Social Security Pensions Act 1975

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 [F1 which is not a money purchase contracted-out scheme] is terminated before he attains [F2 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,

[F3 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, [F4 . . . F5 be calculated as follows—

[F6 (a) any earnings factor shall be taken to be that factor as increased by the last order under [F7 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 [F8 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][F9 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

F1 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 6(1)(h)

F2 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

F3 Words substituted by Social Security Act 1985 (c. 53), Sch. 5, para. 25

F4 Words substituted by Social Security Act 1980 (c. 30), s. 3(9)

F5 Words repealed (with effect from 1.10.1989) by Social Security Act 1989 (c. 24), Sch. 6, para. 12(a) and Sch. 9

F6 S. 45(3)(a) substituted by Social Security Act 1985 (c. 53), Sch. 3, paras. 5 and 7 with effect from 6.4.1979

F7 Words substituted (with effect from 1.7.1992) by Social Security (Consequential Provisions) Act 1992 (c. 6), Sch. 2, para. 30

F8 Words substituted (with effect from 6.4.1987) by Social Security Act 1986 (c. 50), Sch. 8, para. 10

F9 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)

C1 S. 45(1) extended to certain transfers of guaranteed minimum pension rights by S.I. 1984/380, reg. 44(e)

C2 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

C3 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

C4 S. 45(3) modified, for certain transfers of guaranteed minimum pension rights by S.I. 1984/380, reg. 44(e)

C5 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

C6 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