Pensions Bill

House of Lords

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 2 — Occupational and personal pension schemes
22

Financial Assistance Scheme
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Financial assistance scheme: increased levels of payments
(1)
Section 286 of the Pensions Act 2004 (c. 35) (financial assistance scheme for
members of certain pension schemes) is amended as follows.
(2)
After subsection (1) insert—
5
“(1A)
The Secretary of State must, in particular, make provision for securing
that (subject to any relevant restriction) the aggregate amount of—
(a)
any annual payment payable to a qualifying member of such a
scheme, and
(b)
the member’s actual pension (if any),
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is not less than 80% of the member’s expected pension, irrespective of
the date of his attaining normal retirement age (or the date when he
would have attained that age if he dies before attaining it).
(1B)
A “relevant restriction” means any provision of the regulations
which—
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(a)
operates to restrict the amount of an annual payment by means
of a cap on the product of the calculation of a specified fraction
of the member’s expected pension, or
(b)
provides for an annual payment not to be payable where the
member’s actual pension exceeds any specified amount.”
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(3)
In subsection (2), before the definition of “qualifying member” insert—
““actual pension” and “expected pension”, in relation to a
qualifying member of a qualifying pension scheme, mean the
amounts which, in accordance with regulations under
subsection (1), are to be taken into account as the member’s
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actual pension and expected pension, respectively, in
determining the amount of any annual payment payable to the
member;
“annual payment” has the meaning given by regulations under
subsection (1);”.”
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(4)
Subsections (5) and (6) below apply where the scheme manager has
determined that an initial payment may be made under the FAS regulations to
or in respect of a qualifying member of a qualifying pension scheme, and they
so apply whether the determination—
(a)
has been made, or
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(b)
relates to a period beginning,

before or after the passing of this Act.
(5)
Subject to any relevant restriction, the amount of any such initial payment
payable to the member is to be—
(a)
the amount of the member’s expected pension multiplied by 0.8, less
40
(b)
the amount of the member’s interim pension (if any),

irrespective of the date of the member attaining normal retirement age (or the
date when he would have attained that age if he dies before attaining it).
(6)
The amount of any such initial payment payable to the survivor of the member
is to be—
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(a)
whichever is the smaller of—

Pensions Bill
Part 2 — Occupational and personal pension schemes
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(i)
one-half of the product of the calculation in subsection (5)(a), or
(ii)
one-half of the product of that calculation as reduced by virtue
of any relevant restriction,

less
(b)
the amount of the interim pension payable to the survivor (if any),
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irrespective of the date of the member attaining normal retirement age (or the
date when he would have attained that age if he dies before attaining it).
(7)
In subsections (5) and (6) “relevant restriction” means any provision of the FAS
regulations which—
(a)
operates to restrict the amount of an initial payment by means of a cap
10
on the product of the calculation of a specified fraction of the member’s
expected pension, or
(b)
provides for an initial payment not to be payable where the member’s
interim pension exceeds any specified amount;

but for the purposes of those subsections any such specified fraction is to be
15
taken to be 0.8.
(8)
Any provision of the FAS regulations which is inconsistent with subsection (5)
or (6) is of no effect to the extent of the inconsistency.
(9)
The Secretary of State may by regulations—
(a)
amend subsection (5) so as to substitute for the fraction for the time
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being specified there such fraction as is specified in the regulations, and
(b)
make a corresponding amendment in subsection (7).
(10)
No regulations may be made under subsection (9) unless a draft of the
regulations has been laid before and approved by a resolution of each House
of Parliament.
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(11)
In this section—
“expected pension” and “interim pension”, in relation to a qualifying
member of a qualifying pension scheme, mean the amounts which, in
accordance with the FAS regulations, are to be taken into account as the
member’s expected pension and interim pension, respectively, in
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determining the amount of any initial payment payable to, or in respect
of, the member;
“the FAS regulations” means regulations under section 286(1) of the
Pensions Act 2004 (c. 35);
“initial payment” has the meaning given by the FAS regulations;
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“interim pension”, in relation to the survivor of a qualifying member of a
qualifying pension scheme, means the amount which, in accordance
with the FAS regulations, is to be taken into account as the interim
pension payable to the survivor in determining the amount of any
initial payment payable to the survivor;
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“qualifying member”, “qualifying pension scheme” and “scheme
manager” have the same meaning as in section 286 of the Pensions Act
2004;
“survivor” has the meaning given by the FAS regulations.
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Minimum retirement income
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(1)
The amount of the minimum retirement income in respect of each tax year shall
be set by the Chancellor of the Exchequer by order at the level of the standard

Pensions Bill
Part 2 — Occupational and personal pension schemes
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minimum guarantee prescribed under section 2 of the State Pension Credit Act
2002 (c. 16).
(2)
Before making an order under subsection (1), the Chancellor of the Exchequer
shall consult such persons as he considers appropriate.
(3)
An order under this section (other than the order that applies to the first tax
5
year during which this section is in force) must be made on or before 31st
January of the tax year before the tax year to which the order applies.
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Retirement income fund
(1)
The Finance Act 2004 (c. 12) is amended as follows.
(2)
After section 152 (meaning of “arrangement”), insert—
10
“152A
Meaning of “retirement income fund”
(1)
In this Part a retirement income fund means a scheme for the
reinvestment of savings in retirement which—
(a)
is operated by or on behalf of a person authorised to operate a
registered pension scheme,
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(b)
is a scheme in which investments are approved by the Inland
Revenue, and
(c)
meets the conditions set out in subsections (2) to (9).
(2)
The first condition is that, subject to the other conditions in this section,
funds held in the retirement income fund may be invested and
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withdrawn by the member as and when he elects.
(3)
The second condition is that an authorised retirement income fund
provider must set an annual maximum withdrawal allowance for each
member, based on an assessment of each member’s life expectancy, and
a member’s withdrawals from the fund in any one year must not
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exceed that allowance.
(4)
The third condition is that, in setting annual maximum withdrawal
allowances, an authorised provider must ensure that no member’s total
future income falls below the minimum retirement income level, as set
outt under section 19 of the Pensions Act 2007, except in the
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circumstances provided for in the sixth condition.
(5)
The fourth condition is that an authorised provider must set an annual
minimum withdrawal allowance so that each member’s total income is
at least equivalent to the minimum retirement income level, except in
the circumstances provided for in the sixth condition.
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(6)
The fifth condition is that where a member chooses not to declare his
total annual income to the authorised provider, he must withdraw
funds equivalent to the level of the minimum retirement income level
or his annual maximum withdrawal allowance, whichever is the lower.
(7)
The sixth condition is that, where there are insufficient funds to enable
40
the annual minimum withdrawal allowance to be set so that a
member’s total income is at least equivalent to the minimum retirement
income level, the allowance should be set at the highest level consistent
with the assessment of the member’s life expectancy.

Pensions Bill
Part 2 — Occupational and personal pension schemes
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(8)
The seventh condition is that the maximum and minimum withdrawal
allowances must be set at the same level where a member’s total annual
income, including his maximum withdrawal allowance, is lower than
the minimum retirement income level.
(9)
The eighth condition is that a retirement income fund, and any income
5
derived from it, must not be capable of assignment or surrender by the
member.”
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Withdrawal from a retirement income fund
(1)
Section 165 of the Finance Act 2004 (c. 12) (pension rules) is amended as
follows.
10
(2)
In subsection (1) (which sets out the pension rules)—
(a)
in Pension rule 4, after paragraph (a), insert—
“(aa)
a withdrawal from a retirement income fund,”;
(b)
in Pension rule 4, after the second appearance of the words “scheme
pension”, insert the words “a withdrawal from a retirement income
15
fund”;
(c)
in Pension rule 6, after paragraph (a), insert—
“(aa)
a withdrawal from a retirement income fund,”;
(d)
in Pension rule 6, after the second appearance of the words “scheme
pension”, insert the words “a withdrawal from a retirement income
20
fund”.
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Financial assistance scheme: scheme manager
(1)
The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) are
amended as follows.
(2)
In regulation 5(1) for “Secretary of State” substitute “Board of the Pension
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Protection Fund (“the Board”)”.
(3)
In regulation 5(2)(a) omit the words from “Secretary of State” to the end of that
paragraph and insert “the Board”.
(4)
In regulation 5, sub-paragraph (2)(b) is omitted.
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Financial assistance scheme: qualifying pension schemes
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(1)
The Financial Assistance Scheme Regulations 2005 are amended as follows.
(2)
In regulation 9, sub-paragraph (1)(c) is omitted.
(3)
Regulations 11 to 13 are omitted.
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Pension Protection Lifeboat Fund
(1)
There shall be established as soon as reasonably practicable a Pension
35
Protection Lifeboat Fund (“the Lifeboat Fund”) which shall be administered by
the Board of the Pension Protection Fund (“the Board”).
(2)
The purpose of the Lifeboat Fund shall be to make supplementary payments to
persons who are qualifying members of qualifying schemes as defined by the
Financial Assistance Scheme Regulations 2005 (or who would be qualifying
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Pensions Bill
Part 2 — Occupational and personal pension schemes
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members if the qualifying age for the Financial Assistance Scheme were set at
the level of the qualifying scheme retirement age), in addition to the sums
payable in any event under those regulations.
(3)
The supplementary payments made to any person in accordance with
subsection (2) shall equal the amount that, taken together with any amounts
5
payable to that person under the Financial Assistance Scheme and amounts
payable to that person as scheme benefits under the qualifying pension scheme
in respect of which he is a qualifying member of the Financial Assistance
Scheme (or would be a qualifying member if the qualifying age for the
Financial Assistance Scheme were set at the level of the qualifying scheme
10
retirement age), is the amount that would be payable to that person if that
qualifying pension scheme were accepted into the Pension Protection Fund.
(4)
The Secretary of State shall make such loans to the Lifeboat Fund as are
necessary to allow the discharge of its functions and in particular its obligation
to make supplementary payments under subsection (2).
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(5)
The Secretary of State shall make such loans from time to time having regard
to—
(a)
requests for such loans received from the Board;
(b)
the amount of assets transferred or to be transferred to the Lifeboat
Fund under the Scheme (as defined in section 28 (“the Scheme”));
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(c)
the level of any claims on the Lifeboat Fund in respect of assets
transferred to it under the Scheme.
(6)
Loans made in accordance with this section must be repaid to the Secretary of
State as soon as, in the reasonable opinion of the Board, it is prudent to do so
having regard to—
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(a)
the obligations of the Lifeboat Fund;
(b)
the amount of assets transferred or to be transferred to the Lifeboat
Fund under the Scheme; and
(c)
the level of claims on the Lifeboat Fund in respect of assets transferred
to it under the Scheme.
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(7)
Loans made under this section shall be interest free.
(8)
The assets of the Lifeboat Fund shall be held separately from the assets of any
other fund under the control of the Board.
(9)
The Secretary of State may by regulations make further provision in connection
with the Lifeboat Fund.
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(10)
A statutory instrument containing regulations under this section is subject to
annulment in pursuance of a resolution of either House of Parliament.
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Pensions Unclaimed Assets Recovery Agency
(1)
There shall be a body called the Pensions Unclaimed Assets Recovery Agency
(“the Agency”).
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(2)
The Agency must be established no later than three months after the passing of
this Act.
(3)
The Agency shall consist of not fewer than six nor more than twelve members
to be appointed by the Secretary of State, and the Secretary of State shall

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Part 2 — Occupational and personal pension schemes
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appoint one member to be the chairman, and another member to be a deputy
chairman, of the Agency.
(4)
In appointing a person to be a member of the Agency, the Secretary of State
shall have regard to the desirability of appointing persons who have
knowledge of, or experience relating to, matters relevant to the functions of the
5
Agency.
(5)
A member of the Agency may hold office for such a period as the Secretary of
State may determine, but not exceeding—
(a)
six years, in the case of the chairman, and
(b)
four years, in the case of other members.
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(6)
The Secretary of State may make payments to the members of the Agency by
way of remuneration and make payments to them in respect of expenses
incurred by them in the performance of their duties.
(7)
The Secretary of State may also defray any other expenses of the Agency.
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Functions of Pensions Unclaimed Assets Recovery Agency
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The functions of the Agency are—
(a)
to obtain such information about such classes of unclaimed assets as
may be precribed by the Secretary of State by regulations;
(b)
to provide the Secretary of State with that information and any other
related information held by the Agency which the Secretary of State
20
may from time to time require;
(c)
to administer the scheme to be established by virtue of section 28.
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Pensions Unclaimed Assets Recovery Agency: provision of information
(1)
Subject to subsection (2), the Agency may, by notice, require any person to
supply it, within a specified period or at a specified time or times, such
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specified information as the Agency considers it needs for the purposes of
carrying out its functions under section 26.
(2)
This section does not authorise any requirement in relation to information to
be imposed on any person unless that person carries on a business in the
United Kingdom; but a requirement may be imposed under this section on a
30
person in relation to information in the possession or control of a connected
person or undertaking outside the United Kingdom.
(3)
Any person who, when required to do so under this section, fails without
reasonable excuse to supply any information, shall be liable on summary
conviction—
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(a)
to a fine not exceeding level 5 on the standard scale; and
(b)
in the case of a continuing offence, to an additional fine not exceeding
£200 for every day during which the offence continues.
(4)
Any person who knowlingly or recklessly supplies any information which is
false or misleading shall be liable—
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(a)
on conviction on indictment, to imprisonment for a term not exceeding
two years, or to a fine, or both; and
(b)
on summary conviction, to a fine not exceeding the statutory
maximum.