a transfer notice under section 101F(1) to the trustees or managers of the scheme in relation to benefits in the same category (or would be entitled to do so but for section 101G(2)),
the member may not, if the scheme so provides, make an application under section 95(1) in relation to that category of benefits without also giving a transfer notice under section 101F(1) in relation to that category of benefits.”
8 (1) Section 97 (calculation of cash equivalents) is amended as follows.
(2) After subsection (1) insert—
“(1A) Where a member applies under section 95 to take a cash equivalent that relates to money purchase benefits, the cash equivalent is to be calculated by reference to the date of the application.”
(a) in the opening words, for “except guaranteed cash equivalents” substitute “that relate to money purchase benefits”;
(b) in paragraph (aa), for “, including a guaranteed cash equivalent,” substitute “that relates to any category of benefits”.
(4) In subsection (3), omit paragraph (a).
(5) For subsection (3A) substitute—
“(3A) For the purposes of subsection (3), the “appropriate date”—
(a) in relation to a cash equivalent that relates to benefits other than money purchase benefits, means the guarantee date for the purposes of the relevant statement of entitlement under section 93A, and
(b) in relation to a cash equivalent that relates to money purchase benefits, means the date on which the trustees or managers receive an application from the member under section 95.”
9 For section 98 substitute—
“98 Loss of right to cash equivalent
(1) A member of a pension scheme who acquires the right to take a cash equivalent under section 94(1) loses that right if no application to take the cash equivalent is made within the period specified in section 95(1A) (but this does not prevent the member later acquiring a new right to take a cash equivalent under section 94(1) in relation to the same benefits).
(2) A member of a pension scheme loses the right to take a cash equivalent in accordance with this Chapter if the scheme is wound up.”
10 (1) Section 99 (trustees’ duties after exercise of option) is amended as follows.
(2) For subsection (2) substitute—
“(2) Subject to the following provisions of this section, if the trustees or managers of a scheme receive an application under section 95 they must do what is needed to carry out what the member requires—
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(a) in the case of an application that relates to benefits other than money purchase benefits, within 6 months beginning with the guarantee date shown in the relevant statement of entitlement, and
(b) in the case of an application that relates to money purchase benefits, within 6 months beginning with the date of the application.”
(3) In subsection (3)(a) omit “at any time before the expiry of the 12 months beginning with the termination date”.
11 After section 100 insert—
“100A Prohibition on excluding future accruals etc
Except as mentioned in sections 96(4) and 101G(4), a pension scheme may not contain rules that would have the effect of—
(a) preventing a member from exercising a right under this Chapter in relation to a category of benefits without also exercising a right under this Chapter or otherwise to require a transfer payment to be made in respect of another category of benefits, or
(b) preventing a member who exercises a right under this Chapter in relation to a category of benefits from accruing rights to benefits in another category.
100B Meaning of “scheme rules”: occupational pension schemes
‘(1) In this Chapter references to the scheme rules, in relation to an occupational pension scheme, are references to— For the purposes of subsection (1)—
(a) the rules of the scheme, except so far as overridden by a relevant legislative provision,
(b) the relevant legislative provisions, to the extent that they have effect in relation to the scheme and are not reflected in the rules of the scheme, and
(c) any provision which the rules of the scheme do not contain but which the scheme must contain if it is to conform with the requirements of Chapter 1 of Part 4 of this Act.
(d) “relevant legislative provision” means any provision contained in any of the following provisions—
(i) Schedule 5 to the Social Security Act 1989;
(ii) this Part or Chapters 2 or 3 of Part 4 or regulations made under this Part or either of those Chapters;
(iii) Part 4A of this Act or regulations made under that Part;
(iv) section 110(1) of this Act;
(v) Part 1 of the Pensions Act 1995 or subordinate legislation made or having effect as if made under that Part;
(vi) section 31 of the Welfare Reform and Pensions Act 1999;
(vii) any provision mentioned in section 306(2) of the Pensions Act 2004;
(viii) regulations made under Schedule 17 to the Pensions Act 2014;
(ix) regulations made under Schedule 18 to the Pensions Act 2014;
(x) regulations made under Part 2 of the Pension Schemes Act 2014;
(e) a relevant legislative provision is to be taken to override any of the provisions of the scheme if, and only if, it does so by virtue of any of the following provisions—
(i) paragraph 3 of Schedule 5 to the Social Security Act 1989;
(ii) section 129(1) of this Act;
(iii) section 117(1) of the Pensions Act 1995;
(iv) section 31(4) of the Welfare Reform and Pensions Act 1999;
(v) section 306(1) of the Pensions Act 2004;
(vi) regulations made under paragraph 17 of Schedule 17 to the Pensions Act 2014;
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(vii) regulations made under paragraph 6 of Schedule 18 to the Pensions Act 2014;
(viii) regulations made under section28 of the Pension Schemes Act 2014.
100C Meaning of “normal pension age” in this Chapter
‘(1) In this Chapter “normal pension age”, in relation to a category of benefits under a pension scheme, means—
(a) in a case where the scheme is an occupational pension scheme and those benefits consist only of a guaranteed minimum pension, the earliest age at which the member is entitled to receive the guaranteed minimum pension on retirement from any employment to which the scheme applies,
(b) in a case where the scheme is an occupational pension scheme and the scheme provides for the member to become entitled to receive any of those benefits at a particular age on retirement from any employment to which the scheme applies, the earliest age at which the member becomes entitled to receive any of the benefits, and
(c) in any other case, normal minimum pension age as defined by section 279(1) of the Finance Act 2004.
(2) For the purposes of subsection (1) any scheme rule making special provision as to early retirement on grounds of ill-health or otherwise is to be disregarded.
100D Interpretation of Chapter
“accrued rights”, in relation to a member of a pension scheme, means rights that have accrued to or in respect of the member to benefits under the scheme;
“category”, in relation to benefits, has the meaning given by section 93(6);
“flexible benefit” has the meaning given by section (Meaning of “flexible benefit”) of the Pension Schemes Act 2014;
“guarantee date”, in relation to a member who has received a statement of entitlement, has the meaning given by section 93A;
“member” is to be read in accordance with section 93(11);
“normal pension age” has the meaning given by section 100C;
“pension credit rights”, in relation to a member of a pension scheme, means rights to benefits under the scheme which are attributable (directly or indirectly) to a pension credit;
“salary related occupational pension scheme”: an occupational pension scheme is “salary related” if—
(a) the scheme is not a scheme under which all the benefits that may be provided are money purchase benefits, and(b) the scheme does not fall within a prescribed class;
“scheme rules”, in relation to an occupational pension scheme, has the meaning given by section 100B;
“statement of entitlement” has the meaning given by section 93A;
“transferrable rights” is to be read in accordance with section 93(11).””
12 (1) In section 101F (power to give transfer notice) is amended as follows.
(2) In subsection (1), for “pension credit benefit” substitute “pension credit rights”.
(3) After subsection (3) insert—
“(3A) An eligible member who has pension credit rights in relation to more than one category of benefits under the scheme may exercise the power to give a transfer notice in relation to the pension credit rights in relation to any one or more of those categories.”
(4) For subsection (4) substitute—
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“(4) The cash equivalent for the purposes of subsection (1) shall—
(a) in a case where the pension credit rights relate to a category of benefits other than money purchase benefits, be taken to be the amount shown in the relevant statement under section 101H, and
(b) in a case where the pension credit rights relate to money purchase benefits, be determined by reference to the date the notice under that subsection is given.”
(5) For subsection (6A) substitute—
(a) provide for this Chapter not to apply in prescribed circumstances in relation to a member of a prescribed scheme or schemes of a prescribed description;
(b) modify the application of this Chapter in relation to a member who has accrued rights to benefits of a prescribed description.
(6B) In this Chapter a reference to a “category” of benefits is to one of the following three categories—
(b) flexible benefits other than money purchase benefits;
(c) benefits that are not flexible benefits.”
13 For section 101G (restrictions on power to give transfer notice) substitute—
“101G Restrictions on power to give transfer notice
(1) An eligible member may not give a transfer notice in relation to a category of benefits if a crystallisation event has occurred in relation to any of the member’s pension credit rights to benefits in that category.
(2) An eligible member may give a transfer notice in relation to a category of benefits other than money purchase benefits only if—
(a) the member has been provided with a statement under section 101H in relation to benefits in that category, and
(b) not more than 3 months have passed since the date by reference to which the amount shown in the statement is determined.
(3) An eligible member may not give a transfer notice in relation to benefits other than flexible benefits if there is less than one year to go until the member reaches normal benefit age.
(4) Where an eligible member of a qualifying scheme—
(a) is entitled to give a transfer notice in relation to any category of benefits, and
(b) is also entitled to make an application to the trustees or managers of the scheme under section 95(1) in relation to benefits in the same category (or would be entitled to do so but for section 95(1A)(a)),
the member may not, if the scheme so provides, give a transfer notice in relation to that category of benefits without also making an application under section 95(1) in relation to that category of benefits.
(5) A transfer notice may not be given if a previous transfer notice given by the member to the trustees or managers of the scheme is outstanding.
(6) For the purposes of subsection (1) a crystallisation event occurs in relation to a member’s pension credit rights to benefits in a category when—
(a) payment of a pension in respect of any of the benefits has begun,
(b) in the case of money purchase benefits, sums or assets held for the purpose of providing any of the benefits are designated as available for the payment of drawdown pension (as defined by paragraph 4 of Schedule 28 to the Finance Act 2004), or
(c) in the case of a personal pension scheme, sums or assets held for the purpose of providing any of the benefits are applied for purchasing an annuity or insurance policy.”
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14 (1) Section 101H (salary related schemes: statements of entitlement) is amended as follows.
(2) For subsection (1) substitute—
“(1) The trustees or managers of a qualifying scheme must, on the application of an eligible member, provide the member with a written statement of the amount of the cash equivalent of the member’s pension credit rights in relation to categories of benefits other than money purchase benefits.
(1A) In the case of a member with pension credit rights in relation to two categories of benefits other than money purchase benefits, the application may relate to pension credit rights in relation to either or both of those categories.”
(3) In the heading for “Salary related schemes” substitute “Benefits other than money purchase”.
15 (1) Section 101J (time for compliance with transfer notice) is amended as follows.
(2) In subsection (1), for paragraphs (a) and (b) substitute—
“(a) in the case of an application that relates to benefits other than money purchase benefits, within 6 months beginning with the valuation date, and
(b) in the case of an application that relates to money purchase benefits, within 6 months of the date on which the notice is given.”
(3) For subsection (7) substitute—
“(7) In subsection (1)(a), “valuation date” means the date by reference to which the amount shown in the relevant statement under section 101H is determined.”
16 After section 101N insert—
“101NA Prohibition on excluding transfers of some rights without others etc
Except as mentioned in sections 96(4) and 101G(4), a pension scheme may not contain rules that would have the effect of—
(a) preventing a member from exercising a right under this Chapter in relation to a category of benefits without also exercising a right under this Chapter or otherwise to require a transfer payment to be made in respect of another category of benefits, or
(b) preventing a member who exercises a right under this Chapter in relation to a category of benefits from accruing rights to benefits in another category.”
17 (1) Section 101P (interpretation) is amended as follows.
(2) In subsection (1), at the appropriate places insert—
““category”, in relation to benefits, has the meaning given by section 101F(6B);”
““flexible benefit” has the meaning given by section (Meaning of “flexible benefit”) of the Pension Schemes Act 2014;”.
(4) In subsection (3), for “given to the trustees or managers of a salary related occupational pension scheme” substitute “in relation to benefits other than money purchase benefits”.”
18 Omit section 101Q.19 In section 129 (overriding requirements) for “Chapters II, III, IV and V of Part IV” substitute “Chapters 2 and 3 of Part 4, Chapters 1 and 2 of Part 4ZA”.20 In section 130 (extra-statutory benefits), in paragraph (b), for “Chapter II, IV or V of Part IV” substitute “Chapter 2 of Part 4 or Chapter 1 or 2 Part 4ZA”.21 In section 153 (power to modify certain provisions), in subsection (1), for “Chapters II, III and IV of Part IV” substitute “Chapters 2 and 3 of Part 4 and Chapter 1 of Part 4ZA”.22 In section 179 (linked qualifying service), in subsection (1)(a)—
(a) in the opening words, for “Chapter 4 or 5 of Part 4” substitute “Chapter 1 or 2 of Part 4ZA”;
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(i) for “Chapter 4 of Part 4” substitute “Chapter 1 of Part 4ZA”;
(ii) for “Chapter 5” substitute “Chapter 2”.
23 In section 181 (interpretation), in subsection (1), in paragraph (b) of the definition of “transfer credits”, for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.
Pensions Act 1995 (c. 26)
24 The Pensions Act 1995 is amended as follows.25 In section 67A (the subsisting rights provisions: interpretation), in subsection (9)(a), for sub-paragraph (ii) substitute—
(ii) Chapter 2 or 3 of Part 4 of the Pension Schemes Act 1993 (certain protection for early leavers) or regulations made under either of those Chapters;
(iia) Chapter 1 or 2 of Part 4ZA of that Act (transfers and contribution refunds) or regulations made under either of those Chapters;”.
26 In section 73 (preferential liabilities on winding up), in subsection (9), for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.27 In section 73B (sections 73 and 73A: supplementary), in subsection (7), for “Chapter 4 of Part 4” substitute “Chapter 1 of Part 4ZA”.
Learning and Skills Act 2000 (c. 21)
28 In section 135 (pensions: interpretation), in subsection (4), for “section 93(1A)” substitute “section 100D”.
Pensions Act 2004 (c. 35)
29 The Pensions Act 2004 is amended as follows.
30 (1) Section 18 (pension liberation: interpretation) is amended as follows.
(a) after “accrued rights” insert “or an entitlement”;
(b) in sub-paragraph (ii), for “the applicable rules” substitute “the scheme rules”.
(a) for paragraph (a) substitute—
“(a) section 94 of the Pension Schemes Act 1993 (right to cash equivalent under Chapter 1 of Part 4ZA of that Act)”;
(b) in paragraph (b), for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.
(4) In subsection (4)(d), for “the applicable rules” substitute “the scheme rules”.
31 In section 23 (freezing orders), in subsection (4)(g), for “salary related schemes” substitute “benefits other than money purchase”.32 In section 24 (consequences of freezing order), in subsection (7), for paragraphs (a) and (b) substitute—
“(a) Chapter 1 of Part 4ZA of the Pension Schemes Act 1993 (transfer rights: general), or
(b) Chapter 2 of that Part (early leavers: cash transfer sums and contribution refunds).”
33 In section 73 (inspection of premises), in subsection (2)(d)—
(a) for “Chapter 4 of Part 4” substitute “Chapter 1 of Part 4ZA”;
(b) for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.
34 In section 135 (restrictions on winding up, discharge of liabilities etc), in subsection (6)(b), for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.35 In section 138 (payment of scheme benefits), in subsection (3)(b), for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.36 In section 318 (interpretation), in subsection (3)(a), for sub-paragraph (ii) substitute—
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(ii) Chapter 2 or 3 of Part 4 of the Pension Schemes Act 1993 (certain protection for early leavers) or regulations made under either of those Chapters;
(iia) Chapter 1 or 2 of Part 4ZA of that Act (transfers and contribution refunds) or regulations made under either of those Chapters;”.
37 (1) Schedule 7 (pension compensation provisions) is amended as follows.
(2) In paragraph 20(1)(c), for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.
(3) In paragraph 32(1)(b), for “Chapter 5 of Part 4” substitute “Chapter 2 of Part 4ZA”.
Pensions Act 2014 (c. 19)
38 The Pensions Act 2014 is amended as follows.39 In section 34 (power to prohibit offer of incentives to transfer pension rights), in subsection (7), in the definition of “salary related occupational pension scheme”, for “section 93(1A)” substitute “section 100D”.40 In Schedule 17 (automatic transfer of pension benefits etc), in paragraph 1—
(a) in sub-paragraph (4)(d) for “applicable rules” substitute “scheme rules”;
(b) for sub-paragraph (6) substitute—
(a) the reference to “scheme rules” is, in relation to an occupational pension scheme, to be read in accordance with section 100B of the Pension Schemes Act 1993;
(i) money purchase benefits other than money purchase benefits of a prescribed description, or
(ii) benefits of a prescribed description.”
Part 2
Northern Ireland amendments
Pension Schemes (Northern Ireland) Act 1993 (c. 49)
41 The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
42 (1) Chapters 4 and 5 of Part 4 of the Act become Chapters 1 and 2 of a new Part 4ZA.
(a) before section 89 (and before the Chapter heading above it) insert—
Transfers and contribution refunds”;
(b) for the Chapter heading above section 89 substitute—
(c) for the Chapter heading above section 97AA substitute—
Early leavers: cash transfer sums and contribution refunds”.
43 In section 52 (payment of state scheme premiums on termination of certified status: supplementary), in subsection (4)(b), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.44 In section 69 (form of short service benefit and its alternatives), in subsection (3), for “Chapter IV of this Part” substitute “Chapter 1 of Part 4ZA”.45 For sections 89 to 90 substitute—
(1) This Chapter applies to a member of a pension scheme if all of the following conditions are met.
(2) Condition 1 is that the member has accrued rights to any category of benefits under the scheme rules.
(3) Condition 2 is that no crystallisation event has occurred in relation to the member’s accrued rights to benefits in that category (see subsection (7)).
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(a) the member is no longer accruing rights to benefits in that category (see subsection (8)), and
(b) in the case of benefits that are not flexible benefits, the member stopped accruing those rights at least one year before normal pension age.
(5) But this Chapter does not apply to—
(a) a member of a salary related occupational pension scheme whose pensionable service terminated before 1 January 1986 and in respect of whom prescribed requirements are satisfied;
(b) a member of a personal pension scheme which is comprised in an annuity contract made before 4 January 1988.
(6) In this Chapter a reference to a “category” of benefits is to one of the following three categories—
(b) flexible benefits other than money purchase benefits;
(c) benefits that are not flexible benefits.
(7) For the purposes of Condition 2 a crystallisation event occurs in relation to a member’s accrued rights to benefits in a category when—
(a) payment of a pension in respect of any of the benefits has begun,
(b) in the case of money purchase benefits, sums or assets held for the purpose of providing any of the benefits are designated as available for the payment of drawdown pension (as defined by paragraph 4 of Schedule 28 to the Finance Act 2004), or
(c) in the case of a personal pension scheme, sums or assets held for the purpose of providing any of the benefits are applied for purchasing an annuity or insurance policy.
(8) For the purposes of Condition 3 a member stops accruing rights to a category of benefits when there are no longer arrangements in place for the accrual of rights to benefits in that category for or in respect of the member.
(9) In this section a reference to accrued rights does not include pension credit rights.
(a) provide for this Chapter not to apply in relation to a person of a prescribed description;
(b) modify the application of this Chapter in relation to a member who has accrued rights to benefits of a prescribed description.
(11) In the following provisions of this Chapter—
(a) a reference to a “member” of a pension scheme is a reference to a member to whom this Chapter applies, and
(b) a reference to a member’s “transferrable rights” are to any rights in relation to a category of benefits by virtue of which this Chapter applies to the member.
89A Right to statement of entitlement: benefits other than money purchase
‘(1) The trustees or managers of a pension scheme must, on the application of any member, provide the member with a statement of entitlement in respect of the member’s transferrable rights in relation to categories of benefits other than money purchase benefits.
(2) In the case of a member with transferrable rights in relation to two categories of benefits other than money purchase benefits, the application may relate to transferrable rights in relation to either or both of those categories.
(3) For the purposes of this Chapter a member’s “statement of entitlement” is a written statement of the amount of the cash equivalent at the guarantee date of the transferrable rights to which the application under subsection (1) relates.
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(4) In this Chapter “the guarantee date” means the date by reference to which the value of the cash equivalent is calculated, and must be—
(a) within the prescribed period beginning with the date of the application, and
(b) within the prescribed period ending with the date on which the statement of entitlement is provided to the member.
(5) Regulations may make provision in relation to applications under this section and may, in particular, restrict the making of successive applications.
(6) If the trustees or managers of a pension scheme fail to comply with subsection (1), Article 10 of the Pensions (Northern Ireland) Order 1995 (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.
(1) A member of a pension scheme who has received a statement of entitlement under section 89A acquires a right to take the cash equivalent shown in that statement in accordance with this Chapter.
(2) A member of a pension scheme who has transferrable rights in relation to money purchase benefits acquires a right to take their cash equivalent in accordance with this Chapter.”
46 (1) Section 91 (ways of taking right to cash equivalent) is amended as follows.
(2) For subsection (1) substitute—
“(1) A member of a pension scheme who has acquired a right to take a cash equivalent in accordance with this Chapter may only take it by making an application in writing to the trustees or managers of the scheme requiring them to use the cash equivalent in one of the ways specified below.
(1A) In the case of a right acquired under section 90(1), the application must be made—
(a) within the period of 3 months beginning with the guarantee date shown in the relevant statement of entitlement, and
(b) if the cash equivalent relates to benefits that are not flexible benefits, by no later than the date that falls one year before the member attains normal pension age.”
(3) In subsections (2)(a)(i) and (b)(i) and (3)(a)(i) and (b)(i), for “accrued rights” substitute “transferrable rights”.
(4) Omit subsections (7) and (8).
47 (1) Section 92 (further provisions concerning exercise of option under section 91) is amended as follows.
(2) For subsection (1) substitute—
“(1) A member who has acquired a right to take a cash equivalent under section 90(1) or (2) may exercise the option conferred by section 91(1) in relation to different portions of that cash equivalent in different ways, but a member who exercises that option must do so—
(a) in relation to the whole of that cash equivalent, or
(b) if subsection (2) applies, in relation to the whole of the balance mentioned in subsection (3).”
(3) For subsection (4) substitute—
“(4) Where a member of a pension scheme—
(a) is entitled to make an application under section 91(1) in relation to any category of benefits, and
(b) is also entitled to give a transfer notice under section 97F(1) to the trustees or managers of the scheme in relation to benefits in the same category (or would be entitled to do so but for section 97G(2)),
the member may not, if the scheme so provides, make an application under section 91(1) in relation to that category of benefits without also giving a transfer notice under section 97F(1) in relation to that category of benefits.”
48 (1) Section 93 (calculation of cash equivalents) is amended as follows.
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(2) After subsection (1) insert—
“(1A) Where a member applies under section 91 to take a cash equivalent that relates to money purchase benefits, the cash equivalent is to be calculated by reference to the date of the application.”
(a) in the opening words, for “except guaranteed cash equivalents (as defined in section 90(1A)” substitute “that relate to money purchase benefits”;
(b) in paragraph (aa), for “, including a guaranteed cash equivalent,” substitute “that relates to any category of benefits”.
(4) In subsection (3), omit paragraph (a).
(5) For subsection (3A) substitute—
“(3A) For the purposes of subsection (3), the “appropriate date”—
(a) in relation to a cash equivalent that relates to benefits other than money purchase benefits, means the guarantee date for the purposes of the relevant statement of entitlement under section 89A, and
(b) in relation to a cash equivalent that relates to money purchase benefits, means the date on which the trustees or managers receive an application from the member under section 91.”
49 For section 94 substitute—
“94 Loss of right to cash equivalent
(1) A member of a pension scheme who acquires the right to take a cash equivalent under section 90(1) loses that right if no application to take the cash equivalent is made within the period specified in section 91(1A) (but this does not prevent the member later acquiring a new right to take a cash equivalent under section 90(1) in relation to the same benefits).
(2) A member of a pension scheme loses the right to take a cash equivalent in accordance with this Chapter if the scheme is wound up.”
50 (1) Section 95 (trustees’ duties after exercise of option) is amended as follows.
(2) For subsection (2) substitute—
“(2) Subject to the following provisions of this section, if the trustees or managers of a scheme receive an application under section 91 they must do what is needed to carry out what the member requires—
(a) in the case of an application that relates to benefits other than money purchase benefits, within 6 months beginning with the guarantee date shown in the relevant statement of entitlement, and
(b) in the case of an application that relates to money purchase benefits, within 6 months beginning with the date of the application.”
(3) In subsection (3)(a) omit “at any time before the expiry of the 12 months beginning with the termination date”.
51 After section 96 insert—
“96AA Prohibition on excluding future accruals etc
Except as mentioned in sections 92(4) and 97G(4), a pension scheme may not contain rules that would have the effect of—
(a) preventing a member from exercising a right under this Chapter in relation to a category of benefits without also exercising a right under this Chapter or otherwise to require a transfer payment to be made in respect of another category of benefits, or
(b) preventing a member who exercises a right under this Chapter in relation to a category of benefits from accruing rights to benefits in another category.
96AB Meaning of “scheme rules”: occupational pension schemes
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‘(1) In this Chapter references to the scheme rules, in relation to an occupational pension scheme, are references to— For the purposes of subsection (1)—
(a) the rules of the scheme, except so far as overridden by a relevant legislative provision,
(b) the relevant legislative provisions, to the extent that they have effect in relation to the scheme and are not reflected in the rules of the scheme, and
(c) any provision which the rules of the scheme do not contain but which the scheme must contain if it is to conform with the requirements of Chapter 1 of Part 4.
(d) “relevant legislative provision” means any provision contained in any of the following provisions—
(i) Schedule 5 to the Social Security (Northern Ireland) Order 1989;
(ii) this Part or Chapters 2 or 3 of Part 4 or regulations made under this Part or either of those Chapters;
(iii) Part 4A or regulations made under that Part;
(v) Part 2 of the Pensions (Northern Ireland) Order 1995 or orders or regulations made or having effect as if made under that Part;
(vi) Article 28 of the Welfare Reform and Pensions (Northern Ireland) Order 1999;
(vii) any provision mentioned in Article 279(2) of the Pensions (Northern Ireland) Order 2005;
(e) a relevant legislative provision is to be taken to override any of the provisions of the scheme if, and only if, it does so by virtue of any of the following provisions—
(i) paragraph 3 of Schedule 5 to the Social Security (Northern Ireland) Order 1989;
(iii) Article 114(1) of the Pensions (Northern Ireland) Order 1995;
(iv) Article 28(4) of the Welfare Reform and Pensions (Northern Ireland) Order 1999;
(v) Article 279(1) of the Pensions (Northern Ireland) Order 2005.
96AC Meaning of “normal pension age” in this Chapter
‘(1) In this Chapter “normal pension age”, in relation to a category of benefits under a pension scheme, means—
(a) in a case where the scheme is an occupational pension scheme and those benefits consist only of a guaranteed minimum pension, the earliest age at which the member is entitled to receive the guaranteed minimum pension on retirement from any employment to which the scheme applies,
(b) in a case where the scheme is an occupational pension scheme and the scheme provides for the member to become entitled to receive any of those benefits at a particular age on retirement from any employment to which the scheme applies, the earliest age at which the member becomes entitled to receive any of the benefits, and
(c) in any other case, normal minimum pension age as defined by section 279(1) of the Finance Act 2004.
(2) For the purposes of subsection (1) any scheme rule making special provision as to early retirement on grounds of ill-health or otherwise is to be disregarded.
96AD Interpretation of Chapter
“accrued rights”, in relation to a member of a pension scheme, means rights that have accrued to or in respect of the member to benefits under the scheme;
“category”, in relation to benefits, has the meaning given by section 89(6);
“flexible benefit” has the meaning given by section
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(Meaning of “flexible benefit”) of the Pension Schemes Act 2014;
“guarantee date”, in relation to a member who has received a statement of entitlement, has the meaning given by section 89A;
“member” is to be read in accordance with section 89(11);
“normal pension age” has the meaning given by section 96C;
“pension credit rights”, in relation to a member of a pension scheme, means rights to benefits under the scheme which are attributable (directly or indirectly) to a pension credit;
“salary related occupational pension scheme”: an occupational pension scheme is “salary related” if—
(a) the scheme is not a scheme under which all the benefits that may be provided are money purchase benefits, and(b) the scheme does not fall within a prescribed class;
“scheme rules”, in relation to an occupational pension scheme, has the meaning given by section 96B;
“statement of entitlement” has the meaning given by section 89A;
“transferrable rights” is to be read in accordance with section 89(11).””
52 (1) In section 97F (power to give transfer notice) is amended as follows.
(2) In subsection (1), for “pension credit benefit” substitute “pension credit rights”.
(3) After subsection (3) insert—
“(3A) An eligible member who has pension credit rights in relation to more than one category of benefits under the scheme may exercise the power to give a transfer notice in relation to the pension credit rights in relation to any one or more of those categories.”
(4) For subsection (4) substitute—
“(4) The cash equivalent for the purposes of subsection (1) shall—
(a) in a case where the pension credit rights relate to a category of benefits other than money purchase benefits, be taken to be the amount shown in the relevant statement under section 97H, and
(b) in a case where the pension credit rights relate to money purchase benefits, be determined by reference to the date the notice under that subsection is given.”
(5) For subsection (6A) substitute—
(a) provide for this Chapter not to apply in prescribed circumstances in relation to a member of a prescribed scheme or schemes of a prescribed description;
(b) modify the application of this Chapter in relation to a member who has accrued rights to benefits of a prescribed description.
(6B) In this Chapter a reference to a “category” of benefits is to one of the following three categories—
(b) flexible benefits other than money purchase benefits;
(c) benefits that are not flexible benefits.”
53 For section 97G (restrictions on power to give transfer notice) substitute—
“97G Restrictions on power to give transfer notice
(1) An eligible member may not give a transfer notice in relation to a category of benefits if a crystallisation event has occurred in relation to any of the member’s pension credit rights to benefits in that category.
(2) An eligible member may give a transfer notice in relation to a category of benefits other than money purchase benefits only if—
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(a) the member has been provided with a statement under section 97H in relation to benefits in that category, and
(b) not more than 3 months have passed since the date by reference to which the amount shown in the statement is determined.
(3) An eligible member may not give a transfer notice in relation to benefits other than flexible benefits if there is less than one year to go until the member reaches normal benefit age.
(4) Where an eligible member of a qualifying scheme—
(a) is entitled to give a transfer notice in relation to any category of benefits, and
(b) is also entitled to make an application to the trustees or managers of the scheme under section 91(1) in relation to benefits in the same category (or would be entitled to do so but for section 91(1A)(a)),
the member may not, if the scheme so provides, give a transfer notice in relation to that category of benefits without also making an application under section 91(1) in relation to that category of benefits.
(5) A transfer notice may not be given if a previous transfer notice given by the member to the trustees or managers of the scheme is outstanding.
(6) For the purposes of subsection (1) a crystallisation event occurs in relation to a member’s pension credit rights to benefits in a category when—
(a) payment of a pension in respect of any of the benefits has begun,
(b) in the case of money purchase benefits, sums or assets held for the purpose of providing any of the benefits are designated as available for the payment of drawdown pension (as defined by paragraph 4 of Schedule 28 to the Finance Act 2004), or
(c) in the case of a personal pension scheme, sums or assets held for the purpose of providing any of the benefits are applied for purchasing an annuity or insurance policy.”
54 (1) Section 97H (salary related schemes: statements of entitlement) is amended as follows.
(2) For subsection (1) substitute—
“(1) The trustees or managers of a qualifying scheme must, on the application of an eligible member, provide the member with a written statement of the amount of the cash equivalent of the member’s pension credit rights in relation to categories of benefits other than money purchase benefits.
(1A) In the case of a member with pension credit rights in relation to two categories of benefits other than money purchase benefits, the application may relate to pension credit rights in relation to either or both of those categories.”
(3) In the heading for “Salary related schemes” substitute “Benefits other than money purchase”.
55 (1) Section 97J (time for compliance with transfer notice) is amended as follows.
(2) In subsection (1), for paragraphs (a) and (b) substitute—
“(a) in the case of an application that relates to benefits other than money purchase benefits, within 6 months beginning with the valuation date, and
(b) in the case of an application that relates to money purchase benefits, within 6 months of the date on which the notice is given.”
(3) For subsection (7) substitute—
“(7) In subsection (1)(a), “valuation date” means the date by reference to which the amount shown in the relevant statement under section 97H is determined.”
56 After section 97N insert—
“97NA Prohibition on excluding transfers of some rights without others etc
Except as mentioned in sections 92(4) and 97G(4), a pension scheme may not contain rules that would have the effect of—
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(a) preventing a member from exercising a right under this Chapter in relation to a category of benefits without also exercising a right under this Chapter or otherwise to require a transfer payment to be made in respect of another category of benefits, or
(b) preventing a member who exercises a right under this Chapter in relation to a category of benefits from accruing rights to benefits in another category.”
57 (1) Section 97P (interpretation) is amended as follows.
(2) In subsection (1), at the appropriate places insert—
““category”, in relation to benefits, has the meaning given by section 97F(6B);”
““flexible benefit” has the meaning given by section (Meaning of “flexible benefit”) of the Pension Schemes Act 2014;”.
(4) In subsection (3), for “given to the trustees or managers of a salary related occupational pension scheme” substitute “in relation to benefits other than money purchase benefits”.”
58 Omit section 97Q.59 In section 125 (overriding requirements) for “Chapters II, III, IV and V of Part IV” substitute “Chapters 2 and 3 of Part 4, Chapters 1 and 2 of Part 4ZA”.60 In section 126 (extra-statutory benefits), in paragraph (b), for “Chapter II, IV or V of Part IV” substitute “Chapter 2 of Part 4 or Chapter 1 or 2 Part 4ZA”.61 In section 149 (power to modify certain provisions), in subsection (1), for “Chapters II, III and IV of Part IV” substitute “Chapters 2 and 3 of Part 4 and Chapter 1 of Part 4ZA”.62 In section 174 (linked qualifying service), in subsection (1)(a)—
(a) in the opening words, for “Chapter 4 or 5 of Part IV” substitute “Chapter 1 or 2 of Part 4ZA”;
(i) for “Chapter 4 of Part IV” substitute “Chapter 1 of Part 4ZA”;
(ii) for “Chapter 5” substitute “Chapter 2”.
63 In section 176 (interpretation), in subsection (1), in paragraph (b) of the definition of “transfer credits”, for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.
Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213 (N.I. 22))
64 The Pensions (Northern Ireland) Order 1995 is amended as follows.65 In Article 67A (the subsisting rights provisions: interpretation), in paragraph (9)(a), for head (ii) substitute—
(ii) Chapter 2 or 3 of Part 4 of the Pension Schemes Act (certain protection for early leavers) or regulations made under either of those Chapters;
(iia) Chapter 1 or 2 of Part 4ZA of that Act (transfers and contribution refunds) or regulations made under either of those Chapters;”.
66 In Article 73 (preferential liabilities on winding up), in paragraph (9), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.67 In Article 73B (Article 73 and 73A: supplementary), in paragraph (7), for “Chapter 4 of Part IV” substitute “Chapter 1 of Part 4ZA”.
Pensions (Northern Ireland) Order 2005 (S.I. 2005/255 (N.I. 1))
68 The Pensions (Northern Ireland) Order 2005 is amended as follows.69 In Article 2 (interpretation), in paragraph (4)(a), for head (ii) substitute—
(ii) Chapter 2 or 3 of Part 4 of the Pension Schemes Act (certain protection for early leavers) or regulations made under either of those Chapters;
(iia) Chapter 1 or 2 of Part 4ZA of that Act (transfers and contribution refunds) or regulations made under either of those Chapters;”.
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70 (1) Article 14 (pension liberation: interpretation) is amended as follows.
(a) after “accrued rights” insert “or an entitlement”;
(b) in head (ii), for “the applicable rules” substitute “the scheme rules”.
(a) for sub-paragraph (a) substitute—
“(a) section 90 of the Pension Schemes Act (right to cash equivalent under Chapter 1 of Part 4ZA of that Act)”;
(b) in sub-paragraph (b), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.
(4) In paragraph (4)(d), for “the applicable rules” substitute “the scheme rules”.
71 In Article 19 (freezing orders), in paragraph (4)(g), for “salary related schemes” substitute “benefits other than money purchase”.72 In Article 20 (consequences of freezing order), in paragraph (7), for sub-paragraphs (a) and (b) substitute—
“(a) Chapter 1 of Part 4ZA of the Pension Schemes Act (transfer rights: general), or
(b) Chapter 2 of that Part (early leavers: cash transfer sums and contribution refunds).”
73 In Article 68 (inspection of premises), in paragraph (2)(d)—
(a) for “Chapter 4 of Part IV” substitute “Chapter 1 of Part 4ZA”;
(b) for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.
74 In Article 119 (restrictions on winding up, discharge of liabilities etc.), in paragraph (6)(b), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.75 In Article 122 (payment of scheme benefits), in paragraph (3)(b), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.
76 (1) Schedule 6 (pension compensation provisions) is amended as follows.
(2) In paragraph 20(1)(c), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.
(3) In paragraph 32(1)(b), for “Chapter 5 of Part IV” substitute “Chapter 2 of Part 4ZA”.”—(Steve Webb.)
This Schedule amends the transfer provisions, providing rights to transfer specific categories of accrued rights to benefit, where two or more categories are held and accrual of the benefits to be transferred has ceased. It also provides rights to transfer flexible benefits up to and beyond normal retirement age.
—
Brought up, read the First Time and Second Time and added to the Bill
Amendment made: 49, page 28, line 4 leave out Schedule 2.—(Steve Webb.)
See Member’s explanatory statement for amendment 28
Other amendments to do with Parts 1 and 2
Amendment made: 50, page 32, line 10, leave out paragraphs 3 to 5.
The paragraphs left out by this amendment are superseded by NC24 and NS1
Amendments made: 51, page 36, line 2, at end insert—
26A In section 13 (improvement notices), in subsection (7)—
(a) omit the “or” at the end of paragraph (d);
(b) after paragraph (e) insert “, or
(f) the Pension Schemes Act 2014.”
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See Member’s explanatory statement for amendment 32.
Amendment 52, page 38, line 14, leave out “In section 90 (codes of practice)” and insert—
‘(1) Section 90 (codes of practice) is amended as follows.
See Member’s explanatory statement for amendment 32.
Amendment 53, page 38, line 15, at end insert—
‘(3) In subsection (6), in the definition of “the pensions legislation”—
(a) omit the “or” at the end of paragraph (c);
(b) after paragraph (d) insert—
“(e) Schedule 18 to the Pensions Act 2014, or
“(f) the Pension Schemes Act 2014.”
See Member’s explanatory statement for amendment 32.
Amendment 54, page 39, line 20, at end insert—
34A In section 254 (representative of non-European scheme to be treated as trustee), in subsection (3)—
(a) omit the “or” at the end of paragraph (c);
(b) after paragraph (d) insert “, or
(e) the Pension Schemes Act 2014.”
See Member’s explanatory statement for amendment 32.
Amendment 55, page 39, line 34, at end insert—
36A In section 291 (duty of trustees or managers to act consistently with law of host member state), in subsection (4)—
(a) omit the “or” at the end of paragraph (c);
(b) after paragraph (d) insert “, or
(e) the Pension Schemes Act 2014.”—(Steve Webb)
See Member’s explanatory statement for amendment 32.
Pensions Guidance
Amendment made: 56, page 43, line 30, leave out “cash balance benefits or other money purchase” and insert “flexible”
This amendment provides for the definition of “pensions guidance” to reflect the new language of “flexible benefits” introduced by amendment NC31.
—
(Steve Webb.)
Amendment 57, page 43, leave out lines 33 to 36 and insert—
““flexible benefit” has the meaning given by section (Meaning of “flexible benefit”) of the Pension Schemes Act 2014;”
This amendment provides that “flexible benefit” in Part 20A of the Financial Services and Markets Act 2000 will have the same meaning as in the Bill - see NC31.
Amendment 58, page 43, line 38, leave out “150(1) of the Finance Act 2004” and insert “1(5) of the Pension Schemes Act 1993”
This amendment is consequential on amendments 56 and 57.
Amendment 59, page 45, leave out lines 1 and 2
This amendment removes subsection (3) of new section 333D of the Financial Services and Markets Act 2000. It is not needed as a matter of law (silence produces the same result).
Amendment 60, page 45, line 30, at end insert—
“Co-operation and information sharing
333EA Co-operation and information sharing
‘(1) The following must co-operate with one another in matters relating to the giving of pensions guidance—
(a) each designated guidance provider;
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(2) Designated guidance providers and the Treasury may share information for the purposes of subsection (1).”
The new section inserted into the Financial Services and Markets Act 2000 by this amendment requires designated guidance providers and the Treasury to co-operate in delivering pensions guidance and provides that they may share information for this purpose.
Amendment 61, page 46, line 35, at end insert—
“( ) Standards set under this section—
(a) may make different provision for different cases and may, in particular, make different provision in respect of different classes of designated guidance providers or different types of pensions guidance;
(b) may include incidental, supplemental, consequential or transitional provision.”
This amendment provides for the FCA’s power to set standards in new section 333G of the Financial Services and Markets Act 2000 to include the setting of different standards in different cases and regarding different groups of guidance providers and the making of incidental, supplemental, consequential and transitional provision.
Amendment 62, page 47, line 36, after “person” insert “(other than in section 165(11)(d))”
This amendment provides for an amendment to subsection (2) of new section 333H of the Financial Services and Markets Act 2000 such that the connections set out in Schedule 15 to that Act apply.
Amendment 63, page 48, line 19, at end insert—
“(4) If the power conferred by section 333E(3) to revoke a designation is exercised before the power in subsection (1) the reference in subsection (1) to a designated guidance provider is to be read as a reference to a person who, at the time of the failure to comply, was a designated guidance provider.”
This amendment provides for the FCA’s power to make recommendations in new section 333I of the Financial Services and Markets Act 2000 to be effective where, following failure to comply with the standards, the designation of the guidance provider has been revoked by the Treasury under new section 333E(3).
Amendment 64, page 52, line 22, leave out from “guidance” to “whether” in line 24
This amendment is consequential on amendment 65.
Amendment 65, page 52, line 32, at end insert—
“( ) For the purposes of subsection (10)(b) “expenses of designated guidance providers”—
(a) includes expenses incurred by virtue of sections 333G(2), 333I, 333L and 333P, and
(b) where a recommendation or direction has been made by virtue of section 333I(4) or 333M(2), includes expenses of a former designated guidance provider.”
This amendment confirms that the “expenses of designated guidance providers” in subsection (10)(b) of new section 333Q include expenses specified in paragraph (a) and expenses of former guidance providers as specified by paragraph (b).
Amendment 66, page 52, line 37, at end insert—
3A In section 1M (FCA’s general duty to consult), after “section 1B” insert “and its duties under section 333N”.3B In section 1S (reviews by independent person into discharge of FCA functions), in subsection (3) (excluded functions), after “(4)” insert “or its duties under section 333N(1) and (2)(a)”.”
This amendment provides for amendments to sections 1M and 1S of the Financial Services and Markets Act 2000 in consequence of new section 333N of that Act.
Amendment 67, page 52, line 44, leave out “cash balance benefits or other money purchase” and insert “flexible”
This amendment is consequential on amendments 56 and 57.
Amendment 68, page 53, line 9, leave out “cash balance benefits or other money purchase” and insert “flexible”
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This amendment is consequential on amendments 56 and 57.
Amendment 69, page 53, leave out lines 12 to 15 and insert—
““flexible benefit” has the meaning given by section (Meaning of “flexible benefit”) of the Pension Schemes Act 2014;”
This amendment is consequential on amendments 56 and 57.
Amendment 70, page 53, line 23, at end insert—
4A (1) Section 138F (notification of rules) is amended as follows.
(2) The existing text becomes subsection (1).
(3) After that subsection insert—
(2) Subsection (1)(b) does not apply to rules made under or by virtue of section 137FB, 333P or 333Q.””
This amendment provides for an amendment to section 138F of the Financial Services and Markets Act 2000 in consequence of new sections 137FB, 333P and 333Q of that Act.
Amendment 71, page 54, line 17, at end insert—
11A In that Schedule, in paragraph 21 (FCA financial penalty scheme), in sub-paragraph (2) (list of “regulated persons” who may benefit from the scheme)—
(a) omit the “and” at the end of paragraph (c);
(b) at the end of paragraph (d) insert “, and
(e) designated guidance providers.”
This amendment provides for an amendment to paragraph 21 of Schedule 1ZA to the Financial Services and Markets Act 2000 in consequence of new section 333F of that Act.
Amendment 72, page 55, line 44, leave out “cash balance benefits or other money purchase” and insert “flexible”—(Steve Webb.)
This amendment is consequential on amendments 56 and 57.
Amendment made: 1, line 3 at end insert
“and provision designed to give people greater flexibility in accessing benefits and to help them make informed decisions about what to do with benefits”—(Steve Webb.)
5.31 pm
Steve Webb: I beg to move, That the Bill be now read the Third time.
Together with the Taxation of Pensions Bill, this Bill introduces the latest radical reform of pensions. Its ground-breaking pension reforms were the centrepiece of the Queen’s Speech, and are intended to give people freedom and security in retirement.
The Bill follows the Government’s extensive pensions reform. It is about enabling innovation in the pensions industry better to meet the needs of business and individuals, and about giving people greater flexibility in regard to how and when they access their savings. It will do that in two ways: by encouraging and enabling defined ambition or risk-sharing pension schemes and collective benefits, and by giving individuals new freedom and flexibility in relation to how and when they access their pension savings. It builds on the previous pension reform, including the new state pension and the highly successful implementation of automatic enrolment. Defined ambition legislation is a radical reshaping of pensions legislation to ensure that it remains relevant for future generations. It is intended to reflect, recognise and reinvigorate innovation in consumer-focused product design in shared-risk, or defined ambition, pensions.
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The Bill introduces three categories of pension scheme based on the type of promise that the scheme provides for savers during the saving phase about the benefits that will be available to them on retirement. It will also enable schemes in the United Kingdom to offer collective benefits, and to ensure that there is appropriate regulation in regard to such benefits. The crucial point here concerns risk-sharing. The current legislation is based on a binary structure of just money purchase or non-money purchase benefits. While both those types of pension can be the right product for many, is it right that the only future for pensions that our legislation encourages is one that requires either the individual consumer or the employer to take on the full financial risk of such long-term savings? We think not.
Many employers have found the increasing costs of longevity and investment risk too heavy to bear, but if defined contribution schemes are the only alternative, outcomes for savers will be less certain and more volatile than for earlier generations, making it much harder for future generations of savers to plan for later life. That is why the Bill provides for new definitions of private pensions, which include the new defined ambition category and collective benefits.
Mr Love: It would appear that the defined ambition scheme has been created to attract employers who have defined contribution schemes. What evidence is there that there is a demand for defined ambition schemes? Is there not a danger that employers with defined benefit schemes will be encouraged to move to defined ambition schemes?
Steve Webb: Our view is that the shared risk space will suit firms coming from either direction: from DB or DC. I have lost track of the number of times someone has said, “Such and such a measure was the final nail in the coffin of DB.” There must be no more room for any more nails in that coffin. It is clear that, if we do nothing, there will be no DB outside the public sector—sooner or later there will be nothing. The abolition of contracting out may be a further trigger, but if we do nothing we will just have individual DC, so shared risk says that employers who want to do more—employers who are willing to share some of the risk with their employees—should have a space to do that.
We may catch some firms coming out of DB that were going to go out of DB anyway. We may stop them in the middle, rather than going to the opposite extreme, but we may also find employers who offered DC schemes and found that their employees could not afford to retire because the DC benefits were not good enough, or employees who object to the volatility of individual DC and start saying to their bosses, “I want something a bit more predictable and certain. Can you mitigate the risk?” Therefore, my judgment is that some people will come out of DB and some will come out of DC. That does not undermine DB. The writing was on the wall for private sector DB, to be honest.
On the freedom and choice agenda, as we have discussed, Budget 2014 announced radical flexibilities in how and when people access their pension arrangements. The Government undertook a consultation. The response was published in July and draft tax clauses for technical comment were published in August.
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This Bill, along with the Taxation of Pensions Bill, will mean that, from April 2015, individuals from the age of 55 will be able to access that pension flexibility if they wish, subject to their marginal rate of income tax, rather than the current 55% tax charge. The Bill will make the required changes to pension legislation. As we have discussed, it includes a guidance guarantee that means everyone with money purchase benefits or cash balance benefits will be offered free, impartial guidance so they are clear on the range of options available to them at retirement. The Bill contains a duty on providers and schemes to ensure that they make people aware of their right to guidance.
The Taxation of Pensions Bill will legislate for the required tax regime changes. The Government will continue to allow members of private sector schemes offering safeguarded benefits—that is, benefits other than money purchase or cash balance benefits—the freedom to transfer to other types of scheme. In the majority of cases where a member has safeguarded benefits, it will continue to be in the best interests of the individual to remain in the scheme.
As we have discussed, there will be two additional safeguards: the requirement to take advice from a financial adviser, and guidance for trustees on using their existing powers to delay transfers and on taking account of scheme funding when deciding transfer values. In addition, the Exchequer will put in place safeguards in general not allowing unfunded public service defined benefit scheme transfers. For funded public service schemes, Ministers will have a power to reduce cash equivalent transfer values.
These are radical reforms that build on the Government’s changes to improve pensions in the UK. We believe that giving people greater choice has to be at the heart of the reforms: greater choice for business on the pensions they offer and greater choice for individuals on how they can access their pension savings. These are important changes to allow the private pensions market to flourish. I commend the Bill to the House.
5.38 pm
Stephen Timms: The cost of living crisis underlines the need for people in work who are struggling to set money aside for the future to be able to access pension schemes they can trust to give them good value for money and a decent income in retirement. Therefore, we welcome the proposed establishment of collective defined contribution pension schemes, which my hon. Friends called for earlier this year. Those schemes have the potential to provide a more reliable retirement income than individual defined contribution schemes. For that reason, they are to be welcomed. They operate in other countries: the Netherlands, for example. They are potentially better for individuals than individual defined contribution schemes because they can pool risk across and between generations. Research by the Institute for Public Policy Research at the end of last year concluded that there was “strong public support” for a collective pension, that it was the most popular of the options it tested and that it appealed across different income levels, life stages and ages.
We also support the establishment of shared risk schemes and the rule preventing transfers out of most public service schemes—with some exceptions that the
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Minister talked about earlier. We support the power to redefine the pension regulator’s powers to appoint or replace trustees and the power that will allow the Secretary of State to make payments into the Remploy pension scheme.
We have not opposed the Bill, and we will not do so this afternoon, although there are parts that, in our view, should have been strengthened. We are also disappointed that the Government have not been willing to make the changes for which we argued in Committee. We welcome the new pension flexibilities that were announced in the Budget, but we are concerned that Ministers are not yet providing adequate safeguards in the Bill to protect the savings of people who have worked hard all their lives from the risk of excessively high charges.
The changes will introduce increased flexibility for savers, and we agree that that is welcome. They will also make the pensions market much more complicated, however, and safeguards need to be put in place to protect savers from being taken advantage of, given the confusion that could arise as the changes bed down. We simply cannot afford to have another pensions mis-selling scandal like the one that was presided over by the last Conservative Government, which did a great deal of damage.
The Bill contains 55 clauses, which were substantially rewritten in Committee, and the fact that the Government have today added 33 new clauses—over half as many as we started out with at the beginning of the afternoon—and made 77 additional new amendments does not inspire confidence that these complex changes in an area of such immense importance have been properly thought through. This looks rather like a case of legislate in haste, repent at leisure. We can only hope that Members in the other place, among whom there is substantial expertise in this area, can make significant improvements. Trying to make these important changes at the same time as enacting the Budget changes is of course making the task more difficult and more risky.
A few minutes ago, towards the end of the last debate, the Minister gave a full answer to my question about regulations, for which I was grateful. His answer was a full one, but it was not particularly satisfactory. He pressed me about my experience of taking Bills through the House. My recollection is that if such a Bill had referred to regulations that were going to be introduced, I would at least have expected to put a note in front of members of the Committee explaining what those regulations were going to do. Ideally, there would be draft regulations to put in front of the Committee. In this case, as far as I can establish, there is no information at all about any of the regulations referred to in the new clauses and amendments. I was disappointed when the Minister said that no such information would be put in front of Members in the other place either.
Steve Webb:
I think there is a danger of the right hon. Gentleman overdoing this a bit. A lot of the regulatory framework for the budgetary freedoms involves the Financial Conduct Authority, so we are not talking about statutory instruments or any other stuff that goes through this House. The FCA has consulted and published its principles, and it will be publishing its final statutory guidance. All of that will be entirely available to Members in the other place. So a lot of this stuff is out there
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already; it has been consulted on and will be published. A lot of the regulations that the right hon. Gentleman is talking about relate to defined ambition and risk-sharing, for which the timetable is much slower.
Stephen Timms: That is helpful, and I am grateful to the right hon. Gentleman, but I was making the point that, in my experience as a Minister, I would normally have expected to be able to provide some documentation about each set of regulations referred to in a clause that I was advocating to the House. There is no such information relating to the significant number of the new clauses and amendments that refer to regulations and that now form part of this Bill. The right hon. Gentleman suggested that that was normal, but I do not think it is. I was recalling my experience from the Welfare Reform Bill, on which I led for the Opposition. There was a problem there, because at the outset no information was provided about regulations being referred to in the Bill. However, by the time we got to the end of the Committee we were reliably getting, before we debated each clause, some information about the regulations being referred to in it. So I urge him, if he can take even more holiday time away from the lawyers, to look at whether he might be able at least to give their lordships some information about each set of regulations being referred to.
In the earlier debate, I mentioned the three tests we have set for the new flexibility, and I am grateful to the Minister for his response to each. My party has commissioned Professor David Blake of the pensions institute at Cass business school to lead a review of how to support a pensions market that works for all, retaining flexibility and choice on how savings are accessed and drawn down, while ensuring that all savers, including those on low and modest incomes, are protected and are able to secure a decent and reliable retirement income. One question he will consider is whether income draw-down products should be subject to a new charge cap, which could offer some safeguards that are not envisaged at the moment.
Widespread concern has been expressed about the crucial guidance provisions. We do not know a great deal yet about how this is all going to work, and it is supposed to be up and running by next April. There is serious worry, which we have debated earlier, that the guidance on offer will not be taken up in practice. We will certainly be looking with great interest at what the FCA says—the Minister has assured us that it will be referring to this—about the second line of defence.
The TUC has made the point that