The Occupational Pension Schemes (Schemes that were Contracted-out) (No.2) Regulations 2015

PART 3 ADDITIONAL REQUIREMENTS IN RELATION TO RIGHTS ATTRIBUTABLE TO CONTRACTED-OUT EMPLOYMENT ON AND AFTER 6TH APRIL 1997

Alteration of scheme rules

17.—(1) The rules of a scheme may be altered in relation to section 9(2B) rights only if—

(a) following the alteration, the scheme provides benefits for the earner and for the earner’s widow, widower or surviving civil partner, in respect of the period of pensionable service to which the alteration relates, that are at least equal to the benefits that would have been provided by a reference scheme (within the meaning of section 12B(2) of the 1993 Act (reference scheme) as it had effect immediately before the second abolition date);

(b) the alteration is one to which the subsisting rights provisions (within the meaning of section 67(4) of the 1995 Act) do not apply, by virtue of section 67 of that Act;

(c) the alteration is one that is not a protected modification or a detrimental modification (within the meaning of section 67A of the 1995 Act) and the requirement in paragraph (2) is met; or

(d) the alteration is a detrimental modification (within the meaning of section 67A(4) of the 1995 Act) and—

(i) the actuarial equivalence requirements provided for in sections 67C and 67D of that Act are met in relation to the proposed modification of those rights; and

(ii) the requirement in paragraph (2) is met.

(2) Subject to paragraph (3), the requirement is the altered scheme is to provide for a pension to be paid to the earner’s widow, widower or surviving civil partner (referred to in this regulation as the “relevant survivor’s section 9(2B) pension”) that is at least as generous, either as regards the amount of the pension or as regards the circumstances in which it will be paid, as it would have been before the alteration.

(3) In relation to an earner who is in pensionable service under the scheme immediately before the alteration takes effect, the requirement in paragraph (2) is to be deemed to be satisfied if the relevant survivor’s section 9(2B) pension that the scheme would provide in respect of the earner if the earner left pensionable service immediately after the alteration is at least as generous as the relevant survivor’s section 9(2B) pension that the scheme would have provided in respect of the earner had the earner left service immediately before the alteration.

Payment of a lump sum instead of a pension

18.—(1) A relevant scheme may not provide for the payment of a lump sum instead of a pension that is attributable to section 9(2B) rights, unless the payment to be made is authorised under section 164 of the Finance Act (authorised member payments) and the payment is—

(a) permitted by the lump sum rule in section 166 of the Finance Act and qualifies as—

(i) a pension commencement lump sum for the purposes of paragraph 1 of Schedule 29 to that Act;

(ii) a serious ill-health lump sum for the purposes of paragraph 4 of that Schedule;

(iii) an uncrystallised funds pension lump sum for the purposes of paragraph 4A of that Schedule;

(iv) a trivial commutation lump sum for the purposes of paragraph 7 of that Schedule; or

(v) a winding-up lump sum for the purposes of paragraph 10 of that Schedule;

(b) permitted by the lump sum death benefit rule in section 168 of the Finance Act and qualifies as a trivial commutation lump sum death benefit for the purposes of paragraph 20 of Schedule 29 to that Act; or

(c) made by a registered pension scheme (within the meaning of section 150(2) of the Finance Act), is a payment that is described in Part 2 of the Registered Pension Schemes (Authorised Payments) Regulations 2009 (commutation payments), and is made to or in respect of a member.

(2) Where, under the scheme—

(a) an earner qualifies for a lump sum payment on the ground of serious ill-health; and

(b) the earner’s widow, widower or surviving civil partner qualifies for a pension (“a survivor’s pension”),

the scheme is to continue to provide for a survivor’s pension notwithstanding the payment of a lump sum to the earner.

Forfeiture of accrued rights

19.  Section 92(1) of the 1995 Act (no forfeiture of entitlement under an occupational pension scheme) does not prevent forfeiture of section 9(2B) rights under a relevant scheme if—

(a) the person entitled to payments giving effect to those rights (“the pensioner”) is, in the opinion of the trustees of the scheme, unable to act by reason of mental disorder; and

(b) there is provision in the scheme that requires that, in those circumstances, sums equivalent to those payments—

(i) must be paid or applied for the maintenance of the pensioner, except in so far as they are not, in the opinion of the trustees, required for that purpose;

(ii) may, in so far as they are not in the opinion of the trustees required for the maintenance of the pensioner, be paid or applied for the maintenance of any dependants of the pensioner; and

(iii) must, in so far as they are not in the opinion of the trustees required for the maintenance of the pensioner or any dependant of the pensioner, be held by the trustees for the pensioner until the pensioner is again able to act, or if the pensioner dies before that happens, for the pensioner’s estate.