The Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006

PART 2 E+W+S Assumption of responsibility

Board's power to modify relevant contracts E+W+S

2.—(1) Where section 161(1) of the Act (effect of the Board assuming responsibility for a scheme) applies, and the Board considers that a contract relating to the property, rights or liabilities of the scheme contains terms or conditions that the Board considers to be onerous (whether triggered by the insolvency event in relation to the eligible scheme or otherwise) the Board may—

(a) disapply any such term or condition; or

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

(2) Where—

(a) any rights or liabilities under a relevant contract of insurance are transferred to the Board by virtue of section 161(2)(a) of the Act; and

(b) as a result of that transfer, the Board 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 mentioned in section 161(2)(a) of the Act, was a member of the scheme or a person entitled to benefits in respect of such a member,

the Board may modify that term of that contract so that benefit under that contract shall be payable to the Board.

[F1 Power to treat benefits as having become payable before the assessment date E+W+S

3.— (1) Where this regulation applies, the benefits referred to in paragraph (3) are treated, for the purposes of section 163(2) of the Act (adjustments to be made where the Board assumes responsibility for a scheme), as having become payable before the assessment date.

(2) This regulation applies where—

(a) a member of an eligible scheme died before the commencement of the assessment period in relation to the scheme; and

(b) during the period mentioned in section 163(2)(a) of the Act, a person became entitled under the scheme rules to a benefit referred to in paragraph (3) in respect of that member.

(3) The benefits referred to in this paragraph are—

(a) a death benefit which is calculated and paid by the trustees or managers of the eligible scheme on or after the assessment date but before the date the trustees or managers receive the transfer notice in respect of that scheme; and

(b) a contribution refund within the meaning of section 101AB(4) of the 1993 Act (right to cash transfer sum and contribution refund).]

Textual Amendments

F1 Reg. 3 substituted (1.4.2009) by Pension Protection Fund (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/451), regs. 1, 5(2)

[F2 Power to treat benefits as having arisen before the assessment date] E+W+S

4.  Where—

(a) a member of an eligible scheme died before the commencement of the assessment period in relation to the scheme; and

(b) during the period beginning with the assessment date and ending with the receipt by the trustees or managers of the transfer notice, a person became entitled under the scheme rules to a [F3 death benefit or a contribution refund (within the meaning of section 101AB(4) of the 1993 Act)] in respect of that member,

that person's entitlement to that benefit shall, for the purposes of section 166(2) of the Act (duty to pay scheme benefits unpaid at assessment date), be treated as having arisen before the assessment date.

Textual Amendments

F2 Reg. 4 heading substituted (1.4.2009) by Pension Protection Fund (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/451), regs. 1, 5(3)

F3 Words in reg. 4(b) substituted (1.4.2009) by Pension Protection Fund (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/451), regs. 1, 5(4)

[F4 Power to pay certain transfer payments and contribution refunds E+W+S

4A.— (1) The Board must pay 90% of the rights described in paragraph (2) in the circumstances prescribed in paragraph (3).

(2) The rights are—

(a) any transfer payment; and

(b) any payment in respect of a refund of contributions,

to which a member of the scheme was entitled immediately before the commencement of the assessment period.

(3) The circumstances are that—

(a) the Board assumes responsibility for a scheme in accordance with Chapter 3 of Part 2 of the Act;

(b) the circumstances and conditions prescribed in—

(i) regulation 16(1) of the Entry Rules Regulations (restrictions on winding up, discharge of liabilities etc); or

(ii) regulation 2 of the Pension Protection Fund (Hybrid Schemes) (Modification) Regulations 2005 (discharge of liabilities in respect of money purchase benefits during the assessment period),

were met in respect of the rights;

(c) the rights remained unpaid at the time the transfer notice was received by the trustees or managers of the scheme; and

(d) the member sends the Board a written request to make a payment in respect of the rights.]

Textual Amendments

F4 Reg. 4A inserted (1.4.2009) by Pension Protection Fund (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/451), regs. 1, 5(5)

Interest on overpayments and underpayments created during the assessment period E+W+S

5.  The prescribed rate of interest for the purposes of—

(a) section 163(4)(a) of the Act (adjustments to be made where the Board assumes responsibility for a scheme); and

(b) section 163(4)(b) of the Act,

shall be the base rate.

Circumstances where the Board is not required to recover overpaid scheme benefits E+W+S

6.—(1) Where the Board determines that an amount referred to in section 163(4)(a) of the Act has been paid to a member, or to a person in respect of a member, it shall notify that member or person in writing that—

(a) it has so determined;

(b) it has a duty to recover that amount; and

(c) if the person in receipt of that amount believes that recovery of that amount would cause hardship to that member or person with a right to scheme benefits, or his family he should—

(i) notify the Board in writing that he believes that hardship would be so caused (“the hardship notification”) within one month of the date the Board notifies him that such an amount has been paid to him; and

(ii) provide any supporting evidence to the Board that hardship would be so caused within one month of the date of the hardship notification.

(2) Where the Board receives a hardship notification in accordance with paragraph (1)(c)(i), [F5 it shall as soon as reasonably practicable determine] whether recovery of the overpayment would cause hardship to—

(a) the member or the member's family; or

(b) in the case of a person who was in receipt of scheme benefits in respect of a member, to that person with a right to scheme benefits, or that person's family.

[F6 (2A) The Board may request such additional information from the person who gave the hardship notification as it reasonably requires for the purpose of making a determination under paragraph (2).

(2B) In making the determination, the Board shall have regard to any evidence provided under paragraph (1)(c)(ii) and any information provided in accordance with paragraph (2A).]

(3) Where recovery would cause such hardship, the Board shall not recover that amount.

(4) The Board is not required to recover such an amount where recovery would not be conducive to the prudent management of its financial affairs.

Textual Amendments

F5 Words in reg. 6(2) substituted (6.4.2007) by Pension Protection Fund (Miscellaneous Amendments) Regulations 2007 (S.I. 2007/782), regs. 1(1), 5(2)(a)

F6 Reg. 6(2A)(2B) inserted (6.4.2007) by virtue of Pension Protection Fund (Miscellaneous Amendments) Regulations 2007 (S.I. 2007/782), regs. 1(1), 5(2)(b)

Manner of discharge of liabilities in respect of money purchase benefits E+W+S

7.—(1) Subject to regulation 8, in respect of a case to which section 170(1) of the Act (discharge of liabilities in respect of money purchase benefits) applies, the Board must secure that liabilities in respect of money purchase benefits transferred to the Board under section 161 are discharged (or in the case of protected rights, given effect to) by way of—

(a) a transfer payment to—

(i) in the case of—

(aa) protected rights, an appropriate personal pension scheme; or

(bb) rights that are not protected rights, a personal pension scheme M1 ; or

(ii) an occupational pension scheme M2 ;

(b) the purchase of a pension annuity;

(c) the taking out of a policy of insurance or a number of such policies;

(d) assuring the benefits of a policy of insurance or a number of such policies; or

(e) in the circumstances described in regulation 9, a trivial commutation lump sum payment.

(2) Where a person is entitled under the scheme rules to money purchase benefits which include protected rights and rights which are not protected rights, the Board may discharge such rights together where it discharges those rights as if all those rights were protected rights.

(3) Any transfer payment made in relation to protected rights (or, if a transfer payment gives effect to both protected rights and rights which are not protected rights, that part of it which gives effect to protected rights)—

(a) shall be of an amount at least equal to the cash equivalent of the protected rights to which effect is being given, as calculated and verified in a manner consistent with regulations made under section 97 of the 1993 Act M3 (calculation of cash equivalents); and

(b) may only be made, where the appropriate personal pension scheme, personal pension scheme or occupational pension scheme is a stakeholder pension scheme, with the written consent of the member.

Marginal Citations

M1 The definition of “personal pension scheme” in section 1 of the Pension Schemes Act 1993 was substituted by section 239(3) of the Pensions Act 2004.

M2 The definition of “occupational pension scheme” in section 1 of the Pension Schemes Act 1993 was substituted by section 239(1) of the Pensions Act 2004.

M3 Section 97 was amended by paragraph 4 of Schedule 6 to the Pensions Act 1995 and paragraph 8(1) of Schedule 5 to, the Child Support, Pensions and Social Security Act 2000 (c. 19).

Further provision for discharge of liabilities in respect of money purchase benefits E+W+S

8.—(1) In respect of a case to which section 170(1) of the Act applies, before the expiry of a period of three months beginning on the date that the Board assumes responsibility for the scheme in accordance with section 161 of the Act, the Board shall give notice in writing to any person who is entitled under the scheme rules to money purchase benefits (“the money purchase beneficiary”)—

(a) of the existence of those liabilities in relation to such benefits;

(b) of the manner in which those liabilities, may be discharged by the Board in accordance with regulation 7;

(c) that the money purchase beneficiary may wish to seek independent financial advice;

(d) that the money purchase beneficiary may, before the expiry of a period of three months beginning on the date of the notice, inform the Board in writing of the manner in which he wishes those liabilities to be discharged (being a manner consistent with regulation 7); and

(e) that should the money purchase beneficiary not inform the Board in accordance with sub-paragraph (d) of the manner in which he wishes those liabilities to be discharged, the Board will discharge those liabilities as it sees fit, in accordance with these Regulations.

(2) Where the money purchase beneficiary informs the Board in accordance with paragraph (1)(d) that he wishes the liabilities relating to his money purchase benefits to be discharged in a specified manner, the Board shall request in writing any further information it may require in order for it to discharge those liabilities in the manner so specified.

(3) Subject to the requirements of regulation 9 in relation to trivial commutation, where the money purchase beneficiary has provided sufficient information for the Board to discharge the liabilities in relation to that beneficiary in respect of money purchase benefits, the Board shall, within a reasonable period, discharge those liabilities in the manner so requested.

(4) Where it is not possible to discharge money purchase liabilities in relation to a money purchase beneficiary in accordance with paragraph (3), the Board shall discharge those liabilities in accordance with regulation 7(1).

(5) Where the money purchase beneficiary dies before the Board discharges those liabilities in relation to that beneficiary, the Board shall discharge those liabilities—

(a) in the case of money purchase benefits that are protected rights—

(i) where there is a widow, widower or surviving civil partner, by the purchase of an annuity; or

(ii) where there is no widow, widower or surviving civil partner to the money purchase beneficiary's estate;

(b) in the case of money purchase benefits that are not protected rights—

(i) where there is a widow, widower or surviving civil partner, under the rules of the scheme within the limits specified in regulation 7(1); or

(ii) where there is no widow, widower or surviving civil partner, in accordance with paragraph 15 of Schedule 29 to the 2004 Act (uncrystallised funds lump sum death benefit).

Trivial commutation E+W+S

9.  The Board may discharge its liabilities in respect of money purchase benefits by way of a trivial commutation lump sum payment where this lump sum is paid in accordance with the requirements of paragraph 7 of Schedule 29 to the 2004 Act (registered pension schemes: authorised lump sums - trivial commutation lump sum).