The Occupational Pension Schemes (Employer Debt) Regulations 2005

Preliminary U.K.

Citation, commencement, application and extent U.K.

1.—(1) These Regulations may be cited as the Occupational Pension Schemes (Employer Debt) Regulations 2005.

(2) These Regulations come into force on 6th April 2005.

(3) These Regulations do not apply to—

[F1 (a) any employer in relation to any debt which has arisen under section 75(1) of the 1995 Act to the trustees or managers of the scheme before that date.]

(b) any scheme which immediately before that date was regarded by virtue of regulation 2 of the Occupational Pension Schemes (Winding Up) Regulations 1996 M1 as having begun to be wound up before that date for the purposes of those Regulations; or

(c) any scheme which according to the rules in section 124(3A) to (3E) of the 1995 Act M2 began to wind up before that date.

(4) These Regulations extend to England and Wales and Scotland.

Textual Amendments

F1 Reg. 1(3)(a) substituted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(1) (with reg. 2(3)-(8))

Marginal Citations

M1 S.I. 1996/3126.

M2 Subsections (3) to (3E) were inserted in section 124 by section 49(2) of the Child Support, Pensions and Social Security Act 2000 (c. 19).

Interpretation U.K.

2.—(1) In these Regulations––

M3 “the 1993 Act” means the Pension Schemes Act 1993;

“the 1995 Act” means the Pensions Act 1995;

“the 2004 Act” means the Pensions Act 2004;

M4 “the 1996 Regulations” means the Occupational Pension Schemes (Deficiency on Winding Up etc.) Regulations 1996;

[F2 “actuarial valuation” has the same meaning as in Part 3 of the 2004 Act;]

“the actuary” means the actuary appointed for the scheme in pursuance of subsection (1)(b) of section 47 of the 1995 Act or, in the case of a scheme to which that provision does not apply by virtue of regulations made under subsection (5) of that section, an actuary otherwise authorised by the trustees or managers to provide such valuations or certifications as may be required under these Regulations;

[F2 “amount A” means the amount calculated in accordance with paragraph 4 of Schedule 1A;]

[F2 “amount B” means the amount calculated in accordance with either sub-paragraph (2) or (3) of paragraph 5 of Schedule 1A;]

“the applicable time” means the time as at which the value of the assets of a scheme and the amount of its liabilities are to be determined, calculated and verified for the purposes of section 75 of the 1995 Act;

[F2 “approved withdrawal arrangement” means an arrangement that meets the funding test and is approved by the Authority under regulation 7;]

[F2 “approved withdrawal arrangement share” means an amount that is—

(a)

a cessation employer's share of the difference,

(b)

less than amount A, and

(c)

payable by a cessation employer pursuant to an approved withdrawal arrangement;]

[F2 “assessment period” has the meaning given in section 132 of the 2004 Act (assessment periods);]

[F3 “the Board for Actuarial Standards” means the operating body of that name of the Financial Reporting Council;]

[F2 “cessation employer” means an employer in relation to the scheme in respect of whom an employment-cessation event has occurred;]

[F2 “cessation expenses” are all expenses which, in the opinion of the trustees or managers of a scheme, are likely to be incurred by the scheme in connection with an employment-cessation event occurring to an employer in relation to the scheme;]

[F2 “the corresponding assets” means the assets transferred in connection with the transfer from the scheme in respect of any relevant transfer liabilities;]

[F2 “defined contribution employer” means an employer all the liabilities attributable to whom in relation to a scheme are liabilities in respect of money purchase benefits as defined in section 181(1) of the 1993 Act or in respect of supplementary benefits provided on an ancillary basis in the form of payments on death;]

[F2 “departing employer” means—

(a)

a cessation employer; or

(b)

an employer in respect of whom an insolvency event has occurred;]

“employer” has the same meaning as in section 75 of the 1995 Act (but see paragraph (2) and regulations [F4 6,] 9 and 13);

[F5 “employment-cessation event” means in relation to a multi-employer scheme an event which is not a relevant event and which, subject to regulation 6A, occurs on the date on which—

(a)

an employer has ceased to employ at least one person who is an active member of the scheme, and

(b)

at least one other employer who is not a defined contribution employer continues to employ at least one active member of the scheme;]

[F2 “frozen scheme” means a scheme which has ceased to have active members;]

[F2 “guarantors” means such one or more of the parties to a withdrawal arrangement or an approved withdrawal arrangement as are specified in the arrangement as the persons who have given guarantees in relation to amount B for the purposes of the arrangement;

“the guarantee time” means the earliest time when an event specified in paragraph 3 of Schedule 1A occurs;

“liability proportion” means “K/L” where—

(a)

“K” equals the amount of a scheme's liabilities attributable to an employer in accordance with paragraph (4) of regulation 6; and

(b)

“L” equals the total amount of the scheme's liabilities attributable to employment with the employers;

“liability share” means an amount equal to the liability proportion of the total difference between the value of the assets and the amount of the liabilities of the scheme;]

M5 “the MFR Regulations” means the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996;

“money purchase scheme” means an occupational pension scheme under which all the benefits that may be provided other than death benefits are money purchase benefits;

[F6 “multi-employer scheme” means a scheme (or a section of a scheme treated pursuant to regulation 8 as a separate scheme) in relation to which there is more than one employer;]

[F2 “PPF” means the Pension Protection Fund established under Part 2 of the 2004 Act;

“the PPF Valuation Regulations” means the Pension Protection Fund (Valuation) Regulations 2005;

“protected liabilities” has the same meaning as for the purposes of a valuation under section 179 of the 2004 Act (valuations to determine scheme under funding);

“recovery plan” means a recovery plan that complies with the requirements in section 226 of the 2004 Act and the Scheme Funding Regulations;

“regulated apportionment arrangement” is an arrangement under the scheme rules that—

(a)

provides for the amount that would have been the employer's liability share to be changed;

(b)

where the employer's liability share is reduced, apportions all or part of the amount that would have been the employer's liability share to one or more of the remaining employers;

(c)

may provide for when the amount apportioned is to be paid;

(d)

is entered into before, on or after the applicable time;

(e)

sets out the amount of an employer's regulated apportionment arrangement share; and

(f)

meets the conditions in regulation 7A;

“regulated apportionment arrangement share” means the amount under a regulated apportionment arrangement that is an employer's share of the difference;

“relevant accounts” means the audited accounts for the scheme that comply with the requirements imposed under section 41 of the 1995 Act (provision of documents to members);

“the relevant transfer deduction” means the amount of the relevant transfer liabilities less the value of the corresponding assets;

“the relevant transfer liabilities” means the liabilities attributable to a departing employer that are transferred after the applicable time to an occupational or personal pension scheme or are otherwise secured;

“schedule of contributions” means the most recent schedule of contributions that is adopted in relation to the scheme for the purposes of Part 3 of the 2004 Act;

“scheme apportionment arrangement” means an arrangement under the scheme rules that—

(a)

provides for the employer to pay a scheme apportionment arrangement share instead of the employer's liability share;

(b)

where that amount is less than the employer's liability share, apportions all or part of the amount that would have been the employer's liability share to one or more of the remaining employers;

(c)

may provide for when the amount apportioned is to be paid;

(d)

is entered into before, on or after the applicable time;

(e)

sets out the amount of an employer's scheme apportionment arrangement share;

(f)

the trustees or managers consent to; and

(g)

meets the funding test;

“scheme apportionment arrangement share” means the amount under a scheme apportionment arrangement that is an employer's share of the difference;

“scheme's apportionment rule” means a scheme rule which makes provision for the difference between the value of a scheme's assets and the amount of its liabilities to be apportioned among the employers in different proportions from those which would otherwise arise;

“the Scheme Funding Regulations” means the Occupational Pension Schemes (Scheme Funding) Regulations 2005;

“share of the difference” means the amount calculated as at the applicable time that is an employer's share of the total difference between the value of the assets and the amount of the liabilities of a scheme;

“statutory funding objective” has the same meaning as in Part 3 of the 2004 Act;]

“the tax condition”, in relation to a scheme, means–

(a)

that the scheme has been approved by the Commissioners of the Board of Inland Revenue for the purposes of section 590 or 591 of the Taxes Act at any time before 6th April 2006; or

(b)

M6 that the scheme is registered under section 153 of the Finance Act 2004;

M7 “the Taxes Act” means the Income and Corporation Taxes Act 1988.

[F2 “updated actuarial assessment” means—

(a)

the actuary's estimate of the solvency of the scheme as defined in regulation 7(6) of the Scheme Funding Regulations included in the most recent actuarial valuation of the scheme received by the trustees or managers under section 224 of the 2004 Act; or

(b)

where the trustees or managers have not received a valuation of the scheme under section 224 of the 2004 Act, the actuary's estimate of the solvency of the scheme included in the most recent actuarial valuation of the scheme received by the trustees or managers, which in the opinion of the actuary is appropriate to use,

adjusted to the applicable time to reflect the actuary's assessment of changes between the effective date of that valuation and the applicable time in the value of the scheme's assets and of the matters set out in regulation 7(6)(a)(i) and (ii) of the Scheme Funding Regulations;

“updated asset assessment” means an update (whether or not audited) of the value of the assets of the scheme identified in the most recent relevant accounts received by the trustees or managers which—

(a)

is prepared by the trustees or managers, and

(b)

estimates where they consider appropriate any alteration in the value of the assets of the scheme between the date by reference to which those accounts are prepared and the applicable time;]

[F7 “withdrawal arrangement” means an arrangement that meets the conditions specified in paragraph 1 of Schedule 1A and meets the funding test;]

[F2 “withdrawal arrangement share” means an amount that is—

(a)

a cessation employer's share of the difference,

(b)

equal to or, where the employer agrees, greater than amount A, and

(c)

payable by a cessation employer pursuant to a withdrawal arrangement;]

[F2 (2) In these Regulations “scheme” must be read in appropriate cases in accordance with the modifications of section 75 of the 1995 Act made by regulation 8, 14 or 15, as the case may be; and “employer” and “member” must be read accordingly.

[F8 (3) References in these Regulations to BAS standards are to standards on winding up and scheme asset deficiency adopted or prepared, and from time to time revised, by the Board for Actuarial Standards.]

F9 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F10 (4A) For the purposes of regulations 6B, 6C and 7, an arrangement relating to a scheme meets the funding test where the trustees or managers are reasonably satisfied that—

(a) when the arrangement takes effect, the remaining employers will be reasonably likely to be able to fund the scheme so that after the applicable time it will have sufficient and appropriate assets to cover its technical provisions, taking account of any change in those provisions which will in the opinion of the trustees or managers be necessary as a result of the arrangement, and

(b) in the case of a scheme apportionment arrangement under regulation 6B, the effect of the arrangement will not be to adversely affect the security of members' benefits as a result of any—

(i) material change in legal, demographic or economic circumstances, as described in regulation 5(4)(d) of the Scheme Funding Regulations, that would justify a change to the method or assumptions used on the last occasion on which the scheme's technical provisions were calculated, or

(ii) material revision to any existing recovery plan made in accordance with section 226 of the 2004 Act.

(4B) For the purposes of paragraph (4A), where at the applicable time the trustees or managers of the scheme have not received its first actuarial valuation under Part 3 of the 2004 Act, that paragraph shall apply as if for that paragraph there were substituted—

“(4A) For the purposes of regulations 6B, 6C and 7, an arrangement relating to a scheme meets the funding test where the trustees or managers are reasonably satisfied that, after taking account of the financial resources of the remaining employers, the arrangement is unlikely to adversely affect the security of the members' benefits under the scheme.”.

(4C) The trustees or managers may consider that the test in paragraph (4A)(a) is met if in their opinion the remaining employers are able to meet the relevant payments as they fall due under the schedule of contributions for the purposes of section 227 of the 2004 Act , taking into account any revision of that schedule that they think will be necessary when the arrangement takes effect.

(4D) In paragraphs (4A) and (4C), references to “remaining employers” may in relevant circumstances be read as referring only to the employer or employers to whom all or part of the liability share is apportioned under the scheme rules.]

(5) Subject to the previous provisions of this regulation, expressions used in these Regulations have the same meaning as in Part 1 of the 1995 Act (see section 124).]

Textual Amendments

F2 Words in reg. 2(1) inserted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(2)(e) (with reg. 2(3)-(8))

F3 Words in reg. 2(1) inserted (6.4.2007) by The Occupational and Personal Pension Schemes (Prescribed Bodies) Regulations 2007 (S.I. 2007/60), reg. 1, Sch. para. 14(a)(i)

F4 Word in reg. 2(1) inserted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(2)(a) (with reg. 2(3)-(8))

F5 Words in reg. 2(1) substituted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(2)(b) (with reg. 2(3)-(8))

F6 Words in reg. 2(1) substituted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(2)(c) (with reg. 2(3)-(8))

F7 Words in reg. 2(1) substituted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(2)(d) (with reg. 2(3)-(8))

F8 Reg. 2(3) substituted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(3) (with reg. 2(3)-(8))

F9 Reg. 2(4) omitted (6.4.2008) by virtue of The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(4) (with reg. 2(3)-(8))

F10 Reg. 2(4A)-(4D) inserted (6.4.2008) by The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (S.I. 2008/731), regs. 2(1), 4(4) (with reg. 2(3)-(8))

Marginal Citations

M3 1993 c. 48.

M4 S.I. 1996/3128.

M5 S.I. 1996/1536.

M6 2004 c. 12.

M7 1988 c. 1.

Disapplication of the 1996 Regulations U.K.

3.  The 1996 Regulations do not apply in any case where these Regulations apply (and accordingly they only apply to a scheme as respects which regulation 1(3)(a), (b) or (c) applies).

Schemes to which section 75 of the 1995 Act does not apply U.K.

4.—(1) Section 75 of the 1995 Act does not apply to any scheme which is—

(a) a public service pension scheme under the provisions of which there is no requirement for assets related to the intended rate or amount of benefit under the scheme to be set aside in advance (disregarding requirements relating to additional voluntary contributions);

(b) a scheme which is made under section 7 of the Superannuation Act 1972 M8 (superannuation of persons employed in local government etc.) and provides pensions to local government employees;

(c) a scheme which is made under section 2 of the Parliamentary and Other Pensions Act 1987 M9 (power to provide for pensions for Members of the House of Commons etc.);

(d) a scheme in respect of which a relevant public authority, as defined in section 307(4) of the 2004 Act, has given a guarantee or made any other arrangements for the purposes of securing that the assets of the scheme are sufficient to meet its liabilities;

(e) a scheme which does not meet the tax condition;

(f) a scheme which—

(i) has been categorised by the Commissioners of the Board of Inland Revenue for the purposes of its approval as a centralised scheme for non-associated employers;

(ii) which is not contracted-out; and

(iii) under the provisions of which the only benefits that may be provided on or after retirement (other than money purchase benefits derived from the payment of voluntary contributions by any person) are lump sum benefits which are not calculated by reference to a member's salary;

(g) a scheme with such a superannuation fund as is mentioned in section 615(6) of the Taxes Act (fund established to provide superannuation benefits in respect of persons' employment in a trade or undertaking wholly outside the United Kingdom);

(h) a scheme with fewer than two members;

(i) a scheme with fewer than twelve members where all the members are trustees of the scheme and either—

(i) the rules of the scheme provide that all decisions are made only by the trustees who are members of the scheme by unanimous agreement; or

(ii) the scheme has a trustee who is independent in relation to the scheme for the purposes of section 23 of the 1995 Act M10 (power to appoint independent trustees) (see subsection (3) of that section) and is registered in the register maintained by the Authority in accordance with regulations made under subsection (4) of that section;

(j) a scheme with fewer than twelve members where all the members are directors of a company which is the sole trustee of the scheme and either—

(i) the rules of the scheme provide that all decisions are made only by the members of the scheme by unanimous agreement, or

(ii) one of the directors of the company is independent in relation to the scheme for the purposes of section 23 of the 1995 Act and is registered in the register maintained by the Authority in accordance with regulations made under subsection (4) of that section;

(k) the Chatsworth Settlement Estate Pension Scheme; or

F11 (l) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Before 6th April 2006 paragraph (1)(e) applies with the addition at the end of the words “and is not a relevant statutory scheme providing relevant benefits”; and for the purposes of that paragraph “relevant statutory scheme” and “relevant benefits” have the same meaning as in Chapter 1 of Part 14 of the Taxes Act (see sections 611A and 612(1) of that Act).

Textual Amendments

F11 Reg. 4(1)(l) omitted (2.9.2005) by virtue of The Occupational Pension Schemes (Employer Debt etc.) (Amendment) Regulations 2005 (S.I. 2005/2224), regs. 1(2), 4(1)

Marginal Citations

M8 1972 c. 11.

M9 1987 c. 45.

M10 Section 23 is substituted by section 36(3) of the Pensions Act 2004.