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Regulations 17 and 18(5)

SCHEDULE 2U.K.DETERMINATION OF ANNUAL AND INITIAL PAYMENTS

IntroductoryU.K.

1.—(1) This Schedule applies for the purposes of determining the amount of an annual payment or of an initial payment payable to or in respect of qualifying members of qualifying pension schemes.

(2) In this Schedule—

[F1“appropriate person” has the meaning given by regulation 2(1) of the FAS Information and Payments Regulations (interpretation);]

F2...

[F3“the crystallisation date” has the same meaning as in paragraphs (6) and (7) of regulation 4 of the Occupational Pension Schemes (Winding Up) Regulations 1996, as those paragraphs were in force on 5th April 2005;]

F4...

F4...

F4...

F5...

“guaranteed minimum pension” has the meaning given in section 8(2) of the 1993 Act;

[F1“relevant information” means any information—

(a)

that is described in any of paragraphs (j) to (l) of the fourth item of the table in paragraph 1(2) of Schedule 1 to the FAS Information and Payments Regulations (information to be provided by appropriate persons);

(b)

that is to be provided by an appropriate person to the scheme manager in accordance with regulation 3(3)(a) of those Regulations; and

(c)

from which the amount of the actual pension or interim pension of a qualifying member, or of a survivor of a qualifying member, may be derived;]

“scheme rules” means the rules of the qualifying pension scheme.

(3) Paragraphs 2 to 5 are subject to paragraphs 6 to 9.

F6(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Actual pensionU.K.

2.—(1) In this Schedule, “actual pension” means, subject to [F7sub-paragraphs (3) and (4)] the annual rate of annuity [F8which has been,] [F9can be] or could have been, purchased for the beneficiary as at the certification date with the assets available to discharge the liability of the scheme to him after that liability has, or had been, determined.

(2) The liability of the scheme to the beneficiary shall be determined for the purposes of sub-paragraph (1)—

(a)in accordance with section 73 of the 1995 Act; or

(b)where that section does not apply, in accordance with the scheme rules.

(3) The annual rate of annuity which [F10has been, can be or could have been] purchased for the beneficiary for the purposes of sub-paragraph (1) with the assets referred to in that sub-paragraph, shall be determined [F11(or, as the case may be, redetermined)]—

[F12(a)where the beneficiary was an active or a deferred member of the qualifying pension scheme [F13on the crystallisation date], on the basis that the sum which will be, or has been, used to discharge the liability of the scheme to him will only be, or has only been, used to purchase an annuity when the qualifying member attains, or attained, his normal retirement age;]

(b)where the beneficiary is a survivor of a member of that scheme, having regard to the annual rate of annuity which will come into payment to him immediately on the purchase of the annuity from the assets of the scheme;

(c)on the basis that benefits payable to survivors F14... are no more generous than provided in relation to pensions under the scheme rules; and

(d)on the basis that there has been no commutation of benefits deriving from the scheme.

(4) Where the scheme manager is satisfied that it is not possible for him to determine the annual rate of annuity for the purposes of sub-paragraph (1) having regard to the information available to him, he shall determine the annual rate of annuity on the basis of the sum which would discharge the liability of the scheme to the beneficiary and to such other matters as he considers relevant.

[F15(5) Where the scheme manager is satisfied that increases have been, are being, or will be made to the annual rate of annuity, and he considers that those increases are not reasonable, he may determine the annual rate of annuity on the basis of the sum which would discharge the liability of the scheme to the beneficiary and of such other matters as he considers relevant.]

Textual Amendments

Qualifying members receiving pensions from the qualifying pension schemeU.K.

[F163.—(1) This paragraph applies to—

(a)a member or former member of a qualifying scheme who—

(i)is a qualifying member under regulation 15(1), and

(ii)was entitled to present payment of a pension under the scheme rules on the crystallisation date; and

(b)a person who is regarded as a qualifying member under regulation 15(5).]

[F17(2) The annual payment payable to a qualifying member to whom this paragraph applies shall be—

F18 .]

(3) In this paragraph, “expected pension” means[F19, subject to sub-paragraph (4),] the annual rate of the pension which would have been in payment to the qualifying member in respect of rights accrued in a qualifying pension scheme as at the certification date if the scheme had not started to wind up.

[F20(4) Where the scheme manager is satisfied that it is not possible for him to determine the annual rate of the pension for the purposes of sub-paragraph (3) having regard to all the information available to him, he shall determine that annual rate, having regard to such matters as he considers relevant.]

Textual Amendments

Active and deferred membersU.K.

4.—(1) This paragraph applies in respect of a qualifying member of a qualifying pension scheme who F21... was an active member or a deferred member of that scheme [F22on the crystallisation date].

[F23(2) The annual payment payable to a qualifying member to whom this paragraph applies shall be—

F18 .]

(3) In sub-paragraph (2), “expected pension” means, subject to [F24sub-paragraphs (3A), (3B) and (4)], the aggregate of—

(a)the annual rate of the pension to which the qualifying member would have been entitled in accordance with the scheme rules had he attained his normal retirement age when the pensionable service relating to the pension ended;

(b)the revaluation amount for the first revaluation period (see sub-paragraphs (5) and (6)); and

(c)the revaluation amount for the second revaluation period (see sub-paragraphs (7) to (11)).

[F25(3A) In a case to which sub-paragraph (13) applies, “expected pension” means, subject to sub-paragraph (4), the aggregate of the amount specified in sub-paragraph (3)(a) and the revaluation amount for the revaluation period specified in sub-paragraph (13).

(3B) In a case where the certification date is on or before the day on which the qualifying member’s pensionable service ended, “expected pension” means, subject to sub-paragraph (4), the amount specified in sub-paragraph (3)(a).]

(4) In any case where the scheme manager is satisfied, having regard to the information available to him, that it is not possible for him to identify any one of the elements in sub-paragraph (3), [F26(3A) or (3B),] he may determine how the annual payment is to be calculated having regard to such matters as he considers relevant.

[F27(5) The first revaluation period is the period—

(a)beginning on the day on which the qualifying member’s pensionable service ended; and

(b)ending on the earlier of—

(i)the day before the day on which the scheme began to wind up; or

(ii)the day from which the qualifying member is entitled to an annual payment in accordance with regulation 17(2)[F28, (3) or (3C) or 17C].]

(6) The revaluation amount for the first revaluation period is the amount by which the annual rate of the pension under sub-paragraph (3)(a) would fall to be revalued—

(a)in relation to any guaranteed minimum pension, in accordance with section 16 of the 1993 Act, having regard to the relevant scheme rules; and

(b)in relation to the remainder of the pension, in accordance with Chapter 2 of Part 4 of the 1993 Act.

[F29(7) The second revaluation period is the period—

(a)beginning on the day after the date determined in accordance with sub-paragraph (5)(b); and

(b)ending on—

(i)the certification date; or

(ii)the day from which the qualifying member is entitled to an annual payment in accordance with regulation 17(2)[F30, (3) or (3C) or 17C],

whichever is the earlier.]

(8) The revaluation amount for the second revaluation period is, subject to sub-paragraph (12)—

(a)where that period is less than one month, nil; or

(b)in any other case, the revaluation percentage of the aggregate of the annual rate of the pension under sub-paragraph (3)(a) and the revaluation amount for the first revaluation period under sub-paragraph (6).

(9) In sub-paragraph (8), “the revaluation percentage” means the lesser of—

(a)the percentage increase in the general level of prices in Great Britain during the second revaluation period determined in accordance with sub-paragraph (7); and

(b)the maximum revaluation rate.

(10) The method for determining the percentage increase in the general level of prices in Great Britain during the second revaluation period is—

where—

A is the level of the retail prices index for the month which falls two months before the month in which the certification date falls;

B is the level of the retail prices index for the month two months before the month during which the relevant qualifying pension scheme began to wind up.

(11) In sub-paragraph (9)(b), “the maximum revaluation rate” in relation to the second revaluation period is—

(a)if that period is a period of 12 months, 5%; or

(b)in any other case, the percentage that would be the percentage mentioned in sub-paragraph (9)(a) had the general level of prices in Great Britain increased at the rate of 5% compound per annum during that period.

(12) In determining the revaluation amount for the second revaluation period in accordance with sub-paragraphs (8) to (11), no revaluation shall be made in respect of any benefits which are not subject to revaluation under the scheme rules.

[F31(13) This sub-paragraph applies to a case where the certification date falls before the day on which the scheme began to wind up, and in such a case—

(a)the revaluation period is the period beginning on the day on which the qualifying member’s pensionable service ended and ending on the certification date; and

(b)the revaluation amount for the period specified in paragraph (a) shall be calculated in accordance with sub-paragraph (6)(a) and (b).]

Textual Amendments

Survivors of qualifying membersU.K.

5.—[F32(1) This paragraph applies where—

(a)immediately before a qualifying pension scheme began to wind up, a qualifying member—

(i)was entitled to present payment of a pension under the scheme rules and that pension was attributable—

(aa)to the member’s pensionable service; or

(bb)(directly or indirectly) to a pension credit to which the member became entitled under section 29(1)(b) of the Welfare Reform and Pensions Act 1999 (creation of pension debits and credits); or

(ii)was an active member or a deferred member of that scheme;

(b)that member dies on or after the day on which the scheme began to wind up; and

(c)that member—

(i)was entitled to an annual payment determined in accordance with this Schedule, or

(ii)would have been entitled to such an annual payment had he not died before he became so entitled.]

(2) The annual payment payable to the survivor of a qualifying member to whom this paragraph applies shall be determined in accordance with sub-paragraph (3) or (6).

[F33(3) Where the qualifying member dies before the date on which the liabilities of the scheme in respect of that member are discharged (whether by entry into an annuity contract or by other means), the annual payment payable to his survivor shall be—

F18]

(4) In sub-paragraph (3), “expected pension” shall, subject to sub-paragraph (5), be determined—

(a)where the qualifying member was entitled to present payment of a pension under the scheme rules [F34on the crystallisation date] in accordance with paragraph 3(3); or

(b)where the qualifying member was an active member or a deferred member of a qualifying pension scheme [F34on the crystallisation date] in accordance with [F35sub-paragraph (7)].

(5) In any case where the scheme manager is satisfied that it is not possible for him to identify either or both elements of the formula in sub-paragraph (3), he may determine how the annual payment is to be calculated having regard to the scheme rules and such other matters as he considers relevant.

(6) Where the qualifying member dies [F36on or after the date on which the liabilities of the scheme in respect of that member were discharged], the annual payment payable to his survivor shall be—

(a)one-half of the annual payment which was payable to that member in accordance with paragraph 3 or 4 immediately before his death; or

(b)where the annual payment was not payable to that member immediately before his death, one-half of the annual payment which would have been payable to him in accordance with [F37paragraph 3 or 4 if—

(i)he had attained [F38normal retirement age] before his death; or

(ii)he had not attained that age, but the scheme manager, after being notified that the qualifying member was terminally ill, was satisfied as to that fact.]

[F39(7) For the purposes of sub-paragraph (4)(b), “expected pension” means the aggregate amount of—

(a)the amount specified in paragraph 4(3)(a);

(b)the revaluation amount for the first survivor revaluation period (see sub-paragraphs (8) and (9)); and

(c)the revaluation amount for the second survivor revaluation period (see sub-paragraphs (10) and (11)).

(8) The first survivor revaluation period is the period—

(a)beginning on the day on which the qualifying member’s pensionable service ended; and

(b)ending on—

(i)the day before the day on which the scheme began to wind up;

(ii)the day from which the qualifying member became entitled to an annual payment in accordance with regulation 17(2)[F40, (3) or (3C) or 17C]; or

(iii)the day from which the survivor of the qualifying member became entitled to an annual payment under regulation 17(4),

whichever is the earliest.

(9) The revaluation amount for the first survivor revaluation period is the revaluation amount determined in accordance with paragraph 4(6).

(10) The second survivor revaluation period is the period—

(a)beginning on the day after the date determined in accordance with sub-paragraph (8)(b); and

(b)ending on—

(i)the day from which the qualifying member became entitled to an annual payment in accordance with regulation 17(2) [F41, (3) or (3C) or 17C] ; or

(ii)the day from which the survivor of the qualifying member became entitled to an annual payment under regulation 17(4),

whichever is the earlier.

(11) The revaluation amount for the second survivor revaluation period is the revaluation amount determined in accordance with paragraph 4(8) to (12).]

Textual Amendments

[F42Payment for an entitlement under regulation 17CU.K.

5A.—(1) This paragraph applies where a qualifying member is entitled to an annual payment in accordance with regulation 17C for a period during which that member has previously received a relevant payment.

(2) The annual payment payable to a qualifying member to whom this paragraph applies is determined in accordance with this Schedule.

(3) For any period for which an annual payment under regulation 17C is due to be paid and a relevant payment has previously been paid, the relevant payment is treated as a payment on account of the annual payment under regulation 17C.

(4) Where the amount of the relevant payment so treated equals the amount of the annual payment payable under sub-paragraph (2), no further payment under regulation 17C is due to the qualifying member.

(5) In this paragraph, “relevant payment” means a payment in accordance with these Regulations other than a payment for a survivor by virtue of regulation 17(4), 17A(3), 17B(2)(b) or 18(4).]

Textual Amendments

Exclusion of certain benefitsU.K.

6.—(1) No account shall be taken of the benefits specified in sub-paragraph (2) when determining, for the purposes of this Schedule—

(a)the assets available to be used to discharge a liability of a qualifying pension scheme;

(b)the liabilities of such a scheme; and

(c)the annual rate of pension from such a scheme.

(2) The specified benefits are—

(a)money purchase benefit; [F43and]

(b)benefits derived from the payment of voluntary contributions where, on the winding up of the scheme, the assets of the scheme have first been applied to satisfy liabilities in respect of those benefits; F44...

F45(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F46(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Cap on expected pension and actual pensionU.K.

7.—(1) Where the amount of a qualifying member's expected pension determined in accordance with the previous provisions of this Schedule multiplied by [F180.9] , F47... exceeds [F48£26,000], the amount of the annual payment payable to, or in respect of, that member under paragraphs 3 to 5 shall be determined on the basis that the product of that calculation was [F48£26,000].

(2) Where the amount of a qualifying member's actual pension determined in accordance with paragraph 2 exceeds—

(a)the amount of a qualifying member's expected pension determined in accordance with the previous provisions of this Schedule multiplied by [F180.9] F49...; or

(b)[F48£26,000],

no annual payment shall be payable to, or in respect of, that member.

Textual Amendments

De minimis ruleU.K.

F508.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

RevaluationU.K.

9.—(1) The amount of the annual payment shall be determined in accordance with the preceding paragraphs of this Schedule on the basis of the circumstances applying as at the certification date.

(2) Where there is a period of one month or more between the certification date and the date on which the annual payment is first payable to the beneficiary in accordance with regulation 17 [F51or 17C], the annual payment shall be increased by the appropriate revaluation percentage of that amount.

[F52(2A) But sub-paragraph (2) does not apply to an annual payment payable to a beneficiary who is the survivor of a qualifying member [F53where an annual payment was payable to that qualifying member immediately before his death].]

(3) In sub-paragraph (2), “the appropriate revaluation percentage” means the lesser of—

(a)the percentage increase in the general level of prices in Great Britain during the [F54period referred to in sub-paragraph (2)]; and

(b)the maximum revaluation rate.

(4) The method for determining the percentage increase in the general level of prices in Great Britain during that period is—

where—

A is the level of the retail prices index for the month which falls two months before [F55the month] in which the annual payment is first payable to the beneficiary under regulation 17 [F56or 17C];

B is the level of the retail prices index for the month two months before the month in which the certification date falls.

(5) In sub-paragraph (3)(b), “the maximum revaluation rate” in relation to that period is—

(a)if that period is a period of 12 months, 5%; and

(b)in any other case, the percentage that would be the percentage mentioned in sub-paragraph (3)(a) had the general level of prices in Great Britain increased at the rate of 5% compound per annum during that period.

Textual Amendments

Initial paymentsU.K.

10.  The preceding provisions of this Schedule shall apply for the purposes of determining the amount of an initial payment with the following modifications—

(a)for paragraph 2, substitute—

[F57“Interim pension

2.—(1) In this Schedule, “interim pension” means, subject to sub-paragraphs (2) and (3), the annual rate of pension that was in payment, is in payment, or is proposed to be paid, to a qualifying member, or to a survivor of that qualifying member, from the assets of the qualifying pension scheme of which that qualifying member is, or was, a member—

(a)on or after the time when the scheme began to wind up; but

(b)before the day on which the scheme’s liabilities to or in respect of the qualifying member are, or were, discharged.

(2) Where—

(a)the annual rate of pension referred to in sub-paragraph (1)—

(i)was or is in payment, and

(ii)was determined following commutation of some of the benefits deriving from the scheme to which that qualifying member is entitled,

that annual rate shall be redetermined on the basis that there was [F58no such commutation]; and

(b)the annual rate of pension referred to in sub-paragraph (1) is proposed to be paid, that annual rate shall be determined on the basis that there has been no commutation of benefits.

(3) Where the scheme manager is satisfied that it is not possible for him to determine the annual rate of pension for the purposes of sub-paragraph (1) having regard to the information available to him, he shall determine the annual rate of pension on the basis of that portion of the assets of the qualifying pension scheme (of which the qualifying member is, or was, a member) provisionally allocated to the member by the trustees or managers, or survivor of that member—

(a)on or after the time when the scheme began to wind up; but

(b)before the day on which the scheme’s liabilities in respect of the qualifying member are, or were, discharged,

and such other matters as the scheme manager considers relevant.”];

(b)for “actual pension”, in each place, substitute “interim pension”;

[F59(ba)for “[F60regulation 17(2), (3) or (3C) or 17C]” in each place, substitute “regulation 18(4)”;]

F61(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F61(ca). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F62(d)for “annual payment”, in each place that it occurs (except in paragraph 1(1)), substitute “initial payment”; and]

[F63(e)in paragraph 5—

(i)for sub-paragraph (3) substitute—

“(3) The initial payment payable to a survivor of a qualifying member shall be—F18

(ii)omit sub-paragraphs (2) and (6).]

Textual Amendments

RoundingU.K.

11.  Where the amount of an annual payment or an initial payment determined in accordance with this Schedule results in a fraction of a penny, that fraction shall be treated as a penny.