The Pension Protection Fund (Entry Rules) Regulations 2005

Statutory Instruments

2005 No. 590

PENSIONS

The Pension Protection Fund (Entry Rules) Regulations 2005

Made

10th March 2005

Laid before Parliament

10th March 2005

Coming into force as provided for in regulation 1(2)

The Secretary of State for Work and Pensions, in exercise of the powers conferred upon him by sections 120(3) and (4), 121(5), 122(3), (5) and (8), 123(5), 126(1)(b), (3) and (5), 129(1)(b), (3) and (8), 130(5) and (8), 133(3), 134(3)(a)(iii), 135(4), 138(10)(b) and (12), 139(6), 146(1) and (5), 147(1)(a) and (5), 148(8), 150(5) and (6)(a) to (c), 151(4), (6), (8) and (9)(b), 315(2), (4) and (5) and 318(1) and (4)(a) of the Pensions Act 2004 M1 , and of all other powers enabling him in that behalf, by this instrument, which contains regulations made before the end of the period of six months beginning with the coming into force of the provisions of the enactment by virtue of which they are made M2 , hereby makes the following Regulations:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schemes which cease to be eligible schemes E+W+S

Notification of insolvency events in respect of employers E+W+S

Prescribed insolvency events E+W+S

Circumstances in which insolvency proceedings in relation to the employer are stayed or come to an end E+W+S

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Applications and notifications to the Board – further provision E+W+S

Confirmation of scheme status by insolvency practitioner E+W+S

Confirmation of scheme status by Board E+W+S

Confirmation of scheme status by insolvency practitioner – multi-employer schemes E+W+S

Confirmation of scheme status by Board – multi-employer schemes E+W+S

Confirmation of scheme status – binding notices E+W+S

Contributions to schemes E+W+S

Directions E+W+S

Restrictions on winding up, discharge of liabilities etc E+W+S

Payment of scheme benefits E+W+S

Loans to pay scheme benefits E+W+S

Withdrawal following issue of section 122(4) notice E+W+S

Consequences of the Board ceasing to be involved with a scheme E+W+S

Refusal to assume responsibility – schemes which become eligible schemes E+W+S

Refusal to assume responsibility – new schemes created to replace existing schemes E+W+S

Form and content of withdrawal notices issued under sections 146 and 147 of the Act E+W+S

Applications for reconsideration E+W+S

Form and content of audited scheme accounts E+W+S

Signed by authority of the Secretary of State for Work and Pensions.

Malcolm Wicks

Minister of State,

Department for Work and Pensions

10th March 2005

Regulation 25

SCHEDULE E+W+S CONTENTS OF ACCOUNTS AUDITED BY THE AUDITOR OF THE SCHEME

1.  An account of the financial additions to, withdrawals from and changes to the value of the fund during the accounting period. E+W+S

2.—(1) A statement, as at the end of the accounting period, of the assets at market value, or trustees' or managers' estimate thereof where the market value is not readily ascertainable, and liabilities of the scheme, other than liabilities to pay pensions and benefits after the end of the accounting period— E+W+S

(a) giving, in the case of any assets which are stated at an estimate of their market value, the reason why the valuation is an estimate;

(b) showing the distribution of the [F19 investments] and other assets of the scheme between each of the following categories (where none of the investments falls within a particular category, that fact is not required to be stated), namely—

(i) insurance policies;

(ii) public sector fixed interest investments and separately quoted securities and unquoted securities;

(iii) other fixed interest investments and separately showing quoted securities and unquoted securities;

(iv) index-linked securities and separately showing quoted securities and unquoted securities;

(v) equities (including convertible shares) and separately showing quoted equities and unquoted equities;

(vi) property (which in this paragraph means any right or interest in freehold or leasehold land or buildings);

(vii) unit trusts invested in property;

(viii) other unit trusts;

(ix) managed funds (other than unit trusts) invested in property;

(x) other managed funds (not being unit trusts);

(xi) loans (whether or not secured by mortgages);

(xii) cash deposits and cash in hand;

(xiii) investments and other assets not included in heads (i) to (xii) above; and

(c) showing separately, in the case of investments in each category, investments in the United Kingdom and investments outside the United Kingdom, and in the case of cash investments mentioned in heads (vii) to (x) of sub-paragraph (b) investments where the company operating the unit trust or managed fund is, and where it is not, a company registered in the United Kingdom.

(2) Where the assets include insurance policies which are specifically allocated to the provision of benefits for, and which provide all the benefits payable under the scheme to, particular members or other persons in respect of particular members or both, those policies must be included in the statement and there must be a note of the existence of such policies but that entry need not include their market value or an estimate.

(3) Where the assets—

(a) are invested only for the purposes of securing additional money purchase benefits derived from [F20 voluntary contributions] to which section 111 of the 1993 Act (voluntary contributions) applies; and

(b) are specifically allocated to the provision of additional benefits for particular members or other persons in respect of particular members (or both),

a note that [F21 paragraphs (a) and (b)] apply must be included in the statement, but that entry need not include the market value or an estimate of value of those assets.

3.  Where any assets or liabilities are denominated in currencies other than sterling, a translation of those assets into sterling and an explanation of the basis on which they have been translated. E+W+S

4.  Particulars of any investment (other than in UK Government securities) in which more than 5 per cent. of the total value of the net assets of the scheme is invested, and if any such investment is an insurance policy, a statement of its main characteristics. E+W+S

5.  Where the scheme has employer-related investments, within the meaning of section 40(2) of the 1995 Act (restriction on employer related investments), a statement— E+W+S

(a) as to the percentage of the scheme's resources invested in such investments at the end of the accounting period; and

(b) if that percentage exceeds 5 per cent., as the percentage of the scheme's resources which are investments to which regulation 6 of the Occupational Pension Schemes (Investment) Regulations 1996 M41 (investments to which restrictions on employer related investments do not apply) applies.

6.  In respect of every other amount shown in the accounts other than the amounts referred to in paragraph 7, a statement of the corresponding amount for the scheme year previous to the accounting period, except in a case where regulation 2 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 M42 (requirement for trustees or managers to obtain documents) is complied with by the trustees or managers of a scheme for the first time. E+W+S

7.  The total amount of the purchases and the total amount of the sales of investments during the accounting period. E+W+S

8.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [F22 ] E+W+S

Explanatory Note

(This note is not part of the Regulations)

These Regulations make provision relating to various requirements under Part 2 of the Pensions Act 2004 (c. 35) (“the Act”).

Regulation 1 provides for citation, commencement and interpretation and includes an extension of the meaning of “employer” for the purposes of these Regulations.

Regulation 2 sets out those schemes which are not “eligible schemes” for the purposes of Part 2 of the Act and which are not able to receive compensation from the Board of the Pension Protection Fund (“the Board”) pursuant to the pension compensation provisions in that Part of the Act. The Board is established under section 107 of the Act.

Regulation 3 provides that where, after the beginning of an assessment period in relation to an eligible scheme, the scheme ceases to be an eligible scheme in prescribed circumstances, the scheme shall, for the purposes of Part 2 of the Act, be treated as remaining an eligible scheme.

Regulation 4 makes provision in respect of the period in which an insolvency practitioner is required to notify the Board of the occurrence of an insolvency event in relation to the employer in relation to an eligible scheme. If an insolvency event is a “qualifying insolvency event” within the meaning of Part 2 of the Act, the start of an assessment period will be triggered in relation to an eligible scheme and the scheme will become subject to the various requirements in Part 2 of the Act.

Regulation 5 provides for certain events in relation to certain types of bodies (such as building societies, friendly societies and limited liability partnerships) to be classified as insolvency events for the purposes of Part 2 of the Act.

Regulation 6 sets out the circumstances in which insolvency proceedings in relation to the employer in relation to an eligible scheme are stayed or come to an end. Where these circumstances exist, the insolvency practitioner will be required to issue a notice to the effect that he is not able to confirm whether a scheme rescue has occurred or is not possible. This may lead to the Board ceasing to be involved with a scheme.

Regulation 7 makes provision in respect of applications and notifications to the Board under section 129 of the Act for it to assume responsibility for an eligible scheme in circumstances where the employer in relation to the scheme is unlikely to continue as a going concern and meets prescribed requirements.

Regulation 8 sets out the time limit for making applications to the Board under section 129 of the Act. Regulation 8 also makes provision in respect of the form and content of such applications and about the form and content of notifications to the Board which the Pensions Regulator is required to make in circumstances where it becomes aware that an employer in relation to an eligible scheme is unlikely to continue as a going concern and meets prescribed requirements.

Regulations 9 and 10 set out the circumstances which must exist before an insolvency practitioner in relation to an employer in relation to an eligible scheme or the Board is able to determine whether or not a scheme rescue has occurred or is not possible in relation to the scheme. They also make provision regarding the form and content of the notices which must be issued by the insolvency practitioner or the Board in order to confirm the status of a scheme. Regulations 11 and 12 modify the application of regulations 9 and 10 so as to make similar provision in respect of multi-employer schemes.

Regulation 13 makes provision regarding the form and content of binding notices confirming the status of a scheme. A notice is not binding until the period in respect of which it is possible for the issue of the notice to be reviewed under Chapter 6 of Part 2 of the Act has expired or, if an application for a review has been made, until the review or any subsequent appeal has been conclusively resolved.

Regulation 14 makes provision in respect of the types of payments that may be made to a scheme during an assessment period.

Regulation 15 makes provision in respect of the “relevant person” in relation to an eligible scheme to whom the Board may issue directions under section 134 of the Act.

Regulation 16 provides for the circumstances in which a transfer payment may be made during an assessment period in respect of a member's rights under an eligible scheme. It also provides for the other circumstances in which the trustees or managers of a scheme may take steps to discharge a member's rights under an eligible scheme during an assessment period.

Regulation 17 makes provision in respect of the circumstances where a member of an eligible scheme may postpone the receipt of his entitlement to a pension or lump sum payment under the scheme during an assessment period.

Regulation 18 makes provision in respect of the rate of interest which is payable by the trustees or managers of an eligible scheme to which the Board has made a loan to pay scheme benefits under section 139 of the Act. It also makes provision in respect of how the rate of interest payable is to be calculated.

Regulation 19 makes provision in respect of the form and content of withdrawal notices issued by the Board under section 148 of the Act.

Regulation 20 makes provision in respect of the accrual of benefits under a scheme in respect of an assessment period in relation to an eligible scheme when that assessment period comes to an end.

Regulations 21 and 22 make provision in respect of the period in relation to which the Board is to determine whether or not to refuse to assume responsibility for a scheme under sections 146 and 147 of the Act. Regulation 23 makes provision in respect of the form and content of withdrawal notices issued by the Board under sections 146 and 147 of the Act.

Regulation 24 makes provision in respect of the form and content of applications for reconsideration made under section 151 of the Act. It also makes provision in respect of the time limits for making such applications and the documents which are to accompany the application.

Regulation 25 and the Schedule make provision in respect of the prescribed form and content of the audited scheme accounts and report from the auditor which is to accompany an application for reconsideration.

As these Regulations are made before the expiry of the period of six months beginning with the coming into force of the provisions of the Act by virtue of which they are made, the requirement for the Secretary of State to consult such persons as he considers appropriate does not apply.

An assessment of the compliance costs to business of the measures arising from the Act, including these Regulations, has been placed in the libraries of both Houses of Parliament. Copies may be obtained from the Department for Work and Pensions, Regulatory Impact Unit, 3rd Floor, The Adelphi, 1- 11 John Adam Street, London WC2N 6HT.