Chapter IIE+W+S [Reduction in social security benefits for members of schemes that were contracted-out]
PreliminaryE+W+S
40 Scope of Chapter II.E+W+S
This Chapter has effect for the purpose—
(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)of providing for contributions to be paid by the [Inland Revenue] in respect of earners who are members of [money purchase contracted-out schemes and members of] appropriate personal pension schemes; and
(c)of making provision concerning the payment of certain social security benefits payable in respect of members and former members of [schemes that were contracted-out pension schemes].
Textual Amendments
Commencement Information
...E+W+S
41Reduced rates of Class 1 contributionsE+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42 Review and alteration of rates of contributions applicable under s. 41.E+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reduced rates of contributions, and rebates, for members of money purchase contracted-out schemesE+W+S
42AReduced rates of Class 1 contributions, and rebatesE+W+S
[(1)Subsections (2) to [(2D) and (3)] apply where—
(a)the earnings paid to or for the benefit of an earner in any tax week are in respect of an employment which is contracted-out employment at the time of the payment, and
(b)the earner’s service in the employment is service which qualifies him for a pension provided by a money purchase contracted-out scheme;
and in subsections (2) and (2A) “the relevant part”, in relation to those earnings, means so much of those earnings as exceeds the current lower earnings limit but not [the upper accrual point] (or the prescribed equivalents if the earner is paid otherwise than weekly).]
[(2)The amount of any primary Class 1 contribution [attributable to section 8(1)(a) of the Social Security Contributions and Benefits Act 1992] in respect of the earnings shall be reduced by an amount equal to the appropriate flat-rate percentage of the relevant part of the earnings (“Amount R1”).
(2A)The amount of any secondary Class 1 contribution in respect of the earnings shall be reduced by an amount equal to the appropriate flat-rate percentage of the relevant part of the earnings (“Amount R2”).
(2B)The aggregate of Amounts R1 and R2 shall be set off—
(a)first against the aggregate amount which the secondary contributor is liable to pay in respect of the contributions mentioned in subsections (2) and (2A); and
(b)then (as to any balance) against any amount which the secondary contributor is liable to pay in respect of a primary or secondary Class 1 contribution in respect of earnings—
(i)paid to or for the benefit of any other employed earner (whether in contracted-out employment or not), and
(ii)in relation to which the secondary contributor is such a contributor;
and in this subsection any reference to a liability to pay an amount in respect of a primary Class 1 contribution is a reference to such a liability under paragraph 3 of Schedule 1 to the Social Security Contributions and Benefits Act 1992.
(2C)If—
(a)any balance remains, and
(b)the secondary contributor makes an application for the purpose to the Inland Revenue,
the Inland Revenue shall, in such manner and at such time (or within such period) as may be prescribed, pay to the secondary contributor an amount equal to the remaining balance.
But regulations may make provision for the adjustment of an amount that would otherwise be payable under this subsection so as to avoid the payment of trivial or fractional amounts.
(2D)If the Inland Revenue pay any amount under subsection (2C) which they are not required to pay, they may recover that amount from the secondary contributor in such manner and at such time (or within such period) as may be prescribed.]
(3)[Subject to subsection (5A),] the [Inland Revenue] shall except in prescribed circumstances or in respect of prescribed periods pay in respect of that earner and that tax week to the [earner] or, in prescribed circumstances, to a prescribed person the amount by which—
(a)the appropriate age-related percentage of that part of those earnings,
exceeds
(b)the appropriate flat-rate percentage of that part of those earnings.
(4)Regulations may make provision—
(a)as to the manner in which and time at which or period within which payments under subsection (3) are to be made,
(b)for the adjustment of the amount which would otherwise be payable under that subsection so as to avoid the payment of trivial or fractional amounts,
(c)for earnings to be calculated or estimated in such manner and on such basis as may be prescribed for the purpose of determining whether any, and if so what, payments under subsection (3) are to be made.
(5)If the [Inland Revenue] [pay] an amount under subsection (3) which [they] [are] not required to pay or is not required to pay to the person to whom, or in respect of whom, he pays it, he may recover it from any person to whom, or in respect of whom, he paid it.
[(5A)Where a payment under subsection (3) is due in respect of an earner, HMRC are not required to make the payment if they determine that the cost to them of administering the payment would exceed the amount of the payment.]
(6)Where—
(a)an earner has ceased to be employed in an employment, and
(b)earnings are paid to him or for his benefit within the period of six weeks, or such other period as may be prescribed, from the day on which he so ceased,
that employment shall be treated for the purposes of this section as contracted-out employment at the time when the earnings are paid if it was contracted-out employment in relation to the earner when he was last employed in it.
(7)Subsection (3) of section 41 applies for the purposes of this section as it applies for the purposes of that.
[(8)For the purposes of this section “the appropriate age-related percentage” and “the appropriate flat-rate percentage”, in relation to a tax year beginning before [the first abolition date], are the percentages specified as such for that tax year in an order made under section 42B (as it had effect prior to that date).]]
42BDetermination and alteration of rates of contributions, and rebates, applicable under section 42AE+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum contributions: members of appropriate personal pension schemesE+W+S
43 Payment of minimum contributions to personal pension schemes.E+W+S
(1)Subject to the following provisions of this Part, the [Inland Revenue] shall, except in such circumstances [or in respect of such periods] as may be prescribed, pay minimum contributions in respect of an employed earner for any period during which the earner—
(a)is over the age of 16 but has not attained pensionable age;
(b)is not a married woman or widow who has made an election which is still operative that [so much of her liability in respect of primary Class 1 contributions as is attributable to section 8(1)(a) of the Social Security Contributions and Benefits Act 1992 (c. 4)] shall be a liability to contribute at a reduced rate; and
(c)is a member of an appropriate personal pension scheme which is for the time being the earner’s chosen scheme.
(2)Subject to subsection (3), minimum contributions in respect of an earner shall be paid to the [earner].
(3)In such circumstances as may be prescribed minimum contributions shall be paid to a prescribed person.
(4)Where the condition mentioned in subsection (1)(a) or (c) ceases to be satisfied in the case of an earner in respect of whom the [Inland Revenue] [are] required to pay minimum contributions, the duty of the [Inland Revenue] to pay them shall cease as from a date determined in accordance with regulations.
(5)If the [Inland Revenue] [pay] an amount by way of minimum contributions which [they] [are] not required to pay, [they] may recover it—
(a)from the person to whom [they] paid it, or
(b)from any person in respect of whom [they] paid it.
(6)If the [Inland Revenue] [pay] in respect of an earner an amount by way of minimum contributions which [they] [are] required to pay, but [do] not pay it to the trustees or managers of the earner’s chosen scheme, [they] may recover it from the person to whom [they] paid it or from the earner.
[(6A)Where a payment under subsection (1) is due in respect of an earner, HMRC are not required to make the payment if they determine that the cost to them of administering the payment would exceed the amount of the payment.]
[(7)In this section “the earner's chosen scheme” means the scheme which was immediately before [the first abolition date] the earner's chosen scheme in accordance with section 44 (as it had effect prior to that date).]
Textual Amendments
Commencement Information
44 Earner’s chosen scheme.E+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45 Amount of minimum contributions.E+W+S
[(1)In relation to any tax week falling within a period for which the [Inland Revenue are] required to pay minimum contributions in respect of an earner, the amount of those contributions shall be an amount equal to the appropriate age-related percentage of so much of the earnings paid in that week (other than earnings in respect of contracted-out employment) as exceeds the current lower earnings limit but not [the upper accrual point] (or the prescribed equivalents if he is paid otherwise than weekly)].
(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)Regulations may make provision—
(a)for earnings to be calculated or estimated in such manner and on such basis as may be prescribed for the purpose of determining whether any, and if so what, minimum contributions are payable in respect of them;
(b)for the adjustment of the amount which would otherwise be payable by way of minimum contributions so as to avoid the payment of trivial or fractional amounts;
(c)for the intervals at which, for the purposes of minimum contributions, payments of earnings are to be treated as made;
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e)for this section to have effect in prescribed cases as if for any reference to a tax week there were substituted a reference to a prescribed period ... ;
(f)as to the manner in which and time at which or period within which minimum contributions are to be made.
[(4)For the purposes of this section “the appropriate age-related percentage”, in relation to a tax year beginning before [the first abolition date], is the percentage (or percentages) specified as such for that tax year in an order made under section 45A (as it had effect prior to that date).]
Textual Amendments
Commencement Information
45ADetermination and alteration of rates of minimum contributions under section 45E+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45BMoney purchase and personal pension schemes: verification of agesE+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of entitlement to guaranteed minimum pensions on payment of social security benefitsE+W+S
46 Effect of entitlement to guaranteed minimum pensions on payment of social security benefits.E+W+S
(1)Where for any period a person is entitled both—
(a)to a Category A or Category B retirement pension, a widowed mother’s allowance [, a widowed parent’s allowance] [or a widow’s pension] under the Social Security Contributions and Benefits Act 1992; and
(b)to one or more guaranteed minimum pensions,
the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal—
(i)[to that part of its additional pension which is attributable to earnings factors for any tax years ending before the principal appointed day], or
(ii)to the weekly rate of the pension mentioned in paragraph (b) (or, if there is more than one such pension, their aggregate weekly rates),
whichever is the less.
(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[(3)Where for any period—
(a)a person is entitled to one or more guaranteed minimum pensions; and
(b)he is also entitled to long-term incapacity benefit under section 30A of the Social Security Contributions and Benefits Act 1992,
for that period an amount equal to the weekly rate or aggregate weekly rates of the guaranteed minimum pension or pensions shall be deducted from any increase payable under regulations under section 30B(7) of that Act and he shall be entitled to such an increase only if there is a balance after the deduction and, if there is such a balance, at a weekly rate equal to it.]
(4)Where for any period—
(a)a person is entitled to one or more guaranteed minimum pensions;
(b)he is also entitled to a Category A retirement pension under section 44 of the Social Security Contributions and Benefits Act 1992; and
(c)the weekly rate of his pension includes an additional pension such as is mentioned in section 44(3)(b) of that Act,
for that period section 47 of that Act shall have effect as if the following subsection were substituted for subsection (3)—
“(3)In subsection (2) above “the relevant amount” means an amount equal to the aggregate of—
(a)the additional pension; and
(b)the weekly rate or aggregate weekly rates of the guaranteed minimum pension or pensions,
reduced by the amount of any reduction in the weekly rate of the Category A retirement pension made by virtue of section 46(1) of the Pension Schemes Act 1993.”.
(5)Where for any period—
(a)a person is entitled to one or more guaranteed minimum pensions;
(b)he is also entitled to a Category A retirement pension under section 44 of the Social Security Contributions and Benefits Act 1992; and
(c)the weekly rate of his Category A retirement pension does not include an additional pension such as is mentioned in subsection (3)(b) of that section,
for that period the relevant amount shall be deducted from the amount that would otherwise be the increase under section 47(1) of that Act and the pensioner shall be entitled to an increase under that section only if there is a balance remaining after that deduction and, if there is such a balance, of an amount equal to it.
(6)Where for any period—
(a)a person is entitled to one or more guaranteed minimum pensions;
(b)he is also entitled—
(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii)to a Category A retirement pension under section 44 of that Act; or
(iii)to a Category B retirement pension under [section ... [48B or 48BB]] of that Act; and
(c)the weekly rate of the pension includes an additional pension such as is mentioned in section 44(3)(b) of that Act,
for that period paragraph 3 of Schedule 7 to that Act shall have effect as if the following sub-paragraph were substituted for sub-paragraph (3)—
“(3)In this paragraph “the relevant amount” means an amount equal to the aggregate of—
(a)the additional pension; and
(b)the weekly rate or aggregate weekly rates of the guaranteed minimum pension or pensions,
reduced by the amount of any reduction in the weekly rate of the pension made by virtue of section 46(1) of the Pension Schemes Act 1993.”.
(7)Where for any period—
(a)a person is entitled to one or more guaranteed minimum pensions;
(b)he is also entitled to any of the pensions under the Social Security Contributions and Benefits Act 1992 mentioned in subsection (6)(b); and
(c)the weekly rate of the pension does not include an additional pension such as is mentioned in section 44(3)(b) of that Act,
for that period the relevant amount shall be deducted from the amount that would otherwise be the increase under paragraph 3 of Schedule 7 to that Act and the beneficiary shall be entitled to an increase only if there is a balance after that deduction and, if there is such a balance, only to an amount equal to it.
(8)In this section “the relevant amount” means an amount equal to the weekly rate or aggregate weekly rates of the guaranteed minimum pension or pensions—
(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)in the case of subsection (5), reduced by the amount of any reduction in the weekly rate of the Category A retirement pension made by virtue of subsection (1);
and references in this section to the weekly rate of a guaranteed minimum pension are references to that rate without any increase under section 15(1).
(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[(10)In this section a reference to “additional pension” does not include any amount of additional pension attributable to units of additional pension.
(11)For units of additional pension, see section 14A of the Social Security Contributions and Benefits Act 1992.]
Textual Amendments
Modifications etc. (not altering text)
Commencement Information
Marginal Citations
46ARetirement in tax year after 5th April 2020E+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47 Further provisions concerning entitlement to guaranteed minimum pensions for the purposes of s. 46.E+W+S
(1)The reference in section 46(1) to a person entitled to a guaranteed minimum pension shall be construed as including a reference to a person so entitled by virtue of being the widower [, surviving same sex spouse] [or surviving civil partner] of an earner [in any case where he is entitled to a benefit other than a widowed parent’s allowance] ... only if—
[(a)he is also entitled to a Category B retirement pension by virtue of the earner’s contributions (or would be so entitled but for section 43(1) of the Social Security Contributions and Benefits Act 1992); or]
(b)he is also entitled to a Category A retirement pension by virtue of [section 41(5)] of [that Act].
(2)For the purposes of section 46 a person shall be treated as entitled to any guaranteed minimum pension to which he would have been entitled—
(a)if its commencement had not been postponed, as mentioned in section 13(4); or
(b)if there had not been made a transfer payment or transfer under regulations made by virtue of section 20 as a result of which—
(i)he is no longer entitled to guaranteed minimum pensions under the scheme by which the transfer payment or transfer was made, and
(ii)he has not become entitled to guaranteed minimum pensions under the scheme to which the transfer payment or transfer was made.
(3)Where—
(a)guaranteed minimum pensions provided for a member or the member’s [widow, widower or surviving civil partner] under a contracted-out scheme have been wholly or partly secured as mentioned in subsection (3) of section 19; and
(b)either—
(i)the transaction wholly or partly securing them was carried out before 1st January 1986 and discharged the trustees or managers of the scheme as mentioned in subsection (1) of that section; or
(ii)it was carried out on or after that date without any of the requirements specified in subsection (5)(a) to (c) of that section being satisfied in relation to it and the scheme has been wound up; and
(c)any company with which any relevant policy of insurance or annuity contract was taken out or entered into is unable to meet the liabilities under policies issued or securities given by it; and
(d)the combined proceeds of—
(i)any relevant policies and annuity contracts, and
(ii)any cash sums paid or alternative arrangements made under the [Financial Services Compensation Scheme],
are inadequate to provide the whole of the amount secured,
the member and the member’s [widow, widower or surviving civil partner] shall be treated for the purposes of section 46 as only entitled to such part (if any) of the member’s or, as the case may be, the member’s [widow's, widower’s or surviving civil partner's] guaranteed minimum pension as is provided by the proceeds mentioned in paragraph (d).
(4)A policy or annuity is relevant for the purposes of subsection (3) if taking it out or entering into it constituted the transaction to which section 19 applies.
(5)For the purposes of section 46 a person shall be treated as entitled to any guaranteed minimum pension to which he would have been entitled—
(a)if a lump sum had not been paid instead of that pension under provisions included in a scheme by virtue of section 21(1); or
(b)if that pension had not been forfeited under provisions included in a scheme by virtue of section 21(2).
[(6)For the purposes of section 46, a person shall be treated as entitled to any guaranteed minimum pension to which he would have been entitled but for [section 14(2A) and] any reduction under section 15A.]
[(7)For the purposes of section 46, a person shall be treated as entitled to any guaranteed minimum pension to which he would have been entitled but for any order under section 342A of the Insolvency Act 1986 (recovery of excessive pension contributions) or under section [101 of the Bankruptcy (Scotland) Act 2016].]
[(8)For the purposes of section 46, a person shall be treated as entitled to a guaranteed minimum pension to which he would have been entitled but for the fact that the trustees or managers were discharged from their liability to provide that pension on the Board of the Pension Protection Fund assuming responsibility for the scheme.]
[(9)For the purposes of section 46, a person shall be treated as entitled to a guaranteed minimum pension to which, in the opinion of the Commissioners for Her Majesty's Revenue and Customs, he would have been entitled but for the [amendment of a scheme so that it no longer contains the guaranteed minimum pension rules][GMP conversion (within the meaning given by section 24A(1)) in relation to the person].
(10)Where the earner's accrued rights have been transferred after the amendment of the scheme, in making the calculation under subsection (9) the Commissioners shall assume the application of section 16(1) after the transfer.
(11)In making the calculation under subsection (9) the Commissioners shall ignore any effect of the scheme being wound up.]
Textual Amendments
Modifications etc. (not altering text)
Commencement Information
48 Reduced benefits where minimum payments or minimum contributions paid.E+W+S
(1)Subject to subsection (3), this subsection applies where for any period—
(a)minimum payments have been made in respect of an earner to an occupational pension scheme which is a money purchase contracted-out scheme in relation to the earner’s employment, or
(b)minimum contributions have been paid in respect of an earner under section 43.
(2)Where subsection (1) applies then, for the purposes of section 46—
(a)the earner shall be treated, as from the date on which he reaches pensionable age, as entitled to a guaranteed minimum pension at a prescribed weekly rate arising from that period in that employment;
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)in prescribed circumstances ... any [widow, widower or surviving civil partner] of the earner shall be treated as entitled to a guaranteed minimum pension at a prescribed weekly rate arising from that period;
and where subsection (1)(b) applies paragraphs (a) to (c) of this subsection apply also for the purposes of [section] 47(2) of the Social Security Contributions and Benefits Act 1992 and paragraph 3(2) of Schedule 7 to that Act, but with the omission from paragraph (a) of the words “in that employment”.
(3)Where the earner is a married woman or widow, subsection (1) shall not have effect by virtue of paragraph (a) of that subsection in relation to any period during which there is operative an election that her liability in respect of primary Class 1 contributions shall be a liability to contribute at a reduced rate.
(4)The power to prescribe a rate conferred by subsection (2)(a) includes power to prescribe a nil rate.
Textual Amendments
Modifications etc. (not altering text)
Commencement Information
Marginal Citations
[Effect of reduced contributions and rebates on social security benefitsE+W+S
48AAdditional pension and other benefitsE+W+S
(1)[In relation to—
(a)any tax week falling before the first abolition date where the amount of a Class 1 contribution attributable to section 8(1)(a) of the Social Security Contributions and Benefits Act 1992 in respect of the earnings paid to or for the benefit of an earner in that week was reduced under section 42A of this Act (as it then had effect),
(b)any tax week falling before the second abolition date where the amount of a Class 1 contribution attributable to section 8(1)(a) of the Social Security Contributions and Benefits Act 1992 in respect of the earnings paid to or for the benefit of an earner in that week was reduced under section 41 of this Act (as it then had effect), or
(c)any tax week falling before the first abolition date where an amount was paid under section 45(1) of this Act (as it then had effect) in respect of the earnings paid to or for the benefit of an earner,]
section 44(6) of the Social Security Contributions and Benefits Act 1992 (earnings factors for additional pension) shall have effect, except in prescribed circumstances, as if no [such] primary Class 1 contributions had been paid or treated as paid upon those earnings for that week and section 45A of that Act did not apply (where it would, apart from this subsection, apply).
(2)Where the whole or part of a contributions equivalent premium has been paid or treated as paid in respect of the earner, the Secretary of State may make a determination reducing or eliminating the application of subsection (1).
(3)Subsection (1) is subject to regulations under paragraph 5(3A) to (3E) of Schedule 2.
(4)Regulations may, so far as is required for the purpose of providing entitlement to additional pension (such as is mentioned in section 44(3)(b) of the Social Security Contributions and Benefits Act 1992) but to the extent only that the amount of additional pension is attributable to provision made by regulations under section 45(5) of that Act, disapply subsection (1).
(5)In relation to earners where, by virtue of subsection (1), section 44(6) of the Social Security Contributions and Benefits Act 1992 has effect, in any tax year, as mentioned in that subsection in relation to some but not all of their earnings, regulations may modify the application of section 44(5) [or (5A)] of that Act.]
Textual Amendments
Modifications etc. (not altering text)
[Women, married women and widows]E+W+S
49Women, married women and widows. E+W+S
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .