The Pension Protection Fund (General and Miscellaneous Amendments) Regulations (Northern Ireland) 2006

Made: 24th March 2006

Coming into operation in accordance with regulation 1(1)

The Department for Social Development makes the following Regulations in exercise of the powers conferred by Articles 110(1)(b), 135(9)(b), 145(6) and (7), 147(3), (4)(a)(ii) and (b)(ii) and (6)(a), 150(5), 152(1) and (2)(a) to (c), (e) and (f), 154(2) and (3), 155(4), 162(3), 164(5) and (8)(a) and 287(2) and (3) of, and paragraph 24(1) and (2) of Schedule 6 to, the Pensions (Northern Ireland) Order 2005[^f00001].

PART 1 — Preliminary

Citation, commencement and interpretation

1

• (1) These Regulations may be cited as the Pension Protection Fund (General and Miscellaneous Amendments) Regulations (Northern Ireland) 2006 and shall come into operation—

• (a) in the case of this regulation and regulations 19, 20 and 23, on 1st April 2006, and

• (b) in all other cases, on 6th April 2006.

• (2) In these Regulations—

• “the 2004 Act” means the Finance Act 2004[^f00002];

• “the Order” means the Pensions (Northern Ireland) Order 2005;

• ...

• “base rate” means the rate for the time being quoted by the reference banks as applicable to sterling deposits or, where there is for the time being more than one such base rate, the rate which, when the base rate quoted at each bank is ranked in a descending sequence of four, is the first in the sequence;

• “beneficiary” means a person entitled to PPF compensation;

• “dependant” means—a child of the family who is financially dependent on the person, and who is aged less than 18, ora child of the family who is financially dependent on the person, who is aged less than 23 and who is either—attending a qualifying course, orincapable of engaging in full time paid employment due to a condition that falls within the definition of a disability under the Disability Discrimination Act 1995[^f00004];

• “family” means a person’s spouse, civil partner or relevant partner and any dependants;

• “the FSMA” means the Financial Services and Markets Act 2000[^f00005];

• “lump sum compensation” means—any lump sum compensation payments made in relation to a person, payable under the pension compensation provisions specified in Article 146(2) of the Order (the pension compensation provisions), orany lump sum payments made in relation to a person, payable under Article 150 of the Order (duty to pay scheme benefits unpaid at assessment date etc.);

• “normal minimum pension age” has the meaning given in section 279 of the 2004 Act (other definitions);

• “normal pension age” has the meaning given in section 175 of the Pension Schemes Act (normal pension age);

• “pension annuity” means an annuity that can—only be purchased at, or after, normal minimum pension age;be purchased before normal pension age where the scheme rules so provide in accordance with paragraph 22(4) of Schedule 36 of the 2004 Act[^f00006] (pension schemes etc: transitional provisions and savings), orbe purchased after normal pension age where the scheme rules so provide;

• “periodic compensation” means—any periodic compensation payments made in relation to a person, payable under the pension compensation provisions specified in Article 146(2) of the Order, orany periodic payments made in relation to a person, payable under Article 150 of the Order (duty to pay scheme benefits unpaid at assessment date etc.);

• “PPF compensation” means any payments made under the pension compensation provisions as specified in Article 146(2) of the Order;

• “PPF money purchase lump sum” means a payment of a lump sum which is made by the Board in respect of entitlement or accrued rights under the scheme rules to money purchase benefits;

• “qualifying course” means a full time educational or vocational course at a recognised educational establishment where in pursuit of that course, the time spent receiving instruction or tuition, undertaking supervised study, examination or practical work or taking part in any exercise, experiment or project for which provision is made in the curriculum of the course, exceeds 12 hours per week in normal term time, and shall include any gaps between the ending of one course and the commencement of another, where the person is enrolled on and commences the latter course;

• “reference banks” means the four largest persons for the time being (by reference to gross assets)[^f00007] who—have permission under Part 4 of the FSMA (permission to carry on regulated activities) to accept deposits, andare incorporated in the United Kingdom and carrying on there a regulated activity of accepting deposits, and quote a base rate applicable to sterling deposits;

• “registered pension scheme” has the meaning given in section 150(2) of the 2004 Act (meaning of pension scheme);

• “relevant partner” means a person of either sex who was not married to, or in a civil partnership with, the member but who was living with the member as if that person and the member were spouses of each other;

• “stakeholder pension scheme” has the meaning given in Article 3 of the 1999 Order[^f00008] (meaning of “stakeholder pension scheme”);

• “trivial commutation lump sum” has the meaning given in paragraph 7 of Schedule 29 to the 2004 Act (trivial commutation lump sum).

• (3) In paragraph (2), in the definition of “reference banks”, paragraph (b) must be read with—

• (a) section 22 of the FSMA (the classes of activity and categories of investment);

• (b) any relevant order under that section, and

• (c) Schedule 2 to the FSMA (regulated activities).

PART 2 — Assumption of responsibility

Board’s power to modify relevant contracts

2

• (1) Where Article 145(1) of the Order (effect of the Board assuming responsibility for a scheme) applies, and the Board considers that a contract relating to the property, rights or liabilities of the scheme contains terms or conditions that the Board considers to be onerous (whether triggered by the insolvency event in relation to the eligible scheme or otherwise) the Board may—

• (a) disapply any such term or condition, or

• (b) substitute for the term or condition, a term or condition that the Board considers to be reasonable.

• (2) Where—

• (a) any rights or liabilities under a relevant contract of insurance are transferred to the Board by virtue of Article 145(2)(a) of the Order, and

• (b) as a result of that transfer, the Board is required, by reason of a term of that contract, to pay a specified amount, or specified amounts to a specified person who, immediately before the time mentioned in Article 145(2)(a) of the Order, was a member of the scheme or a person entitled to benefits in respect of such a member,

the Board may modify that term of that contract so that benefit under that contract shall be payable to the Board.

Power to treat death in service lump sum benefits as having become payable before the assessment date

3

• (1) Where this regulation applies, the benefits referred to in paragraph (3) shall be treated, for the purposes of Article 147(2) of the Order (adjustments to be made where the Board assumes responsibility for a scheme), as having become payable before the assessment date.

• (2) This regulation applies where—

• (a) a member of an eligible scheme died before the commencement of the assessment period in relation to the scheme, and

• (b) during the period mentioned in Article 147(2)(a) of the Order, a person became entitled under the scheme rules to a benefit referred to in paragraph (3) in respect of that member.

• (3) The benefits referred to in this paragraph are—

• (a) a death benefit which is calculated and paid by the trustees or managers of the eligible scheme on or after the assessment date but before the date the trustees or managers receive the transfer notice in respect of that scheme, and

• (b) a contribution refund within the meaning of section 97AB(4) of the Pension Schemes Act (right to cash transfer sum and contribution refund).

Power to pay death in service lump sum benefits

4

Where—

• (a) a member of an eligible scheme died before the commencement of the assessment period in relation to the scheme, and

• (b) during the period beginning with the assessment date and ending with the receipt by the trustees or managers of the transfer notice, a person became entitled under the scheme rules to a death benefit or a contribution refund (within the meaning of section 97AB(4) of the Pension Schemes Act) in respect of that member,

that person’s entitlement to that benefit shall, for the purposes of Article 150(2) of the Order (duty to pay scheme benefits unpaid at assessment date etc.), be treated as having arisen before the assessment date.

Interest on overpayments and underpayments created during the assessment period

5

The prescribed rate for interest for the purposes of—

• (a) Article 147(4)(a) of the Order, or

• (b) Article 147(4)(b) of the Order,

shall be the base rate.

Circumstances where the Board is not required to recover overpaid scheme benefits

6

• (1) Where the Board determines that an amount referred to in Article 147(4)(a) of the Order has been paid to a member, or to a person in respect of a member, it shall notify that member or person in writing that—

• (a) it has so determined;

• (b) it has a duty to recover that amount, and

• (c) if the person in receipt of that amount believes that recovery of that amount would cause hardship to that member or person with a right to scheme benefits, or his family he should—

• (i) notify the Board in writing that he believes that hardship would be so caused (“the hardship notification”) within one month of the date the Board notifies him that such an amount has been paid to him, and

• (ii) provide any supporting evidence to the Board that hardship would be so caused within one month of the date of the hardship notification.

• (2) Where the Board receives a hardship notification in accordance with paragraph (1)(c)(i), it shall, as soon as reasonably practicable, determine whether recovery of the overpayment would cause hardship to—

• (a) the member or the member’s family, or

• (b) in the case of a person who was in receipt of scheme benefits in respect of a member, to that person with a right to scheme benefits, or that person’s family.

• (2A) The Board may request such additional information, from the person who gave the hardship notification, as it reasonably requires for the purpose of making a determination under paragraph (2).

• (2B) In making such a determination, the Board shall have regard to any evidence provided under paragraph (1)(c)(ii) and any information provided under paragraph (2A).

• (3) Where recovery would cause such hardship, the Board shall not recover that amount.

• (4) The Board is not required to recover such an amount where recovery would not be conducive to the prudent management of its financial affairs.

Manner of discharge of liabilities in respect of money purchase benefits

7

• (1) Subject to regulation 8, in respect of a case to which Article 154(1) of the Order (discharge of liabilities in respect of money purchase benefits) applies, the Board must secure that liabilities in respect of money purchase benefits transferred to the Board under Article 145 are discharged ... by way of—

• (a) a transfer payment to a personal pension scheme or an occupational pension scheme;

• (b) the purchase of a pension annuity;

• (c) the taking out of a policy of insurance or a number of such policies;

• (d) assuring the benefits of a policy of insurance or a number of such policies;

• (e) in the circumstances described in regulation 9, a trivial commutation lump sum payment, or

• (f) in the circumstances described in regulation 9A, a PPF money purchase lump sum.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further provision for discharge of liabilities in respect of money purchase benefits

8

• (1) In respect of a case to which Article 154(1) of the Order applies, before the expiry of a period of three months beginning with the date that the Board assumes responsibility for the scheme in accordance with Article 145 of the Order, the Board shall give notice in writing to any person who is entitled under the scheme rules to money purchase benefits (“the money purchase beneficiary”)—

• (a) of the existence of those liabilities in relation to such benefits;

• (b) of the manner in which those liabilities, may be discharged by the Board in accordance with regulation 7;

• (c) that the money purchase beneficiary may wish to seek independent financial advice;

• (d) that the money purchase beneficiary may, before the expiry of a period of three months beginning with the date of the notice, inform the Board in writing of the manner in which he wishes those liabilities to be discharged (being a manner consistent with regulation 7), and

• (e) that should the money purchase beneficiary not inform the Board in accordance with sub-paragraph (d) of the manner in which he wishes those liabilities to be discharged, the Board will discharge those liabilities as it sees fit, in accordance with these Regulations.

• (1A) Where, on the date that the Board assumed responsibility for the scheme, the money purchase beneficiary—

• (a) had attained normal minimum pension age, or was within six months of attaining that age, or

• (b) met the ill-health condition in paragraph 1 of Schedule 28 to the 2004 Act,

the notice sent by the Board under paragraph (1) shall also include the information listed in Part 1, and paragraph 12, of Schedule 9A to the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2014 (information to be given on the Pensions Guidance).

• (2) Where the money purchase beneficiary informs the Board in accordance with paragraph (1)(d) that he wishes the liabilities relating to his money purchase benefits to be discharged in a specified manner, the Board shall request in writing any further information it may require in order for it to discharge those liabilities in the manner so specified.

• (3) Subject to the requirements of regulation 9 in relation to trivial commutation and regulation 9A in relation to PPF money purchase lump sums, where the money purchase beneficiary has provided sufficient information for the Board to discharge the liabilities in relation to that beneficiary in respect of money purchase benefits, the Board shall, within a reasonable period, discharge those liabilities in the manner so requested.

• (4) Where it is not possible to discharge money purchase liabilities in relation to a money purchase beneficiary in accordance with paragraph (3), the Board shall discharge those liabilities in accordance with regulation 7(1).

• (5) Where the money purchase beneficiary dies before the Board discharges those liabilities in relation to that beneficiary, the Board shall discharge those liabilities—

• (a) where there is a widow, widower or surviving civil partner, under the rules of the scheme within the limits specified in regulation 7(1), or

• (b) where there is no widow, widower or surviving civil partner, in accordance with paragraph 15 of Schedule 29 to the 2004 Act (uncrystallised funds lump sum death benefit).

Trivial commutation

9

The Board may discharge its liabilities in respect of money purchase benefits by way of a trivial commutation lump sum payment where this lump sum is paid in accordance with the requirements of paragraph 7 of Schedule 29 to the 2004 Act (registered pension schemes: authorised lump sums – trivial commutation lump sum).

PART 3 — Equal treatment

Exemption from requirement to modify payment function

10

For the purposes of Article 155(4) of the Order (equal treatment), the prescribed circumstances are where the difference in treatment as between a woman and a man in the operation of any of the payment functions is attributable to—

• (a) the application of actuarial factors in respect of the difference in the life expectancy of men and women, or

• (b) any difference in the amount payable by way of a pension which is permitted by regulations made under Article 64(2) of the 1995 Order (equal treatment rule: exceptions).

PART 4 — PPF compensation administration

Manner in which and time when PPF compensation is to be paid

11

As soon as is reasonably practicable after the Board makes a determination of entitlement to PPF compensation in respect of a beneficiary, PPF compensation shall be paid—

• (a) in the case of PPF compensation that is lump sum compensation—

• (i) in accordance with the method of payment specified in regulation 12, and

• (ii) in full, or

• (b) in the case of PPF compensation that is periodic compensation—

• (i) in accordance with the method of payment specified in regulation 12, and

• (ii) by instalments paid in accordance with regulation 13.

Method of payment

12

• (1) Subject to paragraphs (2) and (3), PPF compensation shall be paid by way of automated credit transfer into a bank or other account held in the name of the beneficiary.

• (2) Where it is not possible for the Board to pay PPF compensation into an account specified in paragraph (1), the Board may pay PPF compensation by way of automated credit transfer into a bank or other account held in the joint names of the beneficiary and his spouse or civil partner.

• (3) Where it appears to the Board that—

• (a) there has been a failure in the automated credit transfer system in relation to a payment of PPF compensation, or

• (b) the beneficiary does not have a bank or other account held in his own name or in the joint names of him and his spouse or civil partner into which an automated credit transfer could be made,

PPF compensation may be paid by such other method of payment as appears to the Board to be appropriate to the beneficiary.

Payment of periodic compensation by instalments

13

Periodic compensation shall be paid in instalments of no more than 52 in a year.

Fractional amounts in the calculation of periodic compensation payments

14