Social Security Pensions Act 1975 (c. 60)

Part III E+W+S Contracting-Out

Modifications etc. (not altering text)

C1 Parts of Pt. III are modified, on transfers from contracted-out schemes, by reg. 3 of, and Sch. 3 to S.I. 1985/1323.

State scheme premiums E+W+S

42 Premium on termination of contracted-out employment. E+W+S

(1) This section has effect as to the cases in which [F1 the prescribed person] may pay a state scheme premium where—

(a) the earner’s service in contracted-out employment by reference to an occupational pension scheme [F2 which is not a money purchase contracted-out scheme] is terminated before he attains the scheme’s normal pension age or (if earlier) the end of the tax year preceding that in which he attains pensionable age; and

(b) he has served for less than [F3 two] years in contracted-out employment by reference to the scheme;

and a premium under this section may be referred to as a “contributions equivalent premium”.

(2) If—

(a) the earner’s service is terminated in any way except by his death or by the scheme’s ceasing to be contracted-out; and

(b) his period of service is not one in respect of which the scheme conforms to the appropriate extent with the preservation requirements of Part II of the M1 Social Security Act 1973,

[F4 the prescribed person] may elect to pay a contributions equivalent premium with a view to extinguishing the earner’s accrued rights to guaranteed minimum pensions under the scheme.

(3) If the earner’s service is terminated by his death and he dies leaving a widow, [F4 the prescribed person] may elect to pay a contributions equivalent premium with a view to extinguishing any such accrued rights in respect of the widow.

Textual Amendments

F1 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

F2 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 6(1)(f)

F3 Word substituted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50) Sch. 10, para. 21

F4 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

Marginal Citations

M1 1973 c. 38.

43 Premium under section 42: additional provisions. E+W+S

(1) The amount of a contributions equivalent premium shall be the equivalent, as certified by the Secretary of State, of the amount by which the Class 1 contributions payable in respect of the earner’s employment in contracted-out employment by reference to the scheme have fallen short of what would have been payable if the employment had not been contracted-out; and in certifying any amount under this section the Secretary of State may make such adjustments as he thinks necessary for avoiding fractional amounts.

[F5 (1A) Where an earner’s earnings paid in any period—

(a) exceeded the lower earnings limit; but

(b) were not such as that primary Class 1 contributions within Bracket 3 fell to be paid in respect of them,

it shall be assumed for the purposes of subsection (1) above that his earnings paid in that period were such that, taking the rate specified in Bracket 3 as the appropriate rate, the same amount of primary Class 1 contributions fell to be paid in respect of them as in fact fell to be paid in respect of them.]

[F6 (1B) Where the amount of a person’s earnings for any period (whether before or after the passing of this Act is relevant for any purpose of subsection (1) or (1A) above and the Secretary of State is satisfied that records of those earnings have not been maintained or retained or are otherwise unobtainable, he may for that purpose—

(a) compute, in such manner as he thinks fit, an amount which shall be regarded as the amount of those earnings; or

(b) take their amount to be such sum as he may specify in the particular case.

(1C) Where—

(a) the Secretary of State subsequently ascertains the amount of those earnings, and

(b) it appears to him that the amount of the premium would have been different if he had not made the calculation of the basis described in subsection (1A) above,

he shall refund to the prescribed person the amount by which it would have been less or, as the case may be, the prescribed person shall pay to the Secretary of State the amount by which it would have been more.]

(2) Where under the rules of the scheme transfer credits have been allowed in respect of the earner’s accrued rights under another scheme, the references in section 42(1), and in subsection (1) above, to contracted-out employment by reference to the scheme shall include references to employment in any period of linked qualifying service which was contracted-out employment by reference to the other scheme.

[F7 (2A) [F8 Subject to subsection (2B) below] for the purposes of this Act any period of an earner’s service in an employment is linked qualifying service in relation to a later period of service (whether in the same or another employment) if—

[F9 (a) under the rules of a scheme applying to him in the earlier period of service—

(i) there was made a transfer of his accrued rights under that scheme to another scheme applying to him in the later period of service; or

(ii) those rights were secured by a policy of insurance or an annuity contract and were subsequently transferred to another scheme applying to him in the later period of service;][F10 and]

(b) in consequence of [F11 [F12 the transfer of] his accrued rights to the second scheme], there are (or were) allowed to him transfer credits under the rules of that other scheme.

except that, for any service to be taken into account as linked qualifying service, it must be actual service and no regard shall be had to any scheme rule which provides for service to be treated for any purposes of benefit or otherwise as longer or shorter than it actually was.]

[F13 (2B) Only so much of the earlier period as is a period of service in respect of which there accrued under the first scheme any of the rights transferred to the second scheme shall be linked qualifying service in relation to the later period of service.]

(3) For the purposes of section 42(2), a scheme conforms to the appropriate extent with the preservation requirements of Part II of the M2 Social Security Act 1973 if—

(a) it entitles the earner to short service benefit within the meaning of those requirements; or

(b) it makes any provision which under those requirements is permitted as an alternative to short service benefit (other than provision for return of contributions or for benefit in the form of a lump sum).

(4) Except in such cases as may be prescribed, [F14 the prescribed person] shall not, in making or abstaining from making elections under section 42(2) or (3), discriminate between different earners on any grounds other than their respective lengths of relevant service; and if the Occupational Pensions Board consider that [F14 the prescribed person] is contravening this subsection, they may cancel any contracting-out certificate held by [F14 the earner’s employer] in respect of the scheme in question.

(5) In subsection (4) above “relevant service” means service in contracted-out employment by reference to the scheme, together with any service in contracted-out employment which in relation to service in that employment is linked qualifying service.

(6) An election by [F14 the prescribed person] under section 42(2) or (3) must be made within the prescribed period in the prescribed manner; and where [F14 the prescribed person] elects to pay a premium in respect of an earner, he shall pay it to the Secretary of State within the prescribed period.

(7) Payment of a premium under section 42(2) shall operate to extinguish the earner’s accrued rights to guaranteed minimum pensions under the scheme; and payment of a premium under section 42(3) shall operate to extinguish any right to guaranteed minimum pension in respect of the widow.

(8) Subject to regulations made under paragraph 1 of Schedule 2 to this Act, an employment which is terminated by the death of the employer shall be treated for the purposes of section 42 as terminated immediately before the death.

Textual Amendments

F5 S. 43(1A) inserted by Social Security Act 1985 (c. 53), Sch. 5, para. 26

F6 S. 43(1B) and (1C) inserted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 9(1)

F7 S. 43(2A) inserted by Health and Social Security Act 1984 (c. 48), Sch. 7, para. 4

F8 Words inserted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 9(2)

F9 S. 43(2A)(a) substituted by Social Security Act 1986 (c. 50), Sch. 10, para. 22(a)

F10 Word inserted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 7, para. 21

F11 Words substituted by Social Security Act 1986 (c. 50), Sch. 10, para. 22(b)

F12 Words substituted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 7, para. 21

F13 S. 43(2B) inserted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 9(2)

F14 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

Modifications etc. (not altering text)

C2 S. 43(1A) shall not apply to any period after the end of the tax year 1986/87 (Social Security Act 1986 (c. 50), Sch. 8 para. 9.)

Marginal Citations

M2 1973 c. 38.

44 Premium on termination of contracted-out scheme. E+W+S

(1) In the case of an occupational pension scheme [F15 which is not a money purchase contracted-out scheme] which is [F16 or has been] contracted-out, the Occupational Pensions Board may, for the event of [F16 , or in connection with,] its ceasing to be contracted-out, approve any arrangements made or to be made in relation to the scheme, or for its purposes, for the preservation or transfer—

(a) of earners’ accrued rights to guaranteed minimum pensions under the scheme;

(b) of the liability for the payment of guaranteed minimum pensions thereunder in respect of persons who have then become entitled to receive them.

[F17 (1A) Regulations may provide that any provision of this Part of this Act shall have effect where the Occupational Pensions Board have approved arrangements under subsection (1) above subject to such modifications as may be specified in the regulations.

(1B) Any such regulations shall have effect in relation to arrangements whenever approved, unless they provide that they are only to have effect in relation to arrangements approved after they come into force.]

[F18 (1C) If the scheme ceases to be a contracted-out scheme (whether by being wound up or otherwise) and the Occupational Pensions Board either—

(a) have withdrawn their approval of previously approved arrangements relating to it; or

(b) have declined to approve arrangements relating to it,

the Board may issue a certificate to that effect.

(1D) A certificate issued under subsection (1C)(a) or (b) above shall be cancelled by the Board if they subsequently approve the arrangements.]

(2) If the scheme ceases to be a contracted-out scheme (whether by being wound up or otherwise) then—

(a) in respect of each earner whose accrued rights to guaranteed minimum pensions under the scheme are not subject to approved arrangements [F19 and have not been disposed of so as to discharge the trustees or managers of the scheme under [F20 section 52C of or] paragraph 16 of Schedule 1A to this Act]; and

(b) in respect of each person who has then become entitled to receive a guaranteed minimum pension under the scheme and whose guaranteed minimum pension rights are not [F21 subject to approved arrangements],

a state scheme premium shall be payable by the prescribed person.

(3) A premium under subsection (2)(a) above may be referred to as an “accrued rights premium”; and a premium under subsection (2)(b) may be referred to as a “pensioner’s rights premium”; and in each case the premium shall be paid within the prescribed period to the Secretary of State.

(4) For the purposes of subsection (2) above, an earner’s accrued rights or, as the case may be, a person’s guaranteed minimum pension rights are subject to approved arrangements if (either before or after the scheme ceased to be contracted-out) the Occupational Pensions Board have approved arrangements under subsection (1) above which operate as respects him and the rights in question, and have not since withdrawn their approval.

(5) [F22 Subject to subsection (5A) below, the amount]—

(a) of an accrued rights premium shall be the cost (as certified by the Secretary of State) of providing guaranteed minimum pensions for the earner and his widow in accordance with his accrued rights under the scheme; and

(b) of a pensioner’s rights premium shall be the cost (as so certified) of providing or continuing to provide any guaranteed minimum pension thereunder, whether for the earner (or former earner) or for his widow.

[F23 (5A) Where, in calculating the costs referred to in subsection (5) above, the Secretary of State cannot readily ascertain the amount of any earnings in a tax week, he may for the purpose of calculating those costs—

(a) compute, in such manner as he thinks fit, an amount which shall be regarded as the amount of those earnings, or

(b) take their amount to be such sum as he may specify in the particular case,

and he may certify the costs accordingly.]

[F24 (5B) Where—

(a) the Secretary of State subsequently ascertains the amount of those earnings; and

(b) it appears to him that the amount of the premium would have been [F25 different] if he had not made the calculation on the basis described in subsection (5A) above,

he shall refund to the prescribed person the amount by which it would have been less [F26 or, as the case may be, the prescribed person shall pay to the Secretary of State the amount by which it would have been more.]]

[F27 (6) In determining the amount of any state scheme premium payable under this section where one or more of the five tax years ending with the tax year in which the scheme ceases to be contracted-out is a relevant year in relation to the earner, the costs referred to in subsection (5)(a) and (b) above shall, unless the person liable for the premium elects in the prescribed manner that this subsection shall not apply, be calculated as follows—

[F28 (a) any relevant earnings factor shall be taken to be that factor as increased by the last order under [F29 section 148 of the Administration Act] to come into force before those five tax years; and]

(b) any relevant earnings factor derived from contributions in respect of any year (hereafter in this subsection referred to as “the relevant contributions year”) shall be treated as increased by 12 per cent. compound for each of those five tax years, other than any of those years which—

(i) constitutes or begins before the relevant contributions year, or

(ii) begins after the final relevant year in relation to the earner;

and in this subsection “relevant year” and “final relevant year” have the same meanings as in section 35 above and references to the earner shall be construed as references to the earner in respect of whom or, as the case may be, in respect of whose widow the premium in question has become payable.]

(7) In calculating those costs, the Secretary of State shall apply whichever of the prescribed actuarial tables (as in force at the time when the scheme ceases to be contracted-out) is applicable in accordance with the regulations prescribing the tables.

(8) In certifying any amount under subsection (5) above, the Secretary of State may make such adjustments as he thinks necessary for avoiding fractional amounts.

(9) Payment of an accrued rights premium shall extinguish the earner’s accrued rights to guaranteed minimum pensions under the scheme; and payment of a pensioner’s rights premium shall extinguish any right to receive guaranteed minimum pensions thereunder, whether for the earner (or former earner) or for his widow.

[F30 (10) Any reference to earners in this section includes, in relation to any particular time, not only a reference to earners who are in employment at that time but also a reference to earners who are not in employment at that time but who have been in employment before it or will be in employment after it.]

Textual Amendments

F15 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 10, para. 6(1)(f)

F16 Words inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(1)

F17 S. 44(1A)(1B) inserted by Health and Social Security Act 1984 (c. 48), s. 19(2)(a)

F18 S. 44(1C)(1D) inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(2)

F19 Words inserted by Social Security Act 1985 (c. 53), Sch. 5, para. 27(a)

F20 Words inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(3)

F21 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 27(b)

F22 Words substituted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(4)

F23 S. 44(5A) substituted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 10(1)

F24 S. 44(5B) inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(5)

F25 Word substituted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 10(2)(a)

F26 Words added (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 10(2)(b).

F27 S. 44(6) substituted by Social Security Act 1980 (c. 30), s. 3(8)

F28 S. 44(6)(a) substituted by Social Security Act 1985 (c. 53), Sch, 3, paras. 4 and 7 with effect from 6.4.1979

F29 Words substituted (with effect from 1.7.1992) by Social Security (Consequential Provisions) Act 1992 (c. 6), Sch. 2, para 31

F30 S. 44(10) inserted by Health and Social Security Act 1984 (c. 48), s. 19(2)(b)

Modifications etc. (not altering text)

C3 S. 44(1)(b) to be construed (with effect from 6.4.1988) as if reference to a person entitled to receive a guaranteed minimum pension includes earner's widower by virtue of, and only in cases prescribed under, Social Security Act 1986 (c. 50), s. 9(6); construction amplified in S.I. 1984/380, reg. 33D.

C4 S. 44(2)(b) to be construed (with effect from 6.4.1988) as if reference to a person entitled to receive a guaranteed minimum pension includes earner's widower by virtue of, and only in cases prescribed under, Social Security Act 1986 (c. 50), s.9(6); construction amplified in S.I. 1984/380, reg. 33D

C5 References in s. 44(5) to “widow” to be construed (with effect from 6.4.1988) as including references to earner's widower by virtue of, and only cases prescribed under, Social Security Act 1986 (c. 50), s. 9(6)

C6 Power to modify s. 44(6) conferred by Social Security (Miscellaneous Provisions) Act 1977 (c. 5), s. 22(13)

C7 S. 44(6) modified, in cases of limited revaluation in respect of certain schemes ceasing to contract out, by S.I. 1984/380, reg. 47

C8 S. 44(6)(a) modified, for certain transfers of guaranteed minimum pension rights, by S.I. 1984/380, reg. 44(d)

C9 S. 44(6)(a) modified, for payments transferring protected rights to schemes which are or were salary related contracted-out schemes where minimum contributions have been paid, by reg. 4(8)(a) of S.I. 1987/1118 with effect from 27.7.1987. for personal pension schemes and 6.4.1988 otherwise

C10 S. 44(9) to be construed (with effect from 6.4.1988) as if reference to “widow” included reference to widower (and with consequential modifications) by virtue of Social Security Act 1986 (c. 50), s.9(4)(g).

[F31 44ZA Money purchase schemes; contracted-out protected rights premium. E+W+S

(1) In the case of a scheme which is or has been a money purchase contracted-out scheme the Occupational Pensions Board may, for the event of, or in connection with, its ceasing to be contracted-out, approve any arrangements made or to be made in relation to the scheme, or for its purposes, for the preservation or transfer of protected rights under the scheme.

(2) If the scheme ceases to be a contracted-out scheme (whether by being wound up or otherwise) and the Occupational Pensions Board either—

(a) have withdrawn their approval of previously approved arrangements relating to it; or

(b) have declined to approve arrangements relating to it,

the Board may issue a certificate to that effect.

(3) A certificate issued under subsection (2)(a) or (b) above shall be cancelled by the Board if they subsequently approve the arrangements.

(4) If the scheme ceases to be a contracted-out scheme (whether by being wound up or otherwise), a state scheme premium shall be payable, except in prescribed circumstances—

(a) in respect of each earner whose protected rights under the scheme are not subject to approved arrangements and have not been disposed of so as to discharge the trustees or managers of the scheme under section 52C of or paragraph 16 of Schedule 1A to this Act; and

(b) in respect of each person who has become entitled to receive a pension under the scheme giving effect to protected rights which are not subject to approved arrangements

(5) A premium under subsection (4) above may be referred to as a “contracted-out protected rights premium”.

(6) A contracted-out protected rights premium shall be paid by the prescribed person, within the prescribed period, to the Secretary of State.

(7) The amount of a contracted-out protected rights premium payable in respect of any person shall be the cash equivalent of the protected rights in question, calculated and verified in the prescribed manner.

(8) Where a contracted-out protected rights premium is paid in respect of a person—

(a) the rights whose cash equivalent is included in the premium shall be extinguished; and

(b) section 29(2) and (2A) above and section 4 of the Social Security Act 1986 shall have effect in relation to that person and a widow or widower of that person as if any guaranteed minimum pension to which that person or any such widow or widower is treated as entitled under those provisions and which derives from the minimum payments, minimum contributions (within the meaning of the Social Security Act 1986) or transfer payment or payments from which those rights derive were reduced by the appropriate percentage.

(9) In subsection (8) above “the appropriate percentage” means, subject to the following provisions of this section,

where—

(a) X = the amount of the premium together with, if the person in respect of whom it fails to be paid gives notice to the prescribed person within the prescribed period—

(i) the cash equivalent, calculated and verified in the prescribed manner, and paid to the Secretary of State within the prescribed period, of any other rights which he has under the scheme and specifies in the notice; and

(ii) the amount of any voluntary contribution paid to the Secretary of State within the prescribed period by, or in respect of, the person concerned; and

(b) Y = the cost of providing any guaranteed minimum pension such as is mentioned in subsection (8) above.

(10) If the appropriate percentage, as calculated under subsection (9) above would fall between two whole numbers, it is to be taken to be the lower number.

(11) If it would be over 100, it is to be taken to be 100.

(12) The remainder after the reduction for which subsection (8) above provides—

(a) if it would contain a fraction of 1p, is to be treated as the nearest lower whole number of pence; and

(b) if it would be less than a prescribed amount, is to be treated as nil.

(13) The power to make regulations conferred by subsections (7) and (9) above includes power to provide that cash equivalents are to be calculated and verified in such manner as may be approved in particular cases—

(a) by prescribed persons;

(b) by persons with prescribed professional qualifications or experience; or

(c) by persons approved by the Secretary of State,

and power to provide that they shall be calculated and verified in accordance with guidance prepared by a prescribed body.

(14) The cost of providing the appropriate percentage of the guaranteed minimum pension shall be certified by the Secretary of State, and in calculating and certifying it the Secretary of State—

(a) shall apply whichever of the prescribed actuarial tables (as in force at the time when the scheme ceases to be appropriate) is applicable in accordance with the regulations prescribing the tables; and

(b) may make such adjustments as he thinks necessary for avoiding fractional amounts.]

Textual Amendments

F31 S. 44ZA inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 7

Modifications etc. (not altering text)

C11 S. 44ZA(4)(a)(b)(7) modified (with effect from 6.4.1988), in certain cases where part of a premium is treated as having been paid, by reg. 23A (10)(b) of S.I. 1984/380

C12 S. 44ZA(8)(9)(a) modified (with effect from 6.4.1988), where part of a premium is treated as having been paid, by reg. 23A(10)(a) of S.I. 1984/380

[F32 44A Transfer premiums. E+W+S

(1) The Secretary of State may by regulations provide that, in such cases and subject to such conditions as may be prescribed, if—

(a) an earner in employment to which an occupational pension scheme [F33 which is not a money purchase contracted-out scheme] applies has ceased, whether before or after the commencement of this section, to be in that employment before attaining normal pension age; and

(b) there has been a transfer from that scheme to another scheme of his accrued rights . . . F34 other than his accrued rights to his and his widow’s guaranteed minimum pensions; and

[F35 (c) the scheme to which his accrued rights are transferred is neither a contracted-out scheme nor one which was formerly contracted-out and in respect of which the Occupational Pensions Board have duties under section 49 below at the time of the transfer; and]

(d) no accrued rights premium is payable in respect of the earner; and

(e) the circumstances in which by virtue of section 42(1)(a) and (b) above a contributions equivalent premium is payable do not exist,

a state scheme premium may be paid to the Secretary of State by the prescribed person within a prescribed time after the prescribed event.

(2) A premium under subsection (1) above may be referred to as a “transfer premium”.

(3) The amount of a transfer premium shall be determined in the manner in which the amount of an accrued rights premium falls to be determined under section 44 above, except that—

(a) subsection (6) shall be disregarded; and

(b) the Secretary of State shall apply the actuarial table prescribed for the purpose of calculating the amount of an accrued rights premium in such manner as may be prescribed.

(4) Payment of a transfer premium shall extinguish the earner’s accrued rights to guaranteed minimum pensions under the scheme from which his other accrued rights . . . F36 have been transferred.]

Textual Amendments

F32 S. 44A inserted by Social Security Act 1985 (c. 53), Sch. 1, para. 1

F33 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 6(1)(g)

F34 Words repealed by Social Security Act 1986 (c. 50), Sch. 11

F35 S. 44A(1)(c) substituted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 11.

F36 Words repealed by Social Security Act 1986 (c. 50), Sch. 11.

45 Premium where guaranteed minimum pension excluded from full revaluation. E+W+S

(1) Where an earner’s service in contracted-out employment by reference to an occupational pension scheme [F37 which is not a money purchase contracted-out scheme] is terminated before he attains [F38 pensionable age] and the weekly rate of the guaranteed minimum pensions to which he has accrued rights under the scheme will fall to be determined in accordance with provisions included in the scheme by virtue of section 35(7) above, then, unless either—

(a) a state scheme premium is payable in respect of him under section 42 or 44 above, or

(b) those provisions conform with such additional requirements as may be prescribed,

[F39 the prescribed person] shall in respect of the earner pay a state scheme premium (which may be referred to as a “limited revaluation premium”).

(2) Such a premium shall be paid to the Secretary of State within the prescribed period; and its amount shall be the difference, as certified by the Secretary of State, between the cost of providing the guaranteed minimum pensions in accordance with the provisions included in the scheme by virtue of the said section 35(7) and what would have been the cost of providing them if no such provision had been included.

(3) Where a state scheme premium is payable in respect of an earner under this section, and the case is one in which his service in contracted-out employment is terminated in consequence of the relevant scheme ceasing to be contracted-out, the costs referred to in subsection (2) above shall, [F40 . . . F41 be calculated as follows—

[F42 (a) any earnings factor shall be taken to be that factor as increased by the last order under [F43 section 148 of the Administration Act]to come into force before the five tax years ending with the tax year in which the scheme ceases to be contracted-out; and]

(b) any relevant earnings factor derived from [F44 earnings upon which primary Class 1 contributions have been paid or treated as paid] in respect of any year (hereafter in this subsection referred to as “the relevant contributions year”) shall be treated as increased by 12 per cent. compound for each of those five tax years, other than any of those years which constitutes or begins before the relevant contributions year][F45 but this subsection shall not apply in any case where its application would result in the amount of the premium being greater than it would have been apart from this subsection.]

(4) In calculating the costs referred to in subsection (2) above the Secretary of State shall apply whichever of the prescribed actuarial tables (as in force at the time when the earner’s service in contracted-out employment is terminated) is applicable in accordance with the regulations prescribing the tables; and—

(a) the tables shall be so framed as to embody the assumption that the increase of weekly equivalent required by section 35(7) is 5 per cent. compound for each relevant year after that in which the earner’s service is terminated; and

(b) that assumption shall prevail over any different provision made by the scheme.

(5) In certifying any amount under subsection (2) above the Secretary of State may make such adjustments as he thinks necessary for avoiding fractional amounts.

(6) References in this section to the termination of an earner’s employment do not include references to its termination by his death; and, subject to regulations made under paragraph 1 of Schedule 2 to this Act, an employment which is terminated by the death of the employer shall be treated for the purposes of this section as terminated immediately before the death.

Textual Amendments

F37 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 6(1)(h)

F38 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

F39 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

F40 Words substituted by Social Security Act 1980 (c. 30), s. 3(9)

F41 Words repealed (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 12(a) and Sch. 9

F42 S. 45(3)(a) substituted by Social Security Act 1985 (c. 53), Sch. 3, paras. 5 and 7 with effect from 6.4.1979

F43 Words substituted (with effect from 1.7.1992) by Social Security (Consequential Provisions) Act 1992 (c. 6), Sch. 2, para. 30

F44 Words substituted (with effect from 6.4.1987) by Social Security Act 1986 (c. 50), Sch. 8, para. 10

F45 Words added (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 12(b)

Modifications etc. (not altering text)

C13 S. 45(1) extended to certain transfers of guaranteed minimum pension rights by S.I. 1984/380, reg. 44(e)

C14 S. 45(1) modified, where guaranteed minimum pension rights have been transferred from schemes which are or were contracted-out salary related schemes, by S.I. 1985/1323, Sch. 3, para. 6(a)–(d), with effect from 23.9.1985

C15 S. 45(1) modified, for payments transferring protected rights to schemes which are or were salary related contracted-out schemes, by reg. 4(9) of S.I. 1987/1118 with effect from 27.7.1987 for personal pension schemes and 6.4.1988 otherwise

C16 S. 45(3) modified, for certain transfers of guaranteed minimum pension rights by S.I. 1984/380, reg. 44(e)

C17 S. 45(3) modified, where guaranteed minimum pension rights have been transferred from schemes which are or were contracted-out salary related schemes, by S.I. 1985/1323, Sch. 3, para. 6(a) and (e), with effect from 23.8.1985

C18 S. 45(3)(a) modified, for payments transferring protected rights to schemes which are or were salary related contracted-out schemes where minimum contributions have been paid, by reg. 4(8)(b) of S.I. 1987/1118 with effect from 27.7.1987 for personal pension schemes and 6.4.88 otherwise

46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F46 E+W+S

Textual Amendments

F46 S. 46 repealed by Social Security Act 1986 (c. 50), Sch. 11 (and expressed to be repealed (7.2.1994) by 1993 c. 48, s. 188, Sch. 5 Pt. I; S.I. 1994/86, art. 2)

47 Deduction of premium from refund of contributions. E+W+S

(1) Where an earner’s service in contracted-out employment is terminated and—

(a) he (or by virtue of a connection with him, any other person) is entitled to a refund of any payments made by or in respect of him for the purposes of the relevant scheme towards the provision of benefits under the scheme; and

(b) a [F47 contributions equivalent premium] falls to be paid by any person in respect of him under this Part of this Act,

then, subject to the provisions of this section, the person by whom the premium falls to be paid shall be entitled on paying it to recover the certified amount (and on paying any part of it to recover a proportionate part of the certified amount) from the person liable for the refund.

(2) For the purposes of this section the certified amount in relation to a premium paid in respect of any person who is or was an earner or whose husband was an earner shall be such amount as may be certified by the Secretary of State as the amount by which the primary Class 1 contributions payable in respect of the earner’s employment in—

(a) contracted-out employment by reference to the relevant scheme; and

(b) employment in any period of linked qualifying service which was contracted-out employment by reference to another scheme,

have fallen short of what would have been payable if the employment or employments had not been contracted-out; and in certifying any amount under this subsection the Secretary of State may make such adjustments as he thinks necessary for avoiding fractional amounts.

[F48 (2A) Where an earner’s earnings paid in any period—

(a) exceeded the lower earnings limit; but

(b) were not such that primary Class 1 contributions within Bracket 3 fell to be paid in respect of them,

it shall be assumed for the purposes of subsection (2) above that his earnings paid in that period were such that, taking the rate specified in Bracket 3 as the appropriate rate, the same amount of primary Class 1 contributions fell to be paid in respect of them as in fact fell to be paid in respect of them.]

(3) The amount recoverable under this section shall not exceed the amount of the refund or so much of it as has not been made.

(4) Where the period taken into account in arriving at the certified amount does not coincide with that in respect of which the refund is to be made, the sum recoverable under this section shall be determined by reference to so much of that amount and of the refund as are referable to the same period.

(5) The amount which may be recovered under this section in respect of any premium shall be increased by such amount as may be prescribed where the refund—

(a) is made in respect of more than one period of service, and one or more of those periods are periods of previous linked qualifying service; and

(b) includes any amount paid under a contracted-out scheme in relation to that service on or in connection with a transfer of accrued rights to another scheme.

(6) Where the person liable for the premium is himself liable for the refund, he shall be entitled to retain out of the refund the amount which he could recover under this section from another person liable for the refund.

(7) The amount of the refund shall be reduced by any amount recovered or retained under this section; and provision shall be made by regulations for requiring the making of refunds to be delayed for the purpose of enabling any right of recovery or retainer conferred by this section to be exercised, and any provision so made shall have effect notwithstanding anything in any enactment relating to the making of the refund.

(8) Where an earner’s service in contracted-out employment is terminated and—

(a) he (or by virtue of a connection with him any other person) is entitled to a refund of any payments made by or in respect of him under the relevant scheme in relation to any previous contracted-out employment of his, being payments towards the provision of benefits under that scheme; and

(b) a [F47 contributions equivalent premium] falls to be paid in respect of him and the period taken into account in arriving at the certified amount includes the period of the previous contracted-out employment,

then in respect of that premium the person liable for it shall have the like right of recovery from that refund (so far as the premium is not recoverable or retainable out of a refund in respect of a later employment) as a person has under the foregoing provisions of this section where a state scheme premium and a refund fall to be made on the termination of service in the employment in respect of which the refund is made; and subsection (7) above shall apply accordingly.

(9) Notwithstanding any contract to the contrary, a person shall not be entitled to recover any part of a state scheme premium from any earner in respect of whom it is payable or, except in accordance with this section, to recover or retain any part of such a premium out of any money payable to or for the benefit of the earner or any other person.

[F49 (9A) Nothing in subsection (9) above affects—

(a) the right of the trustees or managers of a scheme, in a case where an accrued rights premium or a pensioner’s rights premium has been paid, to reduce the pension of the person in respect of whom the premium has been paid by the amount of his guaranteed minimum pension;

(b) the right of trustees or managers, in a case where a limited revaluation premium has been paid, to recoup it—

(i) out of the resources of the scheme, in so far as they derive from contributions; or

(ii) in prescribed cases, out of payments made to them in respect of an earner’s transfer to their scheme from some other scheme;

(c) the right of trustees or managers, in a case where a state scheme premium has been paid, to make the deduction for which paragraph 13(6) of Schedule 1A to this Act provides when they calculate the cash equivalent to which the earner in respect of whom the premium has been paid has a right under Part II of that Schedule.]

(10) The foregoing provisions of this section shall apply in relation to such a refund as is referred to in subsection (1)(a) above which becomes payable after the termination of an earner’s service in contracted-out employment as they apply to such a refund becoming payable on the termination of an earner’s service in such employment; and where he (or, by virtue of a connection with him, any other person) becomes entitled to any payment in lieu of benefit, those provisions shall apply in relation to the payment as if it were such a refund as is referred to in subsection (1)(a) above.

(11) For the purposes of subsection (10) above, a payment in lieu of benefit is any payment falling to be made to or for the benefit of, or in respect of, a person by virtue of his being or having been a member of an occupational pension scheme, being a payment which either—

(a) is made or to be made otherwise than out of the resources of the scheme; or

(b) is made or to be made out of those resources but by way of distribution on a winding-up; or

(c) falls within such other description of payments as may be prescribed for the purposes of subsection (10) above.

(12) In this section, “the relevant scheme” in relation to any employment means the contracted-out scheme by reference to which that employment is or was contracted-out employment in relation to the earner concerned.

Textual Amendments

F47 Words substituted by Social Security (Miscellaneous Provisions) Act 1977 (c. 5), s. 22(14)

F48 S. 47(2A) inserted by Social Security Act 1985 (c. 53), Sch. 5, para. 29

F49 S. 47(9A) inserted by Social Security Act 1985 (c. 53), Sch. 5, para. 30

Modifications etc. (not altering text)

C19 S. 47(2A) shall not apply to any period after the end of the tax year 1986-87 (Social Security Act 1986 (c. 50), Sch. 8, para. 9)