Social Security Pensions Act 1975

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

(1) In the case of an occupational pension scheme [F1 which is not a money purchase contracted-out scheme] which is [F2 or has been] contracted-out, the Occupational Pensions Board may, for the event of [F2 , 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.

[F3 (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.]

[F4 (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(a) have withdrawn their approval of previously approved arrangements relating to it; or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 [F5 and have not been disposed of so as to discharge the trustees or managers of the scheme under [F6 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 [F7 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) [F8 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.

[F9 (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.]

[F10 (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 [F11 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 [F12 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.]]

[F13 (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—

[F14 (a) any relevant earnings factor shall be taken to be that factor as increased by the last order under [F15 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.

[F16 (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

F1 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 10, para. 6(1)(f)

F2 Words inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(1)

F3 S. 44(1A)(1B) inserted by Health and Social Security Act 1984 (c. 48), s. 19(2)(a)

F4 S. 44(1C)(1D) inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(2)

F5 Words inserted by Social Security Act 1985 (c. 53), Sch. 5, para. 27(a)

F6 Words inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(3)

F7 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 27(b)

F8 Words substituted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(4)

F9 S. 44(5A) substituted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 10(1)

F10 S. 44(5B) inserted by Social Security Act 1986 (c. 50), Sch. 10, para. 23(5)

F11 Word substituted (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 10(2)(a)

F12 Words added (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 10(2)(b).

F13 S. 44(6) substituted by Social Security Act 1980 (c. 30), s. 3(8)

F14 S. 44(6)(a) substituted by Social Security Act 1985 (c. 53), Sch, 3, paras. 4 and 7 with effect from 6.4.1979

F15 Words substituted (with effect from 1.7.1992) by Social Security (Consequential Provisions) Act 1992 (c. 6), Sch. 2, para 31

F16 S. 44(10) inserted by Health and Social Security Act 1984 (c. 48), s. 19(2)(b)

Modifications etc. (not altering text)

C1 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.

C2 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

C3 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)

C4 Power to modify s. 44(6) conferred by Social Security (Miscellaneous Provisions) Act 1977 (c. 5), s. 22(13)

C5 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

C6 S. 44(6)(a) modified, for certain transfers of guaranteed minimum pension rights, by S.I. 1984/380, reg. 44(d)

C7 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

C8 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).