The Occupational Pension Schemes (Schemes that were Contracted-out) Regulations 2015

PART 3 ADDITIONAL REQUIREMENTS IN RELATION TO RIGHTS ATTRIBUTABLE TO CONTRACTED-OUT EMPLOYMENT ON AND AFTER 6TH APRIL 1997

Alteration of scheme rules

17.—(1) The rules of a scheme may be altered in relation to section 9(2B) rights only if—

(a) following the alteration, the scheme provides benefits for the earner and for the earner’s widow, widower or surviving civil partner, in respect of the period of pensionable service to which the alteration relates, that are at least equal to the benefits that would have been provided by a reference scheme (within the meaning of section 12B(2) of the 1993 Act(1) (reference scheme) as it had effect immediately before the second abolition date);

(b) the alteration is one to which the subsisting rights provisions (within the meaning of section 67(4) of the 1995 Act) do not apply, by virtue of section 67 of that Act;

(c) the alteration is one that is not a protected modification or a detrimental modification (within the meaning of section 67A of the 1995 Act(2)) and the requirement in paragraph (2) is met; or

(d) the alteration is a detrimental modification (within the meaning of section 67A(4) of the 1995 Act) and—

(i) the actuarial equivalence requirements provided for in sections 67C and 67D of that Act(3) are met in relation to the proposed modification of those rights; and

(ii) the requirement in paragraph (2) is met.

(2) Subject to paragraph (3), the requirement is the altered scheme is to provide for a pension to be paid to the earner’s widow, widower or surviving civil partner (referred to in this regulation as the “relevant survivor’s section 9(2B) pension”) that is at least as generous, either as regards the amount of the pension or as regards the circumstances in which it will be paid, as it would have been before the alteration.

(3) In relation to an earner who is in pensionable service under the scheme immediately before the alteration takes effect, the requirement in paragraph (2) is to be deemed to be satisfied if the relevant survivor’s section 9(2B) pension that the scheme would provide in respect of the earner if the earner left pensionable service immediately after the alteration is at least as generous as the relevant survivor’s section 9(2B) pension that the scheme would have provided in respect of the earner had the earner left service immediately before the alteration.

Payment of a lump sum instead of a pension

18.—(1) A relevant scheme(4) may not provide for the payment of a lump sum instead of a pension that is attributable to section 9(2B) rights, unless the payment to be made is authorised under section 164 of the Finance Act(5) (authorised member payments) and the payment is—

(a) permitted by the lump sum rule in section 166 of the Finance Act(6) and qualifies as—

(i) a pension commencement lump sum for the purposes of paragraph 1 of Schedule 29(7) to that Act;

(ii) a serious ill-health lump sum for the purposes of paragraph 4 of that Schedule(8);

(iii) an uncrystallised funds pension lump sum for the purposes of paragraph 4A of that Schedule(9);

(iv) a trivial commutation lump sum for the purposes of paragraph 7 of that Schedule(10); or

(v) a winding-up lump sum for the purposes of paragraph 10 of that Schedule(11);

(b) permitted by the lump sum death benefit rule in section 168 of the Finance Act(12) and qualifies as a trivial commutation lump sum death benefit for the purposes of paragraph 20 of Schedule 29(13) to that Act; or

(c) made by a registered pension scheme (within the meaning of section 150(2) of the Finance Act), is a payment that is described in Part 2 of the Registered Pension Schemes (Authorised Payments) Regulations 2009(14) (commutation payments), and is made to or in respect of a member.

(2) Where, under the scheme—

(a) an earner qualifies for a lump sum payment on the ground of serious ill-health; and

(b) the earner’s widow, widower or surviving civil partner qualifies for a pension (“a survivor’s pension”),

the scheme is to continue to provide for a survivor’s pension notwithstanding the payment of a lump sum to the earner.

Forfeiture of accrued rights

19.  Section 92(1) of the 1995 Act(15) (no forfeiture of entitlement under an occupational pension scheme) does not prevent forfeiture of section 9(2B) rights under a relevant scheme if—

(a) the person entitled to payments giving effect to those rights (“the pensioner”) is, in the opinion of the trustees of the scheme, unable to act by reason of mental disorder; and

(b) there is provision in the scheme that requires that, in those circumstances, sums equivalent to those payments—

(i) must be paid or applied for the maintenance of the pensioner, except in so far as they are not, in the opinion of the trustees, required for that purpose;

(ii) may, in so far as they are not in the opinion of the trustees required for the maintenance of the pensioner, be paid or applied for the maintenance of any dependants of the pensioner; and

(iii) must, in so far as they are not in the opinion of the trustees required for the maintenance of the pensioner or any dependant of the pensioner, be held by the trustees for the pensioner until the pensioner is again able to act, or if the pensioner dies before that happens, for the pensioner’s estate.

(1)

Section 12B is repealed by paragraph 11 of Schedule 13 to the 2014 Act, but saved for certain purposes, see S.I. 2015/1502. Section 12B was inserted by section 136 of the 1995 Act. There are amendments not relevant to these regulations.

(2)

Section 67A was inserted by section 262 of the 2004 Act, and amended by section 60(2) of, and paragraphs 28 and 29 of Schedule 4 to, the Pension Schemes Act 2015 (c.8).

(3)

Sections 67C and 67D were inserted by section 262 of the 2004 Act, and section 67D was amended by paragraph 7 of Schedule 5 to the Pensions Act 2007.

(4)

See section 37A(2) of the 1993 Act, inserted by the 2014 Act.

(5)

Section 164 was amended by paragraphs 1 and 6 of Schedule 23 to the Finance Act 2006 (c.25), paragraph 1 of Schedule 29 to the Finance Act 2008 (c.1), section 75(2)(b) of the Finance Act 2009 (c.10), paragraphs 62 and 63 of Schedule 16 to the Finance Act 2011 (c.11), and paragraph 85 of Schedule 1 to the Taxation of Pensions Act 2014 (c.30).

(6)

Section 166 was amended by S.I. 2006/572, paragraphs 2 and 5 of Schedule 5 to the Finance Act 2014 (c.26), and paragraphs 53, 54 and 55 of Schedule 1 to the Taxation of Pensions Act 2014.

(7)

Paragraph 1 is amended by paragraphs 1 and 34 of Schedule 10 to the Finance Act 2005 (c.7), S.I. 2006/572 and S.I. 2009/1172, paragraphs 1 and 11 of Schedule 20 to the Finance Act 2007 (c.11), paragraphs 23, 24, 62 and 79 of Schedule 16 to the Finance Act 2011 and section 51 of the Finance Act 2013 (c.29).

(8)

Paragraph 4 was amended by paragraphs 23 and 28 of Schedule 16 to the Finance Act 2011.

(9)

Paragraph 4A was inserted by paragraph 57 of Schedule 1 to the Taxation of Pensions Act 2014.

(10)

Paragraph 7 was amended by S.I. 2006/572, paragraphs 23 and 29 of Schedule 16 to, and paragraphs 1, 3 and 4 of Schedule 18 to, the Finance Act 2011, paragraph 71 of Schedule 1 to the Taxation of Pensions Act 2014, and section 42(1) of the Finance Act 2014.

(11)

Paragraph 10 was amended by paragraphs 1 and 12 of Schedule 20 to the Finance Act 2007, and paragraphs 23 and 30 of Schedule 16 to, and paragraphs 1, 3 and 5 of Schedule 18 to, the Finance Act 2011.

(12)

Section 168 was amended by paragraphs 1 and 5 of Schedule 19 to the Finance Act 2007, paragraphs 62 and 65 of Schedule 16 to the Finance Act 2011, and paragraphs 5 and 7 of Schedule 1 to the Taxation of Pensions Act 2014.

(13)

Paragraph 20 was amended by paragraphs 1, 3 and 6 of Schedule 18 to the Finance Act 2011, and paragraph 74 of Schedule 1 to the Taxation of Pensions Act 2014.

(14)

S.I. 2009/1171; relevant amendments are made by S.I. 2011/1751 and 2012/522.

(15)

Section 92(1) was amended by paragraphs 43 and 58 of Schedule 12 to the Welfare Reform and Pensions Act 1999.