Pensions Act 2008 (c. 30)

Part 1 U.K. Pension scheme membership for jobholders

Modifications etc. (not altering text)

C1 Pt. 1 applied (with modifications) (temp. 1.7.2012 to 30.6.2020) by The Automatic Enrolment (Offshore Employment) Order 2012 (S.I. 2012/1388), art. 2 (with saving in art. 5)

Chapter 1 E+W+S Employers' duties

Quality requirements E+W+S

20 Quality requirement: UK money purchase schemes E+W+S

(1) A money purchase scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if under the scheme—

(a) the jobholder's employer must pay contributions in respect of the jobholder;

(b) the employer's contribution, however calculated, must be equal to or more than 3% of the amount of the jobholder's qualifying earnings in the relevant pay reference period;

(c) the total amount of contributions paid by the jobholder and the employer, however calculated, must be equal to or more than 8% of the amount of the jobholder's qualifying earnings in the relevant pay reference period.

(2) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) A scheme does not fail to satisfy the quality requirement under this section merely because the trustees or managers of the scheme may on any occasion refuse to accept a contribution below an amount prescribed for the purposes of this section on the grounds that it is below that amount.

Textual Amendments

F1 S. 20(2) omitted (6.4.2012) by virtue of The Pensions Act 2007 (Abolition of Contracting-out for Defined Contribution Pension Schemes) (Consequential Amendments) (No. 2) Regulations 2011 (S.I. 2011/1724), art. 3

Modifications etc. (not altering text)

C2 S. 20(1) modified (1.7.2012) by The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations (S.I. 2010/772), regs. 1(1) (as amended by S.I. 2012/1257, reg. 3(b)) and 45(2)

Commencement Information

I1 S. 20 wholly in force at 30.6.2012; s. 20 in force for certain purposes at Royal Assent see s. 149(2)(k); s. 20 in force so far as not already in force at 30.6.2012 by S.I. 2012/1682, art. 2(1)(2)(a), Sch. 1

[F2 21 Quality requirement: UK defined benefits schemes E+W+S

A defined benefits scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if it satisfies the test scheme standard in relation to that jobholder.]

Textual Amendments

F2 S. 21 substituted (6.4.2016 unless brought into force earlier by an order under s. 56(1) of the amending Act) by Pensions Act 2014 (c. 19), s. 56(4), Sch. 13 para. 82

22 Test scheme standard E+W+S

(1) A scheme satisfies the test scheme standard in relation to a jobholder (J) if the pensions to be provided for the relevant members of the scheme are broadly equivalent to, or better than, the pensions which would be provided for them under a test scheme.

[F3 (2) Subject to subsection (3), the relevant members are J and all active members who are jobholders of the same employer as J.]

(3) In applying this section the pensions to be provided for relevant members must be considered as a whole.

(4) The Secretary of State may by regulations make provision for the manner of, and criteria for, determining whether the pensions to be provided for the relevant members under a scheme are broadly equivalent to, or better than, the pensions which would be provided for them under a test scheme.

(5) Regulations under subsection (4) may provide for the determination to be made in accordance with guidance issued from time to time by the Secretary of State.

(6) The Secretary of State may by regulations provide that a scheme only satisfies the test scheme standard if the scheme actuary certifies that it does.

(7) Except in prescribed circumstances, the scheme actuary is the actuary appointed under section 47(1)(b) of the Pensions Act 1995 (c. 26) (professional advisers) in relation to the scheme.

[F4 (8) In the case of a scheme under which a sum of money is made available for the provision of benefits to a relevant member, references in this section to pensions are to be read as references to such sums.]

Textual Amendments

F3 S. 22(2) substituted (6.4.2016 unless brought into force earlier by an order under s. 56(1) of the amending Act) by Pensions Act 2014 (c. 19), s. 56(4), Sch. 13 para. 83

F4 S. 22(8) inserted (3.11.2011 for specified purposes otherwise 30.6.2012) by Pensions Act 2011 (c. 19), ss. 11(1), 38(1)(4); S.I. 2012/1681, art. 2(1)(c)

Commencement Information

I2 S. 22 wholly in force at 30.6.2012; s. 22 in force for certain purposes at Royal Assent see s. 149(2)(k); s. 22 in force so far as not already in force at 30.6.2012 by S.I. 2012/1682, art. 2(1)(2)(a), Sch. 1

[F5 23 Test scheme E+W+S

(1) A test scheme is an occupational pension scheme which satisfies—

(a) the requirement in subsection (2),

(b) the requirement in subsection (4) or requirements prescribed under subsection (6) (as appropriate), and

(c) any further requirements that are prescribed.

(2) The scheme must either—

(a) provide for a member to be entitled to a pension commencing at the appropriate age and continuing for life, or

(b) provide for a sum of money to be made available for the provision of benefits to a member commencing at the appropriate age and continuing for life.

(3) The appropriate age is 65 or any higher age prescribed.

(4) In the case of a scheme that provides entitlement to a pension as mentioned in subsection (2)(a), the annual rate of the pension at the appropriate age must be—

(a) 1/120th of average qualifying earnings in the last three tax years preceding the end of pensionable service,

multiplied by

(b) the number of years of pensionable service, up to a maximum of 40.

(5) Section 13(1) (qualifying earnings) applies for the purposes of subsection (4) as if the reference to a pay reference period were a reference to a tax year.

(6) In the case of a scheme that provides for a sum of money to be made available as mentioned in subsection (2)(b), regulations must prescribe requirements relating to that sum.]

Textual Amendments

F5 S. 23 substituted (3.11.2011 for specified purposes otherwise 30.6.2012) by Pensions Act 2011 (c. 19), ss. 11(2), 38(1)(4); S.I. 2012/1681, art. 2(1)(c)

Modifications etc. (not altering text)

C3 S. 23 modified (1.7.2012) by The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations (S.I. 2010/772), regs. 1(1) (as amended by S.I. 2012/1257, reg. 3(b)) and 41

C4 S. 23 modified (1.7.2012) by The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations (S.I. 2010/772), regs. 1(1) (as amended by S.I. 2012/1257, reg. 3(b)) and 42

Commencement Information

I3 S. 23 (as originally enacted) in force for certain purposes at Royal Assent see s. 149(2)(k)

[F6 23A Alternative quality requirements for UK defined benefits schemes E+W+S

(1) The Secretary of State may by regulations provide that a defined benefits scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if any one or more of the following is satisfied—

(a) the scheme is of a prescribed description and satisfies the quality requirement under section 20 in relation to that jobholder;

(b) the cost of providing the benefits accruing for or in respect of the relevant members over a relevant period would require contributions to be made of a total amount equal to at least a prescribed percentage of the members' total relevant earnings over that period;

(c) in the case of each of at least 90% of the relevant members, the cost of providing the benefits accruing for or in respect of the member over a relevant period would require contributions to be made of a total amount equal to at least a prescribed percentage of the member's total relevant earnings over that period.

(2) For this purpose—

• “contributions” means contributions to the scheme by, or on behalf or in respect of, a relevant member;

• “relevant earnings” means earnings of a prescribed description;

• “relevant members” means members of the scheme of a prescribed description;

• “relevant period” means a period specified in or determined in accordance with the regulations.

(3) A percentage prescribed under subsection (1)(b) or (c) must be at least 8%.

(4) Regulations under subsection (1)(b) or (c) may make provision—

(a) about how to calculate whether the requirement is satisfied, including provision requiring the calculation to be made in accordance with prescribed methods or assumptions;

(b) requiring benefits of a prescribed description to be disregarded in determining whether the requirement is satisfied;

(c) that a scheme only satisfies the requirement if the scheme actuary certifies that it does; and for this purpose “scheme actuary” has the prescribed meaning.

(5) Section 13(3) (meaning of “earnings”) applies for the purposes of this section as it applies for the purposes of that section.

(6) The Secretary of State must from time to time review any regulations in force under subsection (1).

(7) A review must be carried out—

(a) during 2017, and

(b) after that, no more than three years after the completion of the previous review.]

Textual Amendments

F6 S. 23A inserted (12.9.2014) by Pensions Act 2014 (c. 19), ss. 39(2), 56(1); S.I. 2014/2377, art. 2(1)(b)

24 Quality requirement: UK hybrid schemes E+W+S

(1) A hybrid scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if it satisfies the requirements mentioned in whichever of these is the appropriate paragraph—

(a) the requirements for a money purchase scheme under section 20, subject to any prescribed modifications;

(b) the requirements for a defined benefits scheme under sections 21 to [F7 23A], subject to any prescribed modifications.

(2) Which paragraph of subsection (1) is appropriate for any hybrid scheme is to be determined by rules made by the Secretary of State.

(3) The rules may provide for different paragraphs to be appropriate for different provisions of a scheme.

(4) The rules may provide for the paragraphs to be appropriate as alternatives, for any scheme or any provisions of a scheme.

Textual Amendments

F7 Word in s. 24(1)(b) substituted (12.9.2014) by Pensions Act 2014 (c. 19), ss. 39(3), 56(1); S.I. 2014/2377, art. 2(1)(b)

Modifications etc. (not altering text)

C5 S. 24 applied (with modifications) (1.7.2012) by The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations (S.I. 2010/772), regs. 1(1) (as amended by S.I. 2012/1257, reg. 3(b)) and 45(5)(6)

Commencement Information

I4 S. 24 wholly in force at 30.6.2012; s. 24 in force for certain purposes at Royal Assent see s. 149(2)(k); s. 24 in force so far as not already in force at 30.6.2012 by S.I. 2012/1682, art. 2(1)(2)(a), Sch. 1

25 Quality requirement: non-UK occupational pension schemes E+W+S

The Secretary of State may by regulations make provision as to the quality requirement to be satisfied in the case of an occupational pension scheme within section 18(b) or (c).

Commencement Information

I5 S. 25 partly in force; s. 25 in force for certain purposes at Royal Assent see s. 149(2)(k)

26 Quality requirement: UK personal pension schemes E+W+S

(1) This section applies to a personal pension scheme if the operation of the scheme—

(a) is carried on in such a way as to be a regulated activity for the purposes of the Financial Services and Markets Act 2000 (c. 8), and

(b) is carried on in the United Kingdom by a person who is in relation to that activity an authorised person or an exempt person under section 19 of that Act.

(2) The scheme satisfies the quality requirement in relation to a jobholder if the following conditions are satisfied.

(3) The first condition is that all of the benefits that may be provided to the jobholder under the scheme are money purchase benefits.

(4) The second condition is that, in relation to the jobholder, there is an agreement between the provider of the scheme and the employer under which—

(a) the employer must pay contributions in respect of the jobholder;

(b) the employer's contribution, however calculated, must be equal to or more than 3% of the amount of the jobholder's qualifying earnings in the relevant pay reference period.

(5) In subsection (6), “shortfall” means the difference (if any) between—

(a) the employer's contribution in respect of the jobholder under the agreement referred to in subsection (4), and

(b) 8% of the amount of the jobholder's qualifying earnings in the relevant pay reference period.

(6) The third condition is that if there is a shortfall there is an agreement between the provider of the scheme and the jobholder under which the jobholder must pay contributions which, however calculated, are equal to or more than the shortfall.

(7) The fourth condition is that, in relation to the jobholder, there are direct payment arrangements (within the meaning of section 111A of the Pension Schemes Act 1993 (c. 48)) between the jobholder and the employer.

(8) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) A scheme does not fail to satisfy the quality requirement under this section merely because the provider of the scheme may on any occasion refuse to accept a contribution below an amount prescribed for the purposes of this section on the grounds that it is below that amount.

Textual Amendments

F8 S. 26(8) omitted (6.4.2012) by virtue of The Pensions Act 2007 (Abolition of Contracting-out for Defined Contribution Pension Schemes) (Consequential Amendments) (No. 2) Regulations 2011 (S.I. 2011/1724), art. 3

Commencement Information

I6 S. 26 wholly in force at 30.6.2012; s. 26 in force for certain purposes at Royal Assent see s. 149(2)(k); s. 26 in force so far as not already in force at 30.6.2012 by S.I. 2012/1682, art. 2(1)(2)(a), Sch. 1

27 Quality requirement: other personal pension schemes E+W+S

The Secretary of State may by regulations make provision as to the quality requirement to be satisfied in the case of a personal pension scheme to which section 26 does not apply.

Commencement Information

I7 S. 27 partly in force; s. 27 in force for certain purposes at Royal Assent see s. 149(2)(k)

28 [F9 Certification that quality requirement or alternative requirement is satisfied] E+W+S

(1) The Secretary of State may by regulations provide that, subject to provision within subsection (6)(f), a scheme to which this section applies is to be taken to satisfy the relevant quality requirement in relation to [F10 each of an employer's relevant jobholders] if a certificate given in accordance with the regulations is in force in relation to the employer.

[F11 (1A) In this section—

(a) “ relevant jobholder ” means a jobholder to whom the certificate in question applies;

(b) a reference to a scheme includes a reference to part of a scheme.]

(2) The certificate must [F12 state—

(a) that], in relation to [F13 relevant jobholders] of the employer who are active members of the scheme, the scheme is in the opinion of the person giving the certificate able to satisfy the relevant quality requirement throughout the certification period[F14 , or

(b) that, in relation to those jobholders, the scheme is in that person's opinion able to satisfy a prescribed alternative requirement throughout the certification period.]

[F15 (2A) Alternative requirements must be such that, assuming all jobholders to be active members of schemes to which this section applies, for at least 90% of jobholders—

(a) employer contributions, and

(b) total contributions,

would be likely to be no less if every scheme satisfied an alternative requirement applicable to it than if every scheme satisfied the relevant quality requirement.

(2B) In subsection (2A)—

• “ alternative requirement ” means a requirement prescribed under subsection (2)(b);

• “ employer contributions ”, in relation to an active member of a scheme, means the amount of contributions that have to be paid under the scheme in respect of the member by the employer;

• “ total contributions ”, in relation to an active member of a scheme, means the total amount of contributions that have to be paid under the scheme in respect of the member by the employer and by the member.

(2C) The Secretary of State—

(a) must apply the test in subsection (2A) when regulations under subsection (2)(b) are first made, and

(b) must carry out subsequent reviews of whether the test continues to be satisfied.

A review under paragraph (b) must be carried out during 2017, and after that each review must be completed no more than three years after the completion of the previous one.]

(3) This section applies to—

(a) a money purchase scheme to which section 20 applies;

(b) a personal pension scheme to which section 26 applies;

(c) a hybrid scheme, to the extent that requirements within section 24(1)(a) apply.

[F16 (3A) This section also applies to—

(a) a money purchase scheme that is an occupational pension scheme within section 18(b);

(b) a personal pension scheme of a prescribed description for which provision is made under section 27;

(c) a hybrid scheme that is an occupational pension scheme within section 18(b), to the extent prescribed.]

[F17 (3B) This section also applies to a defined benefits scheme that has its main administration in the United Kingdom and is of a description prescribed under section 23A(1)(a).]

(4) The “relevant quality requirement”—

(a) for a scheme within subsection (3)(a), means the quality requirement under section 20;

(b) for a scheme within subsection (3)(b), means the quality requirement under section 26;

(c) for a scheme within paragraph (c) of subsection (3), means the requirements mentioned in that paragraph;

[F18 (d) for a scheme within subsection (3A), means a prescribed requirement.]

[F19 (e) for a scheme within subsection (3B), means the quality requirement under section 23A(1)(a).]

(5) Regulations may make further provision in relation to certification under this section.

(6) Regulations may in particular make provision—

(a) as to the period for which a certificate is in force (the “certification period”);

(b) as to the persons by whom a certificate may be given;

(c) as to procedures in connection with certification or where a certificate has been given;

(d) requiring persons to have regard to guidance issued by the Secretary of State;

(e) requiring an employer to calculate the amount of contributions that a scheme, and any [F20 contribution agreements], required to be paid by or in respect of [F21 any relevant jobholder] in the certification period;

(f) as to cases where the requirements of a scheme, and any [F20 contribution agreements], as to payment of contributions by or in respect of [F22 relevant jobholders] of an employer did not satisfy prescribed conditions.

(7) Provision within subsection (6)(f) includes in particular provision for a scheme not to be treated by virtue of regulations under this section as having satisfied the relevant quality requirement unless prescribed steps are taken (which may include the making of prescribed payments).

(8) In subsection (6)[F23 “contribution agreements” means—

(a) the agreement] required, in the case of a scheme within subsection (3)(b), by section 26(4) and any agreement required, in the case of such a scheme, by section 26(6)[F24 , or

(b) any agreement of the same or a similar kind that is required, in the case of a scheme within subsection (3A)(b), by regulations under section 27.]

(9) The Secretary of State may by order repeal this section.

Textual Amendments

F9 S. 28 heading substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(2), 38(1)(4); S.I. 2012/682, art. 2(b)

F10 Words in s. 28(1) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(3), 38(1)(4); S.I. 2012/682, art. 2(b)

F11 S. 28(1A) inserted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(4), 38(1)(4); S.I. 2012/682, art. 2(b)

F12 Words in s. 28(2) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(5)(a), 38(1)(4); S.I. 2012/682, art. 2(b)

F13 Words in s. 28(2) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(5)(b), 38(1)(4); S.I. 2012/682, art. 2(b)

F14 S. 28(2)(b) and preceding word inserted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(5)(c), 38(1)(4); S.I. 2012/682, art. 2(b)

F15 S. 28(2A)-(2C) inserted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(6), 38(1)(4); S.I. 2012/682, art. 2(b)

F16 S. 28(3A) inserted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 13(2), 38(1)(4); S.I. 2012/682, art. 2(c)

F17 S. 28(3B) inserted (12.9.2014) by Pensions Act 2014 (c. 19), ss. 39(4)(a), 56(1); S.I. 2014/2377, art. 2(1)(b)

F18 S. 28(4)(d) inserted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 13(3), 38(1)(4); S.I. 2012/682, art. 2(c)

F19 S. 28(4)(e) inserted (12.9.2014) by Pensions Act 2014 (c. 19), ss. 39(4)(b), 56(1); S.I. 2014/2377, art. 2(1)(b)

F20 Words in s. 28(6)(e)(f) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 13(4), 38(1)(4); S.I. 2012/682, art. 2(c)

F21 Words in s. 28(6)(e) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(7)(a), 38(1)(4); S.I. 2012/682, art. 2(b)

F22 Words in s. 28(6)(f) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 12(7)(b), 38(1)(4); S.I. 2012/682, art. 2(b)

F23 Words in s. 28(8) substituted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 13(5)(a), 38(1)(4); S.I. 2012/682, art. 2(c)

F24 S. 28(8)(b) and preceding word inserted (3.11.2011 for specified purposes otherwise 6.3.2012) by Pensions Act 2011 (c. 19), ss. 13(5)(b), 38(1)(4); S.I. 2012/682, art. 2(c)

Commencement Information

I8 S. 28 wholly in force at 7.3.2012; s. 28 in force for certain purposes at Royal Assent see s. 149(2)(k); s. 28 in force in so far as not already in force on 7.3.2012 by S.I. 2012/683, art. 2(2)(b)