The Personal and Occupational Pension Schemes (Indexation and Disclosure of Information) (Miscellaneous Amendments) Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations reflect amendments made in sections 278 to 280 of the Pensions Act 2004 (c. 35) to provisions that require increases in the indexation of certain pensions. They also introduce requirements under the Occupational Pension Schemes (Disclosure of Information) Regulations 1996 (S.I. 1996/1655) (“the Disclosure of Information Regulations”) for trustees of occupational pension schemes to provide information about the selection of annuities when benefits under a scheme become payable. A number of other amendments to the Disclosure of Information Regulations are made in consequence of provisions of the Pensions Act 2004.

Regulation 2 modifies section 51 of the Pensions Act 1995 (c. 26) in its application to pensions under occupational pension schemes which provide both defined benefits and money purchase benefits. The regulation excludes from the scope of the indexation requirement so much of the pension as is money purchase benefit.

Regulations 3, 4 and 6 restrict the application of certain provisions of the Personal and Occupational Pension Schemes (Protected Rights) Regulations 1996 (S.I. 1996/1537) (“the Protected Rights Regulations”). The provisions affected are those requiring pensions or annuities which are derived from protected rights accruing before 6th April 1997 to be index-linked. As a result of the amendments made by these Regulations, increases in the rate of payment are only required for pensions or annuities which come into payment before 6th April 2005.

Regulation 5 amends regulation 7 of the Protected Rights Regulations so that separate actuarial tables will no longer be required in calculating payments to give effect to protected rights when payments are made under interim arrangements. From 6th April 2005, all rights held in an appropriate personal pension scheme will be treated in the same way for the purposes of calculating payments to be made under an interim arrangement.

Regulations 7 to 11 amend the Occupational Pension Schemes (Indexation) Regulations 1996 (S.I. 1996/1679) so as to restrict the application of the indexation requirements in respect of transfers made to occupational pension schemes. The changes apply in relation to rights which are allowed by a scheme to a member by reference to transfers or payments from another pension scheme, or from a policy of insurance or annuity contract, and apply only where the transfer or payment is made on or after 6th April 2005. Indexation will only be required for such part of the pension payable by the receiving scheme as is attributable to accrued rights which become section 9(2B) rights in that scheme or which are determined by reference to rights that were subject to indexation in the transferring scheme or under the policy of insurance or contract.

Regulations 12 and 13 amend the Occupational Pension Schemes (Discharge of Liability) Regulations 1997 (S.I. 1997/784). They amend the requirements applying to policies of insurance and annuity contracts for the purposes of discharging liability. The question whether indexation of payments is required for payments under those policies or contracts will depend on whether section 51 of the Pensions Act 1995 would apply to those payments if they were benefits under an occupational pension scheme.

Regulation 14 amends regulation 2 of the Personal and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 1997 (S.I. 1997/786). This allows for the application of section 51 of the Pensions Act 1995 to death benefits in cases where those benefits are the only benefits provided under a hybrid occupational pension scheme which are not money purchase benefits.

Regulations 15 and 16 amend the Pension Sharing (Pension Credit Benefit) Regulations 2000 (S.I. 2000/1054) so as to implement changes to indexation which were made in section 280 of the Pensions Act 2004. The relevant changes restrict indexation to rights to pensions which are not money purchase benefits where the pension comes into payment on or after 6th April 2005. They also reduce the overall maximum levels of indexation.

Regulations 18 and 19 amend paragraphs 7 and 11 of Schedule 2 to the Disclosure of Information Regulations. In any case where a person has the opportunity to select an annuity, trustees of occupational schemes are required to provide certain information relevant to the choice, including general information explaining the different characteristics of different kinds of annuities. The requirements apply whether benefits under the scheme are payable to members or are payable on the death of a member or beneficiary.

Regulations 17 and 20 make consequential amendments to the Disclosure of Information Regulations which result from provisions contained in the Pensions Act 2004.

An assessment of the impact on business, charities or the voluntary sector of the provisions in these Regulations was included in the Regulatory Impact Assessment that accompanies the Pensions Act 2004. A copy of that assessment has been placed in the libraries of both Houses of Parliament. Copies may be obtained from the Department for Work and Pensions, Regulatory Impact Unit, 3rd Floor, The Adelphi, 1-11 John Adam Street, London WC2N 6HT.