Social Security Pensions Act 1975

40 Financing and assurance of benefits. E+W+S

(1) For an occupational pension scheme to be contracted out the resources of the scheme must be derived in whole or in part from—

(a) payments made or to be made by one or more employers of earners to whom the scheme applies, being payments either—

(i) under an actual or contingent legal obligation; or

(ii) in the exercise of a power conferred, or the discharge of a duty imposed, on a Minister of the Crown, government department or any other person, being a power or duty which extends to the disbursement or allocation of public money; or

(b) such other payments by the earner or his employer, or both, as may be prescribed for different categories of scheme.

(2) For an occupational pension scheme, other than a public service pension scheme [F1 or a money purchase contracted-out scheme], to be contracted-out the Occupational Pensions Board must be satisfied [F2 , except in the case mentioned in section 52D below,] that the scheme complies with—

(a) regulations prescribing the means by which guaranteed minimum pensions under contracted-out schemes are to be secured (whether irrevocable trust, policy of insurance, annuity contract or other means); and

(b) the conditions which are required by the regulations to be satisfied in relation to any means adopted;

and generally as to the arrangements in force or to be in force from time to time for securing those pensions.

(3) For an occupational pension scheme [F3 which is not a money purchase contracted-out scheme] to be contracted-out it must contain a rule whereby any liabilities of the scheme in respect of—

(a) guaranteed minimum pensions and accrued rights to guaranteed minimum pensions;

(b) any such benefits as are excluded by section 33(5) above from earners’ guaranteed minimum pensions;

(c) pensions and other benefits (whether or not within paragraph (a) or (b) above) in respect of which entitlement to payment has already arisen; and

(d) state scheme premiums,

are accorded priority on a winding up over other liabilities under the scheme in respect of benefits attributable to any period of service after the rule has taken effect [F4 except that the rule may also accord priority, on a winding up occurring after an earner has attained normal pension age, to liabilities of the scheme in respect of pensions and other benefits to which he will be entitled on ceasing to be in employment or to which the earner’s widow or widower or any dependant of the earner’s will be entitled on the earner’s death].

This does not apply to public service pension schemes, nor to schemes falling within any category or description prescribed as being exempt from the requirements of this subsection.

(4) For an occupational pension scheme [F3 which is not a money purchase contracted-out scheme] to be contracted-out it must, if it provides for the payment out of any sum representing the surrender value of a policy of insurance taken out for the purposes of the scheme, so provide that there shall be no payment out in relation to guaranteed minimum pensions except in such circumstances as may be prescribed.

Textual Amendments

F1 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 6(3)(a)

F2 Words inserted by Social Security Act 1985 (c. 53), Sch. 5, para. 20(a)

F3 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 6(1)(c)

F4 Words inserted by Social Security (Miscellaneous Provisions) Act 1977 (c. 5), s. 22(8)