The Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010

Draft Legislation:

This is a draft item of legislation. This draft has since been made as a UK Statutory Instrument: The Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010 No. 1149

Regulation 13

SCHEDULE 1Insertion of Parts 7 to 9 of the FAS Regulations

“PART 7Valuation of assets and liabilities

Application of this Part

21.—(1) This Part applies to a qualifying pension scheme where—

(a)the qualifying pension scheme has not been fully wound up;

(b)the liabilities of that scheme to or in respect of all members and former members have not been discharged; and

(c)the liabilities of the scheme to or in respect of all members and former members of the scheme have not been, or in the opinion of the scheme manager are unlikely to be, discharged by way of—

(i)binding commitments to purchase annuities;

(ii)the scheme manager having given approval to the trustees of the scheme to purchase annuities under section 286A;

(iii)a transfer of, or transfer payment in respect of, members’ rights;

(iv)such other method of discharging any liability of the scheme for which the scheme manager has given approval under section 135(4C)(1); or

(v)state scheme premiums being paid pursuant to section 55 of the 1993 Act or state scheme rights having been restored under regulation 49 of the Occupational Pension Schemes (Contracting-out) Regulations 1996(2) or regulation 49 of the Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1996(3).

(2) This Part applies to a qualifying member of a qualifying pension scheme where—

(a)the liabilities of that scheme to and in respect of that member have not been, or, in the opinion of the scheme manager, are unlikely to be, fully discharged as a result of any of the methods listed in paragraph (1)(c); or

(b)the liabilities of the scheme to and in respect of that member have not been, or, in the opinion of the scheme manager, are unlikely to be, partially discharged by way of—

(i)a binding commitment to purchase an annuity; or

(ii)the scheme manager having given approval to the trustees of the scheme to purchase an annuity under section 286A.

(3) Notwithstanding paragraph (2)(b), this Part applies to a qualifying member of a qualifying pension scheme where the liabilities of the scheme for and in respect of that member have been partially discharged by one of the methods listed in paragraph (2)(b) if the only liabilities so discharged relate to benefits derived from the payment of voluntary contributions.

(4) In this regulation, no account shall be taken of any money purchase benefits when determining the liabilities of the scheme.

Scheme manager to obtain a valuation of assets and liabilities

22.—(1) Where this Part applies, the scheme manager shall, when it considers it appropriate to do so, instruct the trustees or managers of a qualifying pension scheme to obtain for the scheme manager a valuation of the assets and liabilities of the pension scheme as at the calculation date.

(2) Subject to paragraph (3), where the trustees or managers are instructed to obtain a valuation under paragraph (1), they shall obtain the valuation and it shall include a valuation of the asset share—

(a)of, or in respect of, each qualifying member to whom this Part applies; and

(b)of any other person who is not—

(i)a qualifying member;

(ii)a survivor of a qualifying member; or

(iii)a surviving dependant of a qualifying member,

to whom the scheme has a liability to provide a pension or other benefit which is not a money purchase benefit.

(3) Where the scheme manager is of the opinion that it is not appropriate that a valuation in accordance with paragraph (2)(a) or (b) is obtained in relation to a particular person or category of persons, the valuation shall not include a valuation of that asset share, or, as the case may be, those asset shares.

(4) Where the scheme manager is of the opinion that it is not appropriate to obtain a valuation of some or all of the liabilities of the pension scheme in relation to a particular person or category of persons, the valuation shall not include a valuation of those liabilities.

(5) The valuations referred to in paragraphs (1) and (2) must be—

(a)prepared and signed by a person (“the valuation actuary”)—

(i)who is—

(aa)a Fellow of the Faculty of Actuaries;

(bb)a Fellow of the Institute of Actuaries; or

(cc)a person approved by the Secretary of State; and

(ii)approved by the scheme manager for the purposes of carrying out a valuation under paragraph (1);

(b)prepared in accordance with guidance published from time to time by the Secretary of State;

(c)presented in such manner and form as set out in guidance published from time to time by the scheme manager; and

(d)given to the scheme manager upon completion, together with such information as set out in guidance published from time to time by the Secretary of State.

(6) The scheme manager may direct the trustees or managers whom to appoint as valuation actuary.

(7) When valuing the assets of the scheme, the valuation actuary shall disregard—

(a)any assets representing the value of any rights in respect of money purchase benefits under the scheme rules;

(b)any assets held by or vested in the trustees or managers of the scheme which are to be used prior to transfer of the scheme’s assets in accordance with section 161 (as modified by Schedule 1 to these Regulations) to discharge liabilities in respect of voluntary contributions;

(c)any assets, the value of which is required to discharge the scheme’s pension liabilities to or in respect of a qualifying member to whom this Part does not apply;

(d)any debt due, or treated as due, to the trustees or managers which, in the opinion of the scheme manager, is unlikely to be recovered without disproportionate cost or within a reasonable time;

(e)an amount in respect of the value of any pre-6th April 1997 contract of insurance if—

(i)the trustees or managers have taken all reasonable steps to obtain information concerning that contract of insurance (whether by searching the records of the scheme or otherwise); and

(ii)the information that they provide concerning that contract of insurance is insufficient, in the opinion of the valuation actuary, to conduct a valuation;

(f)any payments made to the trustees or managers of the qualifying pension scheme under regulation 14B (payments in relation to administration and other costs); and

(g)any amount which is required to discharge expenses which have been, or will be reasonably incurred by the trustees or managers of the scheme.

(8) In paragraph (7)(e), “pre-6th April 1997 contract of insurance” means a contract of insurance—

(a)which is a relevant contract of insurance within the meaning given by section 161(8) or Article 145(8);

(b)which was taken out before 6th April 1997; and

(c)of which the trustees or managers are, or should reasonably be, aware.

(9) Where the scheme manager is of the opinion that it is not appropriate for an asset to be disregarded under paragraph (7)(c), the valuation actuary shall not disregard it.

Valuation of assets

23.—(1) This regulation is subject to regulation 24.

(2) Subject to paragraphs (3) to (10), for the purposes of the valuation of the assets of a qualifying pension scheme the valuation actuary shall adopt the given value of the assets of the scheme stated in the relevant accounts as the value of those assets as at the calculation date.

(3) The value of a contract of insurance shall be—

(a)where the contract of insurance is a relevant contract of insurance within the meaning given by section 161(8) or Article 145(8), the value of the liability secured; or

(b)subject to paragraph (4), where the contract of insurance is not a relevant contract of insurance within that meaning, the surrender value of the contract of insurance.

(4) Where a contract of insurance is not a relevant contract of insurance within the meaning given by section 161(8) or Article 145(8) and it appears to the valuation actuary that the surrender value of the contract of insurance does not accurately reflect the actual value at the calculation date, the valuation actuary shall adopt such a value as appears to that actuary to be appropriate.

(5) Subject to paragraph (6), where—

(a)a contribution notice has been issued under section 38 or 47 or Article 34 or 43;

(b)a financial support direction has been issued under section 43 or Article 39; or

(c)a restoration order has been made under section 52 or Article 48,

in relation to the qualifying pension scheme, the valuation actuary shall adopt the amount due to the scheme given in the notice, direction or order as the value of the asset.

(6) Where—

(a)an amount is due under a notice, direction or order referred to in paragraph (5); and

(b)the valuation actuary is of the opinion that the amount due in relation to the notice, direction or order will not be recouped in full by the scheme,

the valuation actuary shall adjust the value of the asset referred to in paragraph (5) to the value which, in the opinion of the valuation actuary is likely to be recouped by the trustees or managers of the qualifying pension scheme.

(7) Where the valuation actuary is of the opinion that any debt due, or treated as due, will be recouped in the future, the proportion of the debt that the valuation actuary expects to be recouped shall be treated as an asset of the scheme.

(8) Where—

(a)the valuation actuary has been given notice; or

(b)(i)the valuation actuary is of the opinion; and

(ii)the scheme manager agrees with the valuation actuary’s opinion,

that the value of any asset set out in the relevant accounts, that is not excluded from the valuation, is substantially different at the calculation date from that set out in the relevant accounts, the valuation actuary shall adjust the value of the asset to the market value of the asset at the calculation date.

(9) Where the valuation actuary has been given notice, or is of the opinion, that there exists an asset of the scheme which is not listed in the relevant accounts and which is not excluded from the valuation, the valuation actuary shall adopt such a value for the asset as appears to that actuary to be appropriate.

(10) Where the relevant accounts are not readily available and the scheme manager is of the opinion that it is not necessary for the purposes of this Part to require their preparation, the valuation actuary shall determine the value of the assets as at the calculation date on the basis of such information as the scheme manager considers appropriate.

(11) When acting under this regulation, the valuation actuary shall act in accordance with guidance issued by the Secretary of State.

Power of the scheme manager to determine the value of an asset

24.—(1) Where the scheme manager is of the opinion that any asset in the scheme has a particular value, the scheme manager may determine the value of that asset of the scheme.

(2) Where the scheme manager makes a determination in accordance with paragraph (1), the valuation actuary shall adopt the value determined by the scheme manager as the value of the asset as at the calculation date.

Approval of valuation

25.—(1) Where the scheme manager is satisfied that the valuation has been prepared in accordance with this Part, it must—

(a)approve the valuation; and

(b)notify the trustees or managers of the qualifying pension scheme of the approval.

(2) Where the scheme manager is not so satisfied, it must instruct the trustees or managers of the qualifying pension scheme to obtain another valuation under this Part.

(3) Where the scheme manager gives an instruction in accordance with paragraph (2), the trustees or managers of the qualifying pension scheme shall obtain another valuation and it shall be calculated as at the calculation date as determined in relation to the previous valuation.

Binding valuation

26.—(1) A valuation obtained under regulation 22 is not binding until—

(a)it is approved under regulation 25;

(b)the period within which an application for a review of the approval of the valuation may be made under regulation 5 of the Financial Assistance Scheme (Internal Review) Regulations 2005 (time for making an application for a review of a reviewable determination) has expired; and

(c)where an application referred to in sub-paragraph (b) is made—

(i)the internal review;

(ii)any appeal to the Ombudsman in respect of the approval; and

(iii)any appeal against any determinations or directions given or made by the Ombudsman in respect of such an appeal,

has been finally disposed of.

(2) Where a valuation becomes binding under this regulation the scheme manager must as soon as reasonably practicable give a notice to that effect together with a copy of the binding valuation to—

(a)the trustees or managers of the qualifying pension scheme; and

(b)the Regulator.

(3) The notice given by the scheme manager under paragraph (2) shall contain—

(a)a statement that it is a notice under regulation 26 of the Financial Assistance Scheme Regulations 2005;

(b)the date on which the notice is given;

(c)the name, address and pension scheme registration number of the qualifying pension scheme in respect of which the notice is given;

(d)a statement that the valuation under Part 7 has become binding;

(e)the date on which the notice was given;

(f)the name of the employer in relation to the qualifying pension scheme in respect of which the notice is given; and

(g)whether the notice given by the scheme manager contains any restricted information and, if so, the nature of the restriction.

PART 8Scheme manager functions after a valuation

Scheme manager calculations after a valuation

27.—(1) Subject to paragraph (2), where a valuation has been obtained in accordance with regulation 22, the scheme manager shall determine—

(a)the annual rate of annuity (“the notional pension”) which could have been payable from the day determined in accordance with paragraphs (3) and (4) until the day determined in accordance with paragraph (5), if purchased on the calculation date with the asset share determined in accordance with regulation 22(2), in respect of—

(i)each qualifying member of the qualifying pension scheme to whom Part 7 applies; and

(ii)any other person who is not—

(aa)a qualifying member;

(bb)a survivor of a qualifying member; or

(cc)a surviving dependant of a qualifying member,

to whom the scheme, as a result of the death of a qualifying member, has a liability to provide a pension or other benefit which is not a money purchase benefit;

(b)where a qualifying member, who is not a qualifying member by virtue of regulation 15(5), has not died before the calculation date, the benefits that could have been purchased for a survivor and any surviving dependants with the asset share determined in accordance with regulation 22(2);

(c)where a qualifying member to whom Part 7 applies has died before the calculation date, the annual rate of annuity (“the survivor notional pension”) which could have been purchased in respect of each survivor and surviving dependant of that qualifying member with the asset share determined in accordance with regulation 22(2); and

(d)any annual increases to the notional pension and the survivor notional pension which could have been purchased with the asset share determined in accordance with regulation 22(2).

(2) Where the scheme manager is of the opinion that it is not appropriate that a determination in accordance with paragraph (1) is made in relation to a particular person or category of persons, the scheme manager shall not make a determination in accordance with paragraph (1) in relation to such a person or category of persons.

(3) Subject to paragraph (4), the day from which the notional pension could have been payable for the purposes of paragraph (1)(a) is—

(a)where the notional pension is in respect of a qualifying member who, on the calculation date, is neither entitled to an ill health payment nor receiving a present payment from the scheme, the day on which the qualifying member attains normal retirement age;

(b)where the notional pension is in respect of a qualifying member who is not a qualifying member by virtue of regulation 15(5) and who is, on the calculation date, entitled to an ill health payment or receiving a present payment from the scheme, the earlier of—

(i)the day on which the qualifying member began to receive a present payment from the scheme in accordance with scheme rules;

(ii)the day on which the qualifying member attains normal retirement age; and

(iii)the day on which the qualifying member became entitled to an ill health payment;

(c)where the notional pension is in respect of a qualifying member who is a qualifying member by virtue of regulation 15(5), the day on which the qualifying member began to receive a present payment from the scheme in accordance with scheme rules;

(d)where the notional pension is in respect of a person referred to in paragraph (1)(a)(ii), the day on which the liability to provide the pension or other benefit arose; and

(e)where a survivor notional pension is being determined, the day after the day on which the qualifying member died.

(4) Where the day determined in accordance with paragraph (3)(b) or (c) falls before the day on which the qualifying pension scheme began to be wound up, the day for the purposes of paragraph (1)(a) is the day on which the qualifying pension scheme began to be wound up.

(5) The day on which the notional pension ceases to be payable for the purposes of paragraph (1)(a) is the day on which entitlement to a payment would end in accordance with these Regulations.

(6) The scheme manager shall make the determination in paragraph (1) by applying the asset share towards satisfying the amounts mentioned in paragraph (7) and—

(a)if sub-paragraph (a) or (b) of paragraph (7) applies and the asset share is insufficient to satisfy the amounts referred to in that sub-paragraph in full, then the asset share must be applied first towards satisfying the amounts mentioned in paragraph (i) of sub-paragraph (a) or (b), as the case may be; and

(b)if the asset share exceeds the amount needed to satisfy those amounts in full, the remainder shall be applied so as to increase the notional pension.

(7) The amounts referred to in paragraph (6) are—

(a)where the notional pension is in respect of a qualifying member who was receiving a present payment from the qualifying pension scheme under the scheme rules before the coming into force of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010—

(i)the pension and other benefits to which the qualifying member was entitled as at the later of—

(aa)the day on which the qualifying member became entitled to present payment of a pension under the scheme rules; or

(bb)the day before the day on which the scheme began to be wound up; and

(ii)annual increases on the amount determined in accordance with paragraph (i);

(b)where the notional pension is in respect of a person referred to in paragraph (1)(a)(ii)—

(i)the pension to which that person was entitled on the day on which the liability to provide the pension or other benefit arose; and

(ii)annual increases on the amount determined in accordance with paragraph (i); and

(c)where the notional pension is in respect of a qualifying member who was not receiving a present payment from the qualifying pension scheme under scheme rules before the coming into force of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010, the annuity which could be purchased in respect the qualifying member including—

(i)the pension and other benefits payable to the qualifying member from the date determined in accordance with paragraph (3);

(ii)benefits which could be purchased for any survivor and surviving dependant of the qualifying member; and

(iii)annual increases on the amounts determined in accordance with paragraphs (i) and (ii).

(8) In determining the amounts mentioned in paragraph (7)(c)(ii), the scheme manager shall have regard to the benefits that would be payable to any survivor or surviving dependant under Schedule 3, or, where the qualifying member is entitled to an ill health payment at the calculation date, under Schedule 5.

(9) The survivor notional pension referred to in paragraph (1)(c) shall be determined by applying the asset share towards satisfying the amounts mentioned in paragraph (10) and—

(a)if sub-paragraph (a) of paragraph (10) applies and the asset share is insufficient to satisfy the amounts referred to in that sub-paragraph in full, then the asset share must be applied first towards satisfying the amounts mentioned in paragraph (i); and

(b)if the asset share exceeds the amount needed to satisfy those amounts in full, the remainder shall be applied so as to increase the survivor notional pension.

(10) The amounts referred to in paragraph (9) are—

(a)where the survivor, surviving dependant or the qualifying member in respect of the survivor or surviving dependant was receiving a present payment from the qualifying pension scheme under scheme rules before the coming into force of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010—

(i)the pension and other benefits to which the survivor or surviving dependant would be entitled as at the day on which the survivor or surviving dependant became entitled to present payment of a pension under the scheme rules; and

(ii)annual increases on the amount determined in accordance with paragraph (i); and

(b)where the survivor, surviving dependant or qualifying member in respect of the survivor or surviving dependant was not receiving a present payment from the qualifying pension scheme under scheme rules before the coming into force of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010, the annuity which could be purchased, including annual increases for the survivor or surviving dependant.

(11) In paragraphs (7)(a)(i) and (10)(a)(i), the pension and other benefits to which the asset share shall be applied in accordance with this regulation are—

(a)the annual rate of pension to which the beneficiary was entitled in accordance with the scheme rules, after any commutation of benefits deriving from the scheme, after the day on which the scheme began to be wound up;

(b)where the beneficiary is a qualifying member, the annual rate of pension to which any survivor or surviving dependant would be entitled in accordance with scheme rules in respect of the qualifying member;

(c)any amount (including any lump sum) payable as a result of a member of the scheme dying within a period specified in the scheme rules which begins on the day on which the member became entitled to a pension from the scheme or, if later, the day on which the pension was first paid; and

(d)any amount which, under the scheme rules, is payable to a beneficiary for a period which is shorter than the period in respect of which the remainder of the pension is payable.

(12) Where the scheme manager is required to determine annual increases for the purposes of this regulation, the scheme manager shall have regard to the way in which annual increases are determined under—

(a)where paragraph (7)(c) or (10)(b) applies and—

(i)the beneficiary is not entitled to an ill health payment at the calculation date, paragraph 6 of Schedule 3; or

(ii)the beneficiary is entitled to an ill health payment at the calculation date, paragraph 6 of Schedule 5;

(b)where paragraph (7)(a) or (10)(a) applies and—

(i)the beneficiary is not entitled to an ill health payment at the calculation date, paragraph 7 of Schedule 4; or

(ii)the beneficiary is entitled to an ill health payment at the calculation date, paragraph 7 of Schedule 6; and

(c)paragraph 4 of Schedule 7, where paragraph (7)(b) applies.

(13) For the purposes of this regulation—

(a)a qualifying member is treated as receiving a present payment from a pension scheme before the coming into force of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010, notwithstanding that no payment has been received, if, prior to the coming into force of those Regulations—

(i)the qualifying member was entitled to payment under the scheme rules;

(ii)the trustees or managers of the scheme received confirmation from the qualifying member that payment should commence; and

(iii)the qualifying member’s entitlement became payable, as a result of (i) and (ii) being satisfied; and

(b)a survivor or surviving dependant is treated as receiving a present payment from a pension scheme before the coming into force of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010, notwithstanding that no payment has been received, if, prior to the coming into force of those Regulations, the beneficiary was entitled to ongoing payments as a result of the death of the qualifying member.

(14) This regulation is subject to regulation 28.

Determination of certain asset shares, notional pensions and survivor notional pensions

28.—(1) Where regulation 22(3) applies in any case, the scheme manager shall determine the asset share for the purposes of these Regulations in respect of any person to which that regulation applies, having regard to such matters as it considers relevant.

(2) Where regulation 27(2) applies in any case, the scheme manager shall determine the notional pension or survivor notional pension for the purposes of these Regulations in respect of any person to which that regulation applies, having regard to such matters as it considers relevant.

(3) Paragraph (4) applies where—

(a)a qualifying member commutes a portion of their pension from the qualifying scheme for a lump sum after the calculation date and before the day on which the transfer notice is given; and

(b)a qualifying member, prior to attaining normal retirement age or becoming entitled to an ill health payment, begins to receive a present payment from the qualifying scheme after the calculation date and before the day on which the transfer notice is given.

(4) Where this paragraph applies, the scheme manager may redetermine the notional pension having regard to—

(a)where paragraph (3)(a) applies, the amount of the lump sum;

(b)where paragraph (3)(b) applies—

(i)the qualifying member’s normal retirement age; and

(ii)the date on which the qualifying member began to receive a present payment from the scheme; and

(c)such other matters as the scheme manager considers relevant.

Transfer notice

29.—(1) Where a valuation has become binding under regulation 26 and the scheme manager is satisfied that it is an appropriate time for the notice to be given, the scheme manager must give the trustees or managers of the qualifying pension scheme a notice (a “transfer notice”).

(2) Where a transfer notice is given under this regulation the scheme manager—

(a)must give a copy of the transfer notice to the Regulator; and

(b)may give a copy of the transfer notice to any other person to whom, in the opinion of the scheme manager, the transfer notice is relevant.

(3) Where the trustees or managers have been discharged from their obligations to provide pensions or other benefits to or in respect of any persons in accordance with section 161 as modified, the scheme manager shall notify those persons, or where such person has an appointed representative, that appointed representative within 28 days of the transfer notice being given.

Terms and conditions of contracts

30.—(1) Where a transfer notice has been given to the trustees or managers of a qualifying pension scheme and the scheme manager considers that a contract relating to the property, rights and liabilities of the scheme contains terms or conditions that the scheme manager considers onerous, the scheme manager may—

(a)disapply any such term or condition; or

(b)substitute for the term or condition, a term or condition that the scheme manager considers to be reasonable.

(2) Where—

(a)any rights or liabilities under a relevant contract of insurance are transferred to the Secretary of State by virtue of section 161 of, and Schedule 6 to, the Pensions Act as modified; and

(b)as a result of the transfer, the Secretary of State is required, by reason of a term of that contract, to pay a specified amount or specified amounts to a specified person who, immediately before the time the transfer notice was given, was a member of the scheme or a person entitled to benefits in respect of such a member,

the scheme manager may modify that term of the contract so that any benefit under that contract shall be payable to the Secretary of State.

PART 9Miscellaneous payments and residual assets

Payments where amounts relating to money purchase benefits are transferred to the Secretary of State

31.—(1) Subject to paragraph (3), where the property transferred to the Secretary of State under section 161 (as modified by Schedule 1 to these Regulations) includes property representing the value of rights in respect of money purchase benefits under the scheme rules, the scheme manager must make arrangements to facilitate a payment or payments to be made to any person in respect of whom the qualifying pension scheme held the assets.

(2) The scheme manager must be satisfied that the arrangement made under paragraph (1) is made in respect of the full value of the assets transferred as at the date the arrangement is made.

(3) Where the person in respect of whom the assets were held has died, the arrangement under paragraph (1) shall be made in respect of the estate of the deceased person.

Payments to estates where a person in receipt of a payment from a scheme dies prior to entitlement and prior to transfer of assets

32.—(1) This regulation applies where—

(a)a person in respect of whom an asset share has been determined dies on or after the calculation date and prior to the day on which the transfer notice is given;

(b)that person was not entitled to an annual payment or an ill health payment on the day on which that person died;

(c)that person was receiving a present payment from the scheme immediately before the day on which the person died; and

(d)the scheme manager is satisfied that the amount of any interim pension from the scheme paid to that person in respect of any year from the later of—

(i)the day on which the person began to receive a payment from the scheme; and

(ii)the day on which the scheme began to wind up,

until the day on which the person died is lower than the sum of the notional pension and any annual increases which the scheme manager has determined under regulation 27 could be paid, in respect of that year.

(2) Where this regulation applies, the scheme manager may, after the transfer notice has been given, make a payment to the person’s estate, having regard to—

(a)the amount of any interim pension which was paid to the person;

(b)the amount of the sum of—

(i)the notional pension; and

(ii)any annual increases determined in accordance with regulation 27; and

(c)such other matters as the scheme manager considers relevant.

Transfer of residual assets to the Secretary of State where Part 7 does not apply

33.—(1) This regulation applies where—

(a)Part 7 does not apply to a qualifying pension scheme because the liabilities to or in respect of all members and former members have been discharged;

(b)the trustees or managers continue to hold assets for the scheme;

(c)the trustees or managers have notified the scheme manager in writing that they wish to transfer the assets to the Secretary of State; and

(d)the scheme manager is satisfied that—

(i)either—

(aa)the cost of distributing the remaining assets to the members or former members of the scheme would be disproportionate; or

(bb)the distribution of the remaining assets would not be of overall benefit to the members or former members of the scheme;

(ii)the assets can be transferred to the Secretary of State; and

(iii)it is appropriate that the assets are transferred to the Secretary of State.

(2) Where this regulation applies, the trustees or managers of a qualifying pension scheme to which Part 7 does not apply may transfer the remaining assets to the Secretary of State at such time as the Secretary of State may decide.”

Regulation 17

SCHEDULE 2Insertion of Schedules 3 to 7 to the FAS Regulations

Regulation 17(8)(b) to (f)and (16)(a)

“SCHEDULE 3Determination of certain annual payments

Introductory

1.—(1) This Schedule applies for the purposes of determining the amount of an annual payment payable to a beneficiary to whom regulation 17(8)(b) to (f) or (16)(a) applies.

(2) In this Schedule—

“A” means—

(a)

where the qualifying member is a qualifying member to whom regulation 17D applied, the amount by which the qualifying member’s annual payment has been commuted; and

(b)

in all other cases, nil;

“B” means—

(a)

where either or both sub-paragraphs (3) or (6) apply, the amount by which the scheme manager determines the annual payment which would otherwise be payable under this Schedule is to be reduced;

(b)

where the beneficiary is a qualifying member to whom regulation 17H applied, the amount, if any, by which the scheme manager determined the payment which would otherwise have been payable under Schedule 7 should be reduced; and

(c)

in all other cases, nil;

“D” means—

(a)

subject to paragraph (b), where sub-paragraph (4) of paragraph 4 applies, the total amount of annual increases to which any surviving dependant was entitled under this Schedule on the day on which the event referred to in paragraphs (a) to (c) of that sub-paragraph occurred;

(b)

where paragraph 4(4)(a) applies and, as a result, the annual payment payable to a surviving dependant is redetermined under paragraph 4(3)(a), nil; and

(c)

in all other cases, nil;

“J” means—

(a)

where the qualifying member became entitled to an annual payment or began to receive a present payment from the qualifying scheme prior to the day on which the transfer notice was given, the total amount of any annual increases which the scheme manager considers could have been paid from the relevant date until the day on which the transfer notice is given, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11); and

(b)

in all other cases, nil;

“N” means—

(a)

in paragraph 3, the number of survivors of that qualifying member; and

(b)

in paragraph 4, the number of surviving dependants of that qualifying member;

“Q” means—

(a)

where the beneficiary is a person to whom regulation 17(17)(a) applies, the payment to which the qualifying member was entitled in accordance with Schedule 7 immediately before the qualifying member died; and

(b)

in all other cases, the sum of—

(i)

R-A;

(ii)

the total amount of any annual increases which the scheme manager considers could have been paid, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11), from the relevant date until the earlier of—

(aa)

the day on which the transfer notice is given; and

(bb)

the day on which the qualifying member died;

(iii)

where the qualifying member died after the calculation date but before the day on which the transfer notice was given, double the total amount of any annual increases which the scheme manager considers could have been paid to a survivor (on the basis that there is one survivor) from the day after the day on which the qualifying member died until the day on which the transfer notice is given, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11); and

(iv)

where the qualifying member died on or after the day on which the transfer notice was given, the total amount of any annual increases to which the qualifying member was entitled in accordance with paragraph 6 on the day on which the qualifying member died;

“R” means the amount of the revalued notional pension as construed in accordance with regulation 17(10);

“S” means—

(a)

where paragraph 3(2) applies, the total amount of increases to which any survivor was entitled under this Schedule on the day on which the survivor died; and

(b)

where sub-paragraph (4) of paragraph 4 applies, the total amount of increases to which any survivor was entitled under this Schedule on the day on which the event referred to in paragraphs (a) to (c) of that sub-paragraph occurred; and

(c)

in all other cases, nil; and

“relevant date” means—

(a)

where the beneficiary began to receive a payment from the scheme after the calculation date and prior to becoming entitled to an annual payment under these Regulations, the date on which the beneficiary began to receive a present payment from the scheme;

(b)

where the beneficiary is a qualifying member to whom paragraph (a) does not apply, but to whom paragraph (3) or (3C) applies, the date on which the qualifying member became entitled to an annual payment under that paragraph; and

(c)

in all other cases, the date from which the notional pension or survivor notional pension could have been payable as determined in accordance with regulation 27(3) and (4).

(3) Where the scheme manager is satisfied that an amount is owed by the beneficiary to the Secretary of State as a result of the beneficiary owing, before the day on which a transfer notice is given, a debt to a qualifying pension scheme to which Part 7 applies, the scheme manager may determine how the annual payment which would otherwise be payable under this Schedule is to be reduced, having regard to the amount owed by the beneficiary and to such other matters as the scheme manager considers relevant.

(4) Sub-paragraph (6) applies where the scheme manager is satisfied that the sum of the interim pension paid to a beneficiary and any payment made under these Regulations in respect of any year in the period determined in accordance with sub-paragraph (5) is higher or lower than the sum of—

(a)the revalued notional pension, or the survivor notional pension, as the case may be; and

(b)any annual increases or proportion of annual increases, which the scheme manager considers could have been paid in respect of that year, taking into account—

(i)the determination under regulation 27(1)(d);

(ii)the revaluation amount determined in accordance with regulation 17(11); and

(iii)the proportion of that year which falls after the 1^st January.

(5) For the purposes of sub-paragraph (4), the period is the period from—

(a)the earlier of—

(i)the day on which the beneficiary became entitled to a payment under these Regulations; and

(ii)the day on which the beneficiary became entitled under the scheme rules to a pension or other benefit; or

(b)the day on which the qualifying pension scheme began to be wound up if that is later than the day determined in accordance with paragraph (a),

until the day on which the scheme manager gave a transfer notice to the scheme trustees or managers.

(6) Where this sub-paragraph applies, the scheme manager may—

(a)determine the amount by which the annual payment which would otherwise be payable under this Schedule in respect of the beneficiary is to be reduced, having regard to—

(i)the amount of interim pension which was paid to the beneficiary;

(ii)the amount of the sum of—

(aa)the revalued notional pension or survivor notional pension; and

(bb)any annual increases, or proportion of annual increases, which the scheme manager considers could have been paid;

(iii)the amount of any payments made under these Regulations prior to the scheme manager giving the transfer notice; and

(iv)such other matters as the scheme manager considers relevant; and

(b)where the sum of the interim pension paid and any payments made under these Regulations in respect of any year is lower than the sum of the amounts referred to in sub-paragraph (4)(a) and (b) in respect of that year, make a payment to the beneficiary or, where the beneficiary has died prior to the scheme manager making this determination, to the beneficiary’s estate, having regard to—

(i)the amount of interim pension which was paid to the beneficiary;

(ii)the amount of the sum of—

(aa)the revalued notional pension or survivor notional pension; and

(bb)any annual increases, or proportion of annual increases, which the scheme manager considers could have been paid;

(iii)the amount of any payments made under these Regulations prior to the scheme manager giving the transfer notice; and

(iv)such other matters as the scheme manager considers relevant.

Amount of an annual payment – qualifying members

2. The annual payment payable to a qualifying member to whom this Schedule applies shall be—

Amount of an annual payment - survivors

3.—(1) Where this Schedule applies, the annual payment payable to a survivor of a qualifying member shall be—

(a)where regulation 17(8)(f) applies, the amount which is the sum of—

(i)the survivor notional pension determined in respect of that survivor; and

(ii)the total amount of any annual increases which the scheme manager has determined under regulation 27 could be paid on the survivor notional pension from the relevant date until the day on which the transfer notice is given,

less the amount, if any, by which the scheme manager determines the payment should be reduced in accordance with paragraph 1(3) or (6); and

(b)where regulation 17(8)(c) to (e) or (16)(a) applies—

(i)where sub-paragraph (ii) does not apply—

(ii)where the qualifying member was a party to a polygamous marriage—

(2) Where a survivor to whom sub-paragraph (1)(b)(ii) applies dies, the annual payment payable to all remaining survivors of the qualifying member shall be redetermined with effect from the day after the day on which the survivor died.

Surviving Dependants

4.—(1) Where this Schedule applies, the annual payment payable to a surviving dependant of a qualifying member shall be—

(a)where regulation 17(8)(f) applies, the amount which is the sum of—

(i)the survivor notional pension determined in respect of that surviving dependant; and

less the amount, if any, by which the scheme manager determines the payment should be reduced in accordance with paragraph 1(3) or (6); and

(b)where regulation 17(8)(c) to (e) or (16)(a) applies, determined in accordance with sub-paragraphs (2) to (4).

(2) Where an annual payment is also payable to a survivor of a qualifying member and—

(a)there is only one surviving dependant, the amount of the annual payment shall be—

(b)there are two or more surviving dependants, the amount of the annual payment shall be—

(3) Where an annual payment is not payable to a survivor of a qualifying member and—

(a)there is only one surviving dependant, the amount of the annual payment shall be—

(b)there are two or more surviving dependants, the amount of the annual payment shall be—

(4) Where—

(a)a survivor of a qualifying member dies;

(b)a person ceases to be a surviving dependant of a qualifying member; or

(c)another person becomes a surviving dependant of a qualifying member,

the annual payment payable to a surviving dependant of that qualifying member shall be redetermined with effect from the day after the day on which the event referred to in paragraphs (a) to (c) occurred.

Rounding

5. Where the amount of an annual payment determined in accordance with this Schedule results in a fraction of a penny, that fraction shall be treated as a penny.

Annual increases to an annual payment

6.—(1) Except where there is no percentage increase in the retail prices index for the period of 12 months ending with 31st May last falling before the indexation date, a beneficiary entitled to an annual amount determined in accordance with this Schedule shall be entitled, on each indexation date after the day on which the transfer notice is given, to an increase of—

(a)the appropriate percentage of the amount of the underlying rate immediately before that date; or

(b)where the beneficiary first became entitled to an annual payment during the period of 12 months ending immediately before that date, one twelfth of that amount for each full month since the date on which the annual payment was first payable.

(2) In this paragraph—

“appropriate percentage” means the lesser of—

(a)

the percentage increase in the retail prices index for the period of 12 months ending with the 31st May last falling before the indexation date; and

(b)

2.5%;

“underlying rate” means the aggregate of—

(a)

the product of X multiplied by—

(i)

where the beneficiary is a qualifying member or a survivor or surviving dependant of a qualifying member who died on or after the calculation date—

(aa)

where the qualifying member is not a qualifying member to whom regulation 17D applied, so much of the revalued notional pension as is attributable to post-1997 service; or

(bb)

where the qualifying member is a qualifying member to whom regulation 17D applied, so much of the sum of R-A as is attributable to post-1997 service; and

(ii)

where the beneficiary is a survivor or surviving dependant in respect of whom a survivor notional pension has been determined, so much of the survivor notional pension as is attributable to the qualifying member’s post-1997 service;

(b)

where the beneficiary is a qualifying member, the total amount of any annual increases which the scheme manager considers could have been paid from the relevant date until the day on which the transfer notice was given, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11);

(c)

where the beneficiary is a survivor or surviving dependant in respect of whom a survivor notional pension has been determined, the total amount of any annual increases which the scheme manager has determined under regulation 27 could be paid on the survivor notional pension from the relevant date until the day on which the transfer notice is given;

(d)

where the beneficiary is a survivor or a surviving dependant of a qualifying member who died on or after the calculation date but before the day on which the transfer notice was given, the sum of—

(i)

the product of X multiplied by the total amount of any annual increases which the scheme manager considers could have been paid from the relevant date until the date on which the qualifying member died, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11); and

(ii)

the total amount of any annual increases which the scheme manager considers could have been paid to the beneficiary from the day after the day on which the qualifying member died until the day on which the transfer notice is given, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11);

(e)

where the beneficiary is the survivor or surviving dependant of a qualifying member who died after the day on which the transfer notice was given, the product of X multiplied by the sum of—

(i)

the total amount of any annual increases which the scheme manager considers could have been paid from the relevant date until the day on which the transfer notice was given, taking into account the determination under regulation 27(1)(d) and the revaluation amount determined in accordance with regulation 17(11); and

(ii)

the total amount of any annual increases to which the qualifying member was entitled in accordance with sub-paragraph (1) on the day on which the qualifying member died; and

(f)

any annual increases to which the beneficiary is entitled under this Schedule immediately before the indexation date;

“post-1997 service” means—

(a)

pensionable service (either actual or notional) which occurred on or after 6th April 1997; or

(b)

where the pension was payable to, or in respect of, a qualifying member who is, or was, a pension credit member of the scheme, pension credit rights deriving from rights attributable to service (whether actual or notional) which occurred on or after 6th April 1997;

“X” means—

(a)

1, where the beneficiary is the qualifying member or a survivor or surviving dependant in respect of whom a survivor notional pension has been determined;

(b)

0.5, where the beneficiary is a survivor who is neither—

(i)

a survivor to whom paragraph 3(1)(b)(ii) applies; nor

(ii)

a survivor in respect of whom a survivor notional pension has been determined;

(c)

the product of 0.5 divided by Y, where the beneficiary is a survivor to whom paragraph 3(1)(b)(ii) applies;

(d)

the product of 1 divided by Z, where the beneficiary is a surviving dependant in respect of whom a survivor notional pension has not been determined and the qualifying member does not have a survivor; or

(e)

the product of 0.5 divided by Z, where the beneficiary is a surviving dependant in respect of whom a survivor notional pension has not been determined and an annual payment is also payable to a survivor of the qualifying member;

“Y” means the number of survivors of the qualifying member; and

“Z” means—

(a)

where there is only one surviving dependant, 2; or

(b)

where there is more than one surviving dependant, the number of surviving dependants of the qualifying member.

(3) In determining the underlying rate where a qualifying member is a qualifying member to whom regulation 17D applied, the amount of R-A that is attributable to post-1997 service is determined by attributing the sum to pre-1997 service and post-1997 service in the same proportions as the revalued notional pension would have been attributed had regulation 17D not applied.

Regulation 17(8)(g) to (k)and (16)(b)