Social Security Pensions Act 1975

32 Contracted-out schemes. E+W+S

(1) An occupational pension scheme is a contracted-out scheme in relation to an earner’s employment if it is for the time being specified in a contracting-out certificate as a scheme by reference to which that employment is contracted-out employment; and references to the contracting-out of a scheme are references to its inclusion in a certificate as aforesaid.

(2) Subject to the provisions of this section, an occupational pension scheme can be contracted-out in relation to an earner’s employment only if—

(a) it complies in all respects with sections 33 to 41 below in respect of [F1 guaranteed minimum pensions] for the earner and his widow and of the other matters there mentioned or, in such cases or classes of case as may be prescribed, with those sections as modified by regulations; and

(b) the rules of the scheme applying to the [F1 guaranteed minimum pensions] are framed so as to comply with the requirements of any regulations prescribing the form and content of rules of contracted-out schemes and with such other requirements as to form and content (not inconsistent with regulations) as may be imposed by the Occupational Pensions Board as a condition of contracting-out, either generally or in relation to a particular scheme.

[F2 or it satisfies subsection (2A) below.]

[F3 (2A) An occupational pension scheme satisfies this subsection only if—

(a) the requirements imposed by or by virtue of Schedule 1 to the Social Security Act 1986, modified under sub-section (2B) below, are satisfied in its case;

(b) it complies with section 40(1) below; and

(c) the rules of the scheme applying to protected rights are framed so as to comply with the requirements of any regulations prescribing the form and content of rules of contracted-out schemes and with such other requirements as to form and content (not inconsistent with regulations) as may be imposed by the Occupational Pensions Board as a condition of contracting-out, either generally or in relation to a particular scheme.

(2B) The modifications of Schedule 1 are—

(a) that for the references to a personal pension scheme there shall be substituted references to an occupational pension scheme;

(b) that for the references in paragraph 5 to minimum contributions there shall be substituted references to minimum payments and any payments by the Secretary of State under section 7 of the Social Security Act 1986;

(c) that for paragraph 7(2) there shall be substituted—

“(2) The rules of the scheme may provide that a member’s protected rights are his rights under the scheme which derive from the payment of minimum payments (within the meaning of the Social Security Pensions Act 1975) together with any payments by the Secretary of State to the scheme under section 7 of this Act in respect of the member and any rights of the member to money purchase benefits which derive from protected rights (within the meaning of the Social Security Pensions Act 1975) under another occupational pension scheme or protected rights under a personal pension scheme which have been the subject of a transfer payment and such other rights as may be prescribed.”

(d) that in paragraph 9—

(i) for the reference to an occupational pension scheme there shall be substituted a reference to a personal pension scheme; . . . F4

(ii) for the reference to a personal pension protected rights premium there shall be substituted a reference to a contracted-out protected rights premium; and

[F5 (iii) for the references in sub-paragraphs (3)(a) and 7(a)(i) to the date on which the member attains pensionable age there shall be substituted a reference to a date not earlier than that on which he attains the age of 60 nor later than that on which he attains the age of 65; and]

(e) that paragraph 10 shall not apply to public service pension schemes.

(2C) A contracting-out certificate shall state whether the scheme is contracted-out by virtue of subsection (2) or subsection (2A) above; and where a scheme satisfies both of those subsections the employers, in their application for a certificate, shall specify one of the subsections as the subsection by virtue of which they desire the scheme to be contracted-out.

(2D) A scheme which has been contracted-out by virtue of one of those subsections may not become contracted-out by reason of the other, except in prescribed circumstances.]

(3) Where by any provision of this Part of this Act the contracting-out of a scheme in relation to an employment depends on the satisfaction of a particular condition, continued contracting-out of the scheme shall be dependent on continued satisfaction of the condition; and if the condition ceases to be satisfied, that shall be a ground (without prejudice to any other) for the cancellation or variation of the contracting-out certificate.

(4) A contracting-out certificate in respect of any employment may be withheld or cancelled by the Occupational Pensions Board notwithstanding that the relevant scheme is one that they would otherwise treat as proper to be contracted-out in relation to all earners in that employment if the Board consider that there are circumstances . . . F6 which make it inexpedient that the employment should be or, as the case may be, continue to be, contracted-out employment by reference to the scheme.

(5) Where in relation to an earner’s employment there are in force two or more occupational pension schemes none of which can by itself be a contracted-out scheme, the Board may if they think fit treat them for contracting-out purposes as a single scheme.

(6) It is hereby declared that nothing in this Part of this Act precludes an occupational pension scheme from providing benefits that are more favourable than those required for contracting-out purposes.

[F7 (7) An occupational pension scheme which—

(a) at any time before the coming into operation of the first regulations made under paragraph (a) of subsection (2) above did not satisfy that paragraph; but

(b) would have satisfied it if those regulations had then been in operation;

shall, for the purpose of determining whether the scheme satisfied that paragraph, be treated as if those regulations had been in operation at that time.]

Textual Amendments

F1 Words substituted (with effect from 1.11.1986) by Social Security Act 1986 (c. 50), Sch. 10, para. 16(a).

F2 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 5(a)

F3 S. 32(2A)–(2D) inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 5(b)

F4 Word repealed (with effect from 13.7.1990) by Social Security Act 1990 (c. 27), Sch. 7

F5 S. 32(2B)(d)(iii) inserted by Social Security Act 1990 (c. 27), Sch. 4, para. 6(1), with effect from 17.5.1990 by virtue of para. 6(2) Social Security Act 1990.

F6 Words repealed by Social Security Act 1986 (c. 50), Sch. 10, para. 16(b)

F7 S. 32(7) added by Social Security and Housing Benefits Act 1982 (c. 24), Sch. 4, para. 20

Modifications etc. (not altering text)

C1 S. 32(2) has effect (with effect from 27.7.1987) in relation to personal pension schemes as modified by S.I. 1987/1116, reg. 3(1)

C2 S. 32(2)(a) to be construed (with effect from 6.4.1988) as if reference to “widow” included reference to widower (and with consequential modification) by virtue of Social Security Act 1986 (c. 50), s. 9(4)(b).