The Pension Protection Fund (Compensation) Regulations 2005

PART 7 E+W+S Commutation

Commutation of periodic compensation E+W+S

19.—(1) The prescribed circumstances for the purposes of paragraph 24(1) of Schedule 7 to the Act (commutation of periodic compensation) are the circumstances [F1 specified in paragraphs (2) and (3)].

(2) The circumstances are that a person entitled to periodic compensation under paragraph 5, 8, 11 or 15 of Schedule 7 (pension compensation provisions)—

(a) must not have exercised an option to commute for a lump sum a portion of the pension in respect of which that person is entitled to periodic compensation; and

(b) must exercise the option to commute under paragraph 24(1) of Schedule 7 within six months beginning with the date on which—

(i) the Board gives the trustees or managers of the scheme a transfer notice under section 160(2) of the Act (transfer notice); or

(ii) entitlement to periodic compensation arises,

whichever is the later.

[F2 (3) Where a person makes an application to the PPF Board to commute in accordance with regulation 20(1), that person must have attained the age of 60 and must not have attained the age of 75 on the date specified in paragraph 20(2)(b).]

Textual Amendments

F1 Words in reg. 19(1) substituted (6.4.2006) by The Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006 (S.I. 2006/580), regs. 1(1)(b), 22(3)(a)

F2 Reg. 19(3) added (6.4.2006) by The Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006 (S.I. 2006/580), regs. 1(1)(b), 22(3)(b)

[F3 Circumstances in which the portion of compensation to be commuted may exceed 25 per cent E+W+S

20.— (1) The prescribed circumstances for the purposes of paragraph 24(2) of Schedule 7 to the Act (commutation of periodic compensation) are that the portion to be commuted is a PPF trivial commutation lump sum, in accordance with paragraph (2).

(2) A payment is a PPF trivial commutation lump sum if—

(a) either—

(i) no trivial commutation lump sum or PPF trivial commutation lump sum has previously been paid to the person—

(aa) by a registered pension scheme; or

(bb) the Board; or

(ii) if such a lump sum has previously been paid; that lump sum is paid before the end of the commutation period;

(b) on the nominated date, the value of the member's entitlement to PPF compensation and pension rights do not exceed the commutation limit;

(c) it is paid when all or part of the member's standard lifetime allowance is available; and

(d) it extinguishes the member's entitlement to PPF compensation.

(3) The nominated date is—

(a) the day within the period of three months ending with the first day of the commutation period nominated by the person; or

(b) if no day is nominated, the first day of the commutation period.

(4) The commutation limit is 1% of the standard lifetime allowance on the nominated date.

(5) The value of the member's pension rights on the nominated date is the aggregate of—

(a) the value of the member's relevant crystallised pension rights on that date; and

(b) the value of the member's uncrystallised rights on that date.

(6) For the purposes of paragraph (5)—

(a) relevant crystallised pension rights shall be calculated in accordance with paragraph 8 of Schedule 29 to the 2004 Act (trivial commutation lump sum); and

(b) a member's uncrystallised rights shall be calculated in accordance with paragraph 9 of Schedule 29 to the 2004 Act.

(7) The value of the member's entitlement to PPF compensation shall be calculated by adding any entitlement he may have to lump sum compensation and any entitlement he may have to periodic compensation.

(8) For the purposes of paragraph (7), the value of any entitlement to—

(a) lump sum compensation, shall be the full amount of the lump sum compensation to which that member would be entitled on the nominated date; and

(b) periodic compensation, shall be calculated by multiplying the annual periodic compensation to which that member would be entitled on the nominated date by 20.]

Textual Amendments

F3 Reg. 20 substituted (6.4.2006) by The Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006 (S.I. 2006/580), regs. 1(1)(b), 22(4)

Manner in which an option to commute may be exercised E+W+S

21.—(1) The manner in which an option to commute periodic compensation under paragraph 24(1) of Schedule 7 may be exercised is specified in paragraphs (2) to (5).

(2) A person must exercise an option to commute a portion of his periodic compensation under paragraph 24(1) by giving notice to the Board in writing.

(3) A notice given under paragraph (2) must include—

(a) the name, address, date of birth and national insurance number of the person exercising the option;

(b) the name and address of the employer in respect of the scheme; and

(c) the percentage of the periodic compensation that the person opts to commute.

F4 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The Board may require a person exercising an option under paragraph 24(1) to produce any document or provide any other information relevant to the exercise of the Board's functions in respect of the notice given under paragraph (2).

Textual Amendments

F4 Reg. 21(4) omitted (6.4.2006) by virtue of The Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006 (S.I. 2006/580), regs. 1(1)(b), 22(5)