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Pensions Act 2004

Type Public General Act

Publication 2004-11-18

Last updated 2024-11-18

State In force

Department Statute Law Database

Source legislation.gov.uk

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For this purpose the references in that sub-paragraph to the active member’s pensionable service, accrual rate and pensionable earnings are to be read as references to the part of his pensionable service in question and to his accrual rate and pensionable earnings in respect of that part.

(6) In any case where the Board is satisfied that it is not possible to identify one or more of the elements of the formula in sub-paragraph (4), the Board may, having regard to the admissible rules, determine how the accrued amount is to be calculated.

(7) This paragraph does not apply in relation to a lump sum to which a person is entitled by reason of commuting any part of a pension under the scheme.

(8) This paragraph is subject to—

paragraph 20 (compensation in respect of scheme right to transfer payment or contribution refund), ...

paragraph 22A (calculation of compensation on and after 1 January 2024), and

paragraph 30 (power of Secretary of State to change percentage rates by order).

Active members who have not attained normal pension age at assessment date

11

(1) Compensation is payable in accordance with this paragraph where a person who, under the admissible rules, is (immediately before the assessment date) an active member of the scheme has not, before that date, attained normal pension age in respect of his rights under the admissible rules of the scheme to a pension.

(2) If the active member survives to attain normal pension age in respect of that pension (“the pension”), he is entitled to periodic compensation in respect of the pension commencing at that age and continuing for life.

(3) The annual rate of the periodic compensation is 90% of the aggregate of—

(a) the protected notional pension, ...

(aa) if the commencement of periodic compensation under this paragraph has been postponed for any period by virtue of paragraph 25A, the amount of the actuarial increase under that paragraph, and

(b) any increases under paragraph 28 (annual increases in periodic compensation).

(4) In sub-paragraph (3) “the protected notional pension” means the aggregate of—

(a) the accrued amount, and

(b) the revaluation amount for the revaluation period (see paragraph 12).

(5) Subject to sub-paragraphs (6) and (7), the accrued amount is—

$$AR×PE×PS$where—AR is the active member’s annual accrual rate in respect of the pension under the admissible rules,PE is the active member’s annual pensionable earnings in respect of the pension under the admissible rules, andPS is the active member’s pensionable service in respect of the pension under the admissible rules in years (including any fraction of a year).$

(6) If the accrual rates or pensionable earnings differ in respect of different parts of the active member’s pensionable service relating to the pension, an amount is calculated in accordance with the formula in sub-paragraph (5) in respect of each of those parts and the accrued amount is the aggregate of those amounts.

For this purpose the references in sub-paragraph (5) to the active member’s pensionable service, accrual rate and pensionable earnings are to be read as references to the part of his pensionable service in question and to his accrual rate and pensionable earnings in respect of that part.

(7) In any case where the Board is satisfied that it is not possible to identify one or more of the elements of the formula in sub-paragraph (5), the Board may, having regard to the admissible rules, determine how the accrued amount is to be calculated.

(8) This paragraph is subject to—

paragraph 20 (compensation in respect of scheme right to transfer payment or contribution refund),

paragraph 22A (calculation of compensation on and after 1 January 2024),

paragraph 24 (commutation),

paragraph 25E (terminal illness lump sum),

... and

paragraph 30 (power of Secretary of State to change percentage rates by order).

12

(1) This paragraph applies for the purposes of paragraph 11(4)(b).

(2) The revaluation period is the period which—

(a) begins with the assessment date, and

(b) ends with the day before the day on which the active member attains normal pension age in respect of the pension.

(3) The revaluation amount for the revaluation period is—

(a) in a case where the revaluation period is less than one month, nil, and

(b) in any other case, the aggregate of—

(i) the higher revaluation percentage of so much of the accrued amount as is attributable to the active member's pensionable service falling before the day on which section 101 of the Pensions Act 2008 comes into force (“the 2008 Act commencement day”), and

(ii) the lower revaluation percentage of so much of the accrued amount as is attributable to the active member's pensionable service falling on or after that day.

(3A) For the purposes of sub-paragraph (3)(b)—

(a) any service within paragraph 36(4)(b) (notional pensionable service) is to be treated as falling on or after the 2008 Act commencement day if, or to the extent that, it is so treated for the purposes of the scheme;

(b) regulations may make provision in relation to cases where it is unclear whether or not any particular pensionable service (either actual or notional) falls, or is to be treated as falling, on or after that day.

(4) In sub-paragraph (3)(b)—

“the higher revaluation percentage” means the lesser of—the percentage increase in the general level of prices in Great Britain during the revaluation period determined in the prescribed manner (“the inflation percentage”), andthe higher maximum revaluation rate;

“the lower revaluation percentage” means the lesser of—the inflation percentage, andthe lower maximum revaluation rate.

(5) For the purposes of sub-paragraph (4)—

“the higher maximum revaluation rate”, in relation to the revaluation period, is—if that period is a period of 12 months, 5%, andin any other case, the percentage that would be the inflation percentage had the general level of prices in Great Britain increased at the rate of 5% compound per annum during that period;

“the lower maximum revaluation rate”, in relation to the revaluation period, is—if that period is a period of 12 months, 2.5%, andin any other case, the percentage that would be the inflation percentage had the general level of prices in Great Britain increased at the rate of 2.5% compound per annum during that period.

This is subject to paragraph 29 (power of Board to determine maximum revaluation rates etc).

(6) In this paragraph “the active member”, “the accrued amount” and “the pension” are to be construed in accordance with paragraph 11.

13

(1) This paragraph applies where the active member dies on or after the assessment date.

(2) Subject to sub-paragraph (4), the widow or widower of the active member is entitled to periodic compensation commencing on the day following the active member’s death and continuing for life.

(3) The annual rate of the periodic compensation at any time is—

(a) where the active member died after attaining normal pension age, half of the annual rate of the periodic compensation (including any actuarial increase under paragraph 25A and any increases under paragraph 28) to which the member would at that time have been entitled under paragraph 11 in respect of the pension had the member not died, and

(b) where the active member died before attaining normal pension age, half of the annual rate of the periodic compensation (including any increases under paragraph 28) to which the member would have been entitled at normal pension age under paragraph 11 if—

(i) normal pension age had been the member’s actual age immediately before the date of the member’s death, and

(ii) the member had not died.

(assuming commencement of the periodic compensation was not postponed by virtue of paragraph 25A).

(3ZA) For the purposes of sub-paragraph (3)(a), if on the day the active member (“A”) died commencement of A's periodic compensation under paragraph 11 was postponed by virtue of paragraph 25A, assume that the periodic compensation commenced immediately before the date of A's death.

(3A) For the purposes of this paragraph, a person's entitlement under paragraph 11 is to be determined disregarding paragraph 25E(1)(b) (successful applicant for terminal illness lump sum loses entitlement to periodic compensation).

(4) The active member’s widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed.

(5) In this paragraph “the pension” and “the active member” are to be construed in accordance with paragraph 11.

14

(1) Compensation is payable in accordance with this paragraph where immediately before the assessment date, under the admissible rules of the scheme, an active member of the scheme has not attained normal pension age in respect of his rights to a lump sum (“the scheme lump sum”).

(2) If the active member survives to attain normal pension age in respect of the scheme lump sum, he is entitled to compensation in respect of the scheme lump sum when he attains that age.

(3) The compensation is a lump sum equal to 90% of the aggregate of—

(a) the protected amount, and

(b) if the payment of compensation under this paragraph has been postponed for any period by virtue of paragraph 25A, the amount of the actuarial increase under that paragraph.

(4) In sub-paragraph (3) “the protected amount” means the aggregate of—

(a) the accrued amount, and

(b) the revaluation amount for the revaluation period.

(5) Subject to sub-paragraphs (6) and (7), the accrued amount is—

$$AR×PE×PS$where—AR is the active member’s annual accrual rate in respect of the scheme lump sum under the admissible rules,PE is the active member’s annual pensionable earnings in respect of the scheme lump sum under the admissible rules, andPS is the active member’s pensionable service in respect of the scheme lump sum, under the admissible rules, in years (including any fraction of a year).$

(6) If the accrual rates or pensionable earnings differ in respect of different parts of the active member’s pensionable service relating to the scheme lump sum, an amount is calculated in accordance with the formula in sub-paragraph (5) in respect of each of those parts and the accrued amount is the aggregate of those amounts.

(7) In any case where the Board is satisfied that it is not possible to identify one or more of the elements of the formula in sub-paragraph (5), the Board may, having regard to the admissible rules, determine how the accrued amount is to be calculated.

(8) Paragraph 12 applies for the purpose of determining the revaluation amount except that—

(a) in that paragraph the references to the pension are to be read as references to the scheme lump sum, and

(b) in sub-paragraph (6) of that paragraph the reference to paragraph 11 is to be read as a reference to this paragraph.

(9) This paragraph is subject to—

paragraph 20 (compensation in respect of scheme right to transfer payment or contribution refund),

paragraph 22A (calculation of compensation on and after 1 January 2024),

paragraph 25E (terminal illness lump sum),

...and

paragraph 30 (power of Secretary of State to change percentage rates by order).

Deferred members who have not attained normal pension age at assessment date

15

(1) Compensation is payable in accordance with this paragraph where, under the admissible rules of the scheme, a person who is a deferred member immediately before the assessment date has not attained normal pension age, in respect of his rights to a pension under the scheme, before that date.

(2) If that person (“the deferred member”) survives to attain normal pension age in respect of that pension (“the pension”), he is entitled to periodic compensation in respect of the pension commencing at that age and continuing for life.

(3) The annual rate of the periodic compensation is 90% of the aggregate of—

(a) the protected pension rate, ...

(aa) if the commencement of periodic compensation under this paragraph has been postponed for any period by virtue of paragraph 25A, the amount of the actuarial increase under that paragraph, and

(b) any increases under paragraph 28 (annual increases in periodic compensation).

(4) In sub-paragraph (3) “the protected pension rate” means the aggregate of—

(a) the accrued amount,

(b) the revaluation amount for the first revaluation period (see paragraph 16), and

(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the initial annual rate of the pension to which the deferred member would have been entitled in accordance with the admissible rules had he attained normal pension age when the pensionable service relating to the pension ended.

(6) This paragraph is subject to—

paragraph 22A (calculation of compensation on and after 1 January 2024),

paragraph 24 (commutation),

paragraph 25E (terminal illness lump sum),

... and

paragraph 30 (power of Secretary of State to change percentage rates by order).

16

(1) This paragraph applies for the purposes of paragraph 15(4)(b).

(2) The first revaluation period is the period which—

(a) begins with the day after the day on which the deferred member’s pensionable service in respect of the pension ended, and

(b) ends with the day before the assessment date.

(3) The revaluation amount for the first revaluation period is—

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

(b) in any other case, the amount determined in the prescribed manner.

(4) In this paragraph “the deferred member” and “the pension” are to be construed in accordance with paragraph 15.

17

(1) This paragraph applies for the purposes of paragraph 15(4)(c).

(2) The second revaluation period is the period which—

(a) begins with the assessment date, and

(b) ends with the day before the day on which the deferred member attains normal pension age in respect of the pension.

(3) The revaluation amount for the second revaluation period is—

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

(b) in any other case, the aggregate of—

(i) the higher revaluation percentage of so much of the relevant amount as is attributable to the deferred member's pensionable service falling before the day on which section 101 of the Pensions Act 2008 comes into force (“the 2008 Act commencement day”), and

(ii) the lower revaluation percentage of so much of the relevant amount as is attributable to the deferred member's pensionable service falling on or after that day.

(3A) For the purposes of sub-paragraph (3)(b)—

(a) any service within paragraph 36(4)(b) (notional pensionable service) is to be treated as falling on or after the 2008 Act commencement day if, or to the extent that, it is so treated for the purposes of the scheme;

(b) regulations may make provision in relation to cases where it is unclear whether or not any particular pensionable service (either actual or notional) falls, or is to be treated as falling, on or after that day.

(4) In sub-paragraph (3)—

“the higher revaluation percentage” means the lesser of—the percentage increase in the general level of prices in Great Britain during the revaluation period determined in the prescribed manner (“the inflation percentage”), andthe higher maximum revaluation rate;

“the lower revaluation percentage” means the lesser of—the inflation percentage, andthe lower maximum revaluation rate;

“the relevant amount” means the aggregate of—the accrued amount, andthe revaluation amount for the first revaluation period (see paragraph 16).

(5) For the purposes of sub-paragraph (3)—

“the higher maximum revaluation rate”, in relation to the second revaluation period, is—if that period is a period of 12 months, 5%, andin any other case, the percentage that would be the inflation percentage had the general level of prices in Great Britain increased at the rate of 5% compound per annum during that period;

“the lower maximum revaluation rate”, in relation to the second revaluation period, is—if that period is a period of 12 months, 2.5%, andin any other case, the percentage that would be the inflation percentage had the general level of prices in Great Britain increased at the rate of 2.5% compound per annum during that period.

This is subject to paragraph 29 (power of Board to determine maximum revaluation rates etc).

(6) In this paragraph “the deferred member”, “the accrued amount” and “the pension” are to be construed in accordance with paragraph 15.

18

(1) This paragraph applies where—

(a) the deferred member dies on or after the assessment date, and

(b) the pension was attributable to the deferred member’s pensionable service.

(2) Subject to sub-paragraph (4), the widow or widower of the deferred member is entitled to periodic compensation commencing on the day following the deferred member’s death and continuing for life.

(3) The annual rate of the periodic compensation at any time is—

(a) where the deferred member died after attaining normal pension age, half of the annual rate of the periodic compensation (including any actuarial increase under paragraph 25A and any increases under paragraph 28) to which the deferred member would at that time have been entitled under paragraph 15 in respect of the pension had the member not died,

(b) where the deferred member died before attaining normal pension age, half of the annual rate of the periodic compensation (including any increases under paragraph 28) to which the deferred member would have been entitled at that time under paragraph 15 if—

(i) normal pension age had been the deferred member’s actual age immediately before the date of the deferred member’s death, and

(ii) the deferred member had not died.

(assuming commencement of the periodic compensation was not postponed by virtue of paragraph 25A).

(3ZA) For the purposes of sub-paragraph (3)(a), if on the day the deferred member (“D”) died commencement of D's periodic compensation under paragraph 15 was postponed by virtue of paragraph 25A, assume that the periodic compensation commenced immediately before the date of D's death.

(3A) For the purposes of this paragraph, a person's entitlement under paragraph 15 is to be determined disregarding paragraph 25E(1)(b) (successful applicant for terminal illness lump sum loses entitlement to periodic compensation).

(4) The deferred member’s widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed.

(5) In this paragraph “the deferred member” and “the pension” are to be construed in accordance with paragraph 15.

19

(1) Compensation is payable in accordance with this paragraph where, under the admissible rules of the scheme, a deferred member has not attained normal pension age in respect of his rights to a lump sum under the scheme (“the scheme lump sum”) before the assessment date.

(2) If the deferred member survives to attain normal pension age in respect of the scheme lump sum, he is entitled to compensation under this paragraph on attaining that age.

(3) The compensation is a lump sum equal to 90% of the aggregate of—

(a) the protected amount, and

(b) if the payment of compensation under this paragraph has been postponed for any period by virtue of paragraph 25A, the amount of the actuarial increase under that paragraph.

(4) In sub-paragraph (3) “the protected amount” means the aggregate of—

(a) the accrued amount,

(b) the revaluation amount for the first revaluation period, and

(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the amount of the scheme lump sum to which the deferred member would have been entitled in accordance with the admissible rules had normal pension age been the actual age attained by the deferred member when the pensionable service relating to the lump sum ended.

(6) Paragraphs 16 and 17 apply in relation to this paragraph as if in those paragraphs—

(a) references to the pension were to the scheme lump sum, and

(b) “the deferred member” and “the accrued amount” had the same meaning as in this paragraph.

(7) This paragraph does not apply in relation to a lump sum to which a person is entitled by reason of commuting any part of a pension under the scheme.

(8) This paragraph is subject to—

paragraph 22A (calculation of compensation on and after 1 January 2024),

paragraph 25E (terminal illness lump sum),

... and

paragraph 30 (power of Secretary of State to change percentage rates by order).

Compensation in respect of scheme right to transfer payment or contribution refund

20

(1) Compensation is payable in accordance with this paragraph where—

(a) a person’s pensionable service terminates on the commencement of the assessment period,

(b) as a result, he has rights, under the admissible rules, to—

(i) a transfer payment calculated by reference to the value of benefits which have accrued to him under the scheme (“the protected transfer payment”), or

(ii) a cash payment calculated by reference to the amount of contributions made by him or on his behalf to the scheme (“the protected contribution repayment”),

(c) Chapter 2 of Part 4ZA of the Pension Schemes Act 1993 (c. 48) (early leavers: cash transfer sums and contribution refunds) does not apply to him, and

(d) he does not have relevant accrued rights to benefit (within the meaning of section 101AA(4) of that Act).

(2) That person is entitled to compensation in the form of a lump sum in respect of the protected transfer payment or protected contribution repayment.

(3) The amount of the compensation is 90% of the amount of the protected transfer payment or protected contribution repayment (whichever is the greater).

(4) For the purposes of sub-paragraph (3), the amount of the protected transfer payment or protected contribution repayment is to be calculated in accordance with the admissible rules, which are to be applied for this purpose subject to any prescribed modifications.

(5) The compensation is payable immediately after the transfer notice given under section 160 is received by the trustees or managers of the scheme.

(6) This paragraph is subject to—

paragraph 22A (calculation of compensation on and after 1 January 2024), and

paragraph 30 (power of Secretary of State to change percentage rates by order).

(7) Regulations may modify any provision of paragraph 8, 10, 11 or 14 (compensation for persons who were active members immediately before assessment date) as it applies in the case of a person who is entitled to compensation under this paragraph.

(8) Regulations may modify any provision of sub-paragraphs (1) to (6) as it applies in the case of a person who is entitled to compensation under paragraph 8, 10, 11 or 14.

Pension credit members who have not attained normal benefit age at assessment date

21

(1) This paragraph applies to a person who—

(a) is a pension credit member of the scheme immediately before the assessment date, but

(b) has not attained normal benefit age before that date.

(2) But it applies only to the extent that the member's pension credit rights do not involve the member being credited by the scheme with notional pensionable service.

(3) Paragraphs 15, 18 and 19 apply to the pension credit member as they apply to a deferred member who has not attained normal pension age before the assessment date, subject to the following modifications.

(4) In paragraph 15—

(a) in sub-paragraphs (1) and (2) the references to normal pension age are to be read as references to normal benefit age,

(b) in sub-paragraph (4) for the words from “the aggregate of” to the end substitute “ the accrued amount ”, and

(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the initial annual rate of the pension to which the deferred member would have been entitled in accordance with the admissible rules had the member attained normal benefit age on the transfer day.

(5) In paragraph 18—

(a) for sub-paragraph (1)(b) substitute—

(b) the pension was attributable (directly or indirectly) to a pension credit to which the deferred member became entitled under section 29(1)(b) of the Welfare Reform and Pensions Act 1999.

, and

(b) in sub-paragraph (3) the references to normal pension age are to be read as references to normal benefit age.

(6) In paragraph 19—

(a) in sub-paragraphs (1) and (2) the references to normal pension age are to be read as references to normal benefit age,

(b) in sub-paragraph (4) for the words from “the aggregate of” to the end substitute “ the accrued amount ”,

(5) In sub-paragraph (4) “the accrued amount” means an amount equal to the amount of the scheme lump sum to which the deferred member would have been entitled in accordance with the admissible rules had the member attained normal benefit age on the transfer day.

, and

(d) omit sub-paragraph (6).

(7) In this paragraph “transfer day” has the meaning given by section 29 of the Welfare Reform and Pensions Act 1999 (creation of pension debits and credits).

Survivors who do not meet conditions for scheme benefits at assessment date

22

(1) Compensation is payable in accordance with this paragraph where—

(a) a member of the scheme has died before the assessment date,

(b) as a result of that death, a pension, which is attributable to the member’s pensionable service, is payable to that person’s widow or widower or any other person (“the survivor”) if conditions specified in the scheme rules are met, and

(2) The survivor is entitled to periodic compensation in respect of that pension (“the pension”)—

(a) commencing if, and when, the pension would have become payable under the admissible rules, and

(b) continuing until such time as entitlement to the pension would have ceased under the admissible rules.

(3) The annual rate of the periodic compensation is 100% of the aggregate of—

(a) the initial rate of the pension which would have been payable in accordance with the admissible rules had the conditions mentioned in sub-paragraph (1)(c) been satisfied, immediately before the assessment date, and

(b) any increases under paragraph 28 (annual increases in periodic compensation).

(4) This paragraph is subject to—

paragraph 22A (calculation of compensation on and after 1 January 2024), and

paragraph 30 (power of Secretary of State to change percentage rates by order).

Compensation in form of dependants' benefits

23

(1) Regulations may provide for compensation to be payable, in such circumstances as may be prescribed, to or in respect of—

(a) partners of prescribed descriptions of persons of prescribed descriptions who were members of the scheme immediately before the assessment date;

(b) dependants of prescribed descriptions of persons of prescribed descriptions who—

(i) were members of the scheme, or had rights to benefits payable under the scheme rules in respect of a member, immediately before the assessment date,

(ii) became entitled to benefits under the scheme rules in respect of a member on or after the assessment date but before the time the trustees or managers of the scheme received a transfer notice under section 160, or

(iii) have become entitled to compensation under paragraph 22 (survivors who do not meet conditions for scheme benefits at assessment date), in relation to the scheme.

(2) Regulations may in particular—

(a) provide for compensation in the form of periodic or lump sum payments;

(b) provide for periodic compensation to be payable for a prescribed period;

(c) apply paragraphs 28 and 29(2) (annual increases in respect of periodic compensation) in respect of compensation in the form of periodic payments (with or without modifications).

Commutation of periodic compensation

24

(1) In prescribed circumstances, a person entitled to periodic compensation under paragraph 5, 8, 11 or 15 may opt to commute for a lump sum a portion of the periodic compensation with effect from the time it commences .

(2) Except in such circumstances as may be prescribed, the portion commuted under sub-paragraph (1) must not exceed 25% of the periodic compensation at that time.

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

(4) Where a person opts to commute any part of his periodic compensation under this paragraph, the lump sum payable under sub-paragraph (1) is the actuarial equivalent of the commuted portion of the periodic compensation calculated from tables designated for this purpose by the Board.

(5) The Board must publish in such manner as it considers appropriate the tables designated by it for the purposes of sub-paragraph (4).

(6) Regulations may prescribe the manner in which an option to commute periodic compensation under this paragraph may be exercised.

(7) This paragraph does not apply where—

(a) before the assessment date, the person concerned has received benefits under the scheme rules which were in the form of a lump sum (otherwise than as a result of the commutation of any part of a pension) and were attributable to his own service under the scheme, or

(b) immediately before the assessment date, the person concerned has rights to a lump sum under the admissible rules (otherwise than by commutation of any part of a pension) and those rights are attributable to such service.

(8) The Secretary of State may, by order, amend sub-paragraph (2) to substitute a different percentage for the percentage for the time being specified in that sub-paragraph.

Early payment of compensation

25

(1) Regulations may prescribe circumstances in which, and conditions subject to which, a person may become entitled to—

(a) periodic compensation under paragraph 11 or 15, or

(b) lump sum compensation under paragraph 14 or 19,

before he attains normal pension age (or, in a case to which paragraph 21 or 21A applies, normal benefit age).

(2) The Board must determine the amount of the actuarial reduction to be applied to compensation where a person becomes so entitled by virtue of regulations under this paragraph.

(3) Where, by virtue of this paragraph, periodic compensation is payable to a person under paragraph 11 or 15 before that person attains normal pension age—

(a) paragraph 12(2) applies as if the reference to the date on which the active member attains normal pension age were a reference to the date on which the compensation is payable by virtue of this paragraph, and

(b) paragraph 17(2)(b) applies as if the reference to the date on which the deferred member attains normal pension age were a reference to the date on which the compensation is payable by virtue of this paragraph.

Compensation cap

26

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Increasing the compensation cap in line with earnings

27

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annual increase in periodic compensation

28

(1) This paragraph provides for the increases mentioned in sub-paragraph (3)(b) of paragraphs 3, 5, 8, 11, 15 and 22.

(2) Where a person is entitled to periodic compensation under any of those paragraphs, he is entitled, on the indexation date, to an increase under this paragraph of—

(a) the appropriate percentage of the amount of the underlying rate immediately before that date, or

(b) where the person first became entitled to the periodic compensation during the period of 12 months ending immediately before that date, 1/12th of that amount for each full month for which he was so entitled.

(3) In sub-paragraph (2)—

“appropriate percentage” means the lesser of—the percentage increase in the general level of prices in Great Britain for the period of 12 months ending with the 31st May last falling before the indexation date, and2.5%;

“indexation date” means—the 1st January next falling after a person first becomes entitled to the periodic compensation, andeach subsequent 1st January during his lifetime;

“underlying rate” means, in the case of periodic compensation under paragraph 3 or 22, the aggregate of—so much of the amount mentioned in sub-paragraph (3)(a) of the paragraph in question as is attributable to post-1997 service, andthe amount within sub-paragraph (3)(b) of that paragraph immediately before the indexation date.

“underlying rate” means, in the case of periodic compensation under paragraph 5, 8, 11 or 15, the aggregate of—so much of the amount mentioned in sub-paragraph (3)(a) of the paragraph in question as is attributable to post-1997 service,so much of the amount mentioned in sub-paragraph (3)(aa) of the paragraph in question as is attributable to post-1997 service, andthe amount within sub-paragraph (3)(b) of that paragraph immediately before the indexation date.

(3A) For the purposes of paragraph (a) of the definition of “appropriate percentage” in sub-paragraph (3), the Secretary of State may (from time to time) decide, as the Secretary of State thinks fit, the manner in which percentage increases in the general level of prices in Great Britain are to be determined.

(3B) The Secretary of State must publish any decision made under sub-paragraph (3A).

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

(5) Where a portion of periodic compensation under one of the paragraphs mentioned in sub-paragraph (1) has been commuted under paragraph 24—

(a) for the purposes of sub-paragraph (2), each definition of “underlying rate” in sub-paragraph (3) applies as if the reference in paragraph (a) of the definition to the amount mentioned in sub-paragraph (3)(a) of the paragraph in question was a reference to that amount reduced by the commutation percentage, ...

(b) that amount (as so reduced) is attributable to post-1997 service and pre-1997 service in the same proportions as that amount would have been so attributable had no part of the periodic compensation been commuted.

(c) for the purposes of sub-paragraph (2), the definition of “underlying rate” in the case of periodic compensation under paragraph 5, 8, 11 or 15 applies as if the reference in paragraph (b) of the definition to the amount mentioned in sub-paragraph (3)(aa) of the paragraph in question was a reference to that amount reduced by the commutation percentage, and

(d) that amount (as so reduced) is attributable to post-1997 service and pre-1997 service in the same proportions as that amount would have been so attributable had no part of the periodic compensation been commuted.

(5A) The amount mentioned in sub-paragraph (3)(aa) of paragraph 5, 8, 11 or 15 is attributable—

(a) to post-1997 service, in so far as it relates to so much of the amount mentioned in sub-paragraph (3)(a) of the paragraph in question as is attributable to post-1997 service, and

(b) to pre-1997 service, in so far as it relates to so much of that amount as is attributable to pre-1997 service.

(5B) Where the commencement of periodic compensation under paragraph 5, 8, 11 or 15 has been postponed by virtue of paragraph 25A, this paragraph applies as if the person first becomes entitled to periodic compensation under the paragraph in question on the day on which the periodic compensation commences.

(6) In this paragraph—

“post-1997 service” means—pensionable service which is within paragraph 36(4)(a) and occurs on or after 6th April 1997, orpensionable service which is within paragraph 36(4)(b) and meets such requirements as may be prescribed;

“pre-1997 service” means—pensionable service which is within paragraph 36(4)(a) and occurred before 6th April 1997, orpensionable service which is within paragraph 36(4)(b) and meets such requirements as may be prescribed;

“the commutation percentage”, in relation to periodic compensation, means the percentage of that compensation commuted under paragraph 24.

(7) But in this paragraph, in relation to any relevant pension credit amount, “post-1997 service” and “pre-1997 service” have such meanings as may be prescribed.

(8) In sub-paragraph (7), “relevant pension credit amount” means an amount mentioned in sub-paragraph (3)(a) of—

(a) paragraph 3,

(b) paragraph 5, or

which is attributable (directly or indirectly) to a pension credit.

(9) This paragraph is subject to paragraph 29 (Board’s power to alter rates of revaluation and indexation).

Board’s powers to alter rates of revaluation and indexation

29

(1) The Board may determine what is to be the higher maximum revaluation rate or the lower maximum revaluation rate for the purposes of paragraphs 12(4) and 17(4), and where it does so the relevant definitions in paragraphs 12(5) and 17(5) do not apply.

(2) The Board may also determine the percentage that is to be the appropriate percentage for the purposes of paragraph 28 (and where it does so the definition of “appropriate percentage” in paragraph 28(3) does not apply).

(3) Before making a determination under this paragraph the Board must—

(a) consult such persons as it considers appropriate, and

(b) publish details of the proposed determination in such manner as it considers appropriate and consider any representations made in respect of it.

(4) The rate determined under this paragraph may be nil.

(5) A determination under this paragraph may be expressed so as to have effect for a limited period.

(6) A determination under sub-paragraph (2)—

(a) has effect in relation to future increases under paragraph 28 only, and

(b) may be expressed to have effect—

(i) in all cases (whether the entitlement to the periodic compensation first arose before or after the date the determination is made), or

(ii) only in cases where entitlement to the periodic compensation first arose on or after a date determined by the Board.

(6A) A determination under sub-paragraph (2) which has effect as mentioned in sub-paragraph (6)(b)(ii) may provide that, where the payment of periodic compensation to a person is postponed by virtue of paragraph 25A, the determination applies as if the person first becomes entitled to the periodic compensation on the day on which the periodic compensation commences.

(7) Notice of any determination under this paragraph must be published in such manner as the Board considers appropriate.

Secretary of State’s powers to vary percentage paid as compensation

30

(1) The Secretary of State may, on the recommendation of the Board, by order provide that any of the provisions mentioned in sub-paragraph (2) is to have effect as if a different percentage were substituted for the percentage specified in the provision on the passing of this Act (“the original percentage”).

(2) The provisions are paragraphs 3(4)(a) and (b), 5(3), 7(2), 8(3), 10(2), 11(3), 14(3), 15(3), 19(3), 20(3) and 22(3) of this Schedule (percentage used to calculate periodic or lump sum compensation entitlement).

(3) Subject to sub-paragraph (4), an order under sub-paragraph (1) has effect only in respect of any period for which the Board has, under paragraph 29—

(a) reduced the maximum revaluation rate for the purposes of paragraphs 12(4) and 17(4) to nil, and

(b) reduced the appropriate percentage for the purposes of paragraph 28 to nil in all cases.

(4) Sub-paragraph (3) does not prevent an order under sub-paragraph (1) having effect to the extent that it provides for paragraph 3(4)(a), 11(3), 14(3), 15(3), 19(3) or 20(3) (provisions where the original percentage is 90%) to have effect as if for the original percentage there were substituted a higher percentage.

(5) Before making a recommendation for the purposes of sub-paragraph (1) the Board must—

(a) consult such persons as it considers appropriate, and

(b) publish details of the proposed recommendation in such manner as it considers appropriate and consider any representations made in respect of it.

(6) Subject to sub-paragraph (3), an order under this paragraph may have effect—

(a) for a limited period specified in the order;

(b) in relation—

(i) to all payments of compensation which fall to be made after such date as may be specified in the order (whether the entitlement to the periodic compensation first arose before or after that date), or

(ii) only to payments of compensation to which a person first becomes entitled after such a date.

(6A) An order under this paragraph which has effect as mentioned in sub-paragraph (6)(b)(ii) may provide that, where the payment of compensation to a person is postponed by virtue of paragraph 25A, the order applies as if the person first becomes entitled to the compensation immediately after the period of postponement ends.

(7) The date specified under sub-paragraph (6)(b)(i) or (ii) must not be earlier than the date of the order.

Special provision in relation to certain pensions in payment before the assessment date

31

(1) The powers conferred by this paragraph are exercisable in relation to cases where—

(a) immediately before the assessment date, a person (“the pensioner”) is entitled to present payment of a pension under the scheme rules (“the pre-assessment date pension”), but

(b) the effect of disregarding rules within paragraphs (a) and (b) of paragraph 35(2) is that the pensioner is not entitled to compensation under paragraph 3(2) by reason of the pension or a part of the pension.

(2) Regulations may provide—

(a) for the pensioner to be treated, for the purposes of the pension compensation provisions, as entitled, immediately before the assessment date, to present payment of a pension under the admissible rules, and

(b) for the compensation payable under paragraph 3 in respect of that pension to be determined in the prescribed manner and, for this purpose, for any provision of this Schedule to be applied with such modifications as may be prescribed.

(3) Regulations may also provide, in cases where—

(a) the pensioner is not treated as entitled to present payment of a pension by virtue of regulations under sub-paragraph (2), but

(b) he is or may become entitled to compensation in respect of the pre-assessment date pension otherwise than under paragraph 3,

for any provision of this Schedule to apply with such modifications as may be prescribed.

Short periods of service which terminate on commencement of assessment period

32

(1) This paragraph applies to a member of the scheme if—

(a) his pensionable service terminates on the commencement of the assessment period, and

(b) as a result, he has rights, in relation to the scheme, under Chapter 2 of Part 4ZA of the Pension Schemes Act 1993 (c. 48) (early leavers: cash transfer sums and contribution refunds).

(2) Where this paragraph applies, for the purposes of this Schedule the member is to be treated as if, immediately before the assessment date, he—

(a) had relevant accrued rights to benefits under the scheme (within the meaning of section 101AA(4) of that Act), and

(b) did not have any other rights to benefits (other than benefits attributable (directly or indirectly) to a pension credit) under the scheme.

Power to modify Schedule in its application to certain schemes

33

(1) Where the scheme is a prescribed scheme or a scheme of a prescribed description, this Schedule applies with such modifications as may be prescribed.

(2) Where the scheme is a variable-rate scheme, regulations under this paragraph may have the effect that the amount of periodic compensation payable to a person is, from a specified time, to be different from the amount that would otherwise be payable under this Schedule.

(3) A “variable-rate scheme” is a scheme under which the annual rate of pension to which a person is entitled would have increased (otherwise than by way of revaluation) or decreased at any time after the assessment date, had the scheme continued in existence until that time (and had the scheme rules remained unchanged).

(4) Where the scheme is a fixed-term scheme, regulations under this paragraph may have the effect that no periodic compensation is to be payable to a person from a specified time.

(5) A “fixed-term scheme” is a scheme under which a person's entitlement to benefits would have ceased at any time after the assessment date, had the scheme continued in existence until that time (and had the scheme rules remained unchanged).

(6) In this paragraph “a specified time” means a time determined in accordance with regulations under this paragraph.

Normal pension age

34

(1) In this Schedule “normal pension age”, in relation to the scheme and any pension or lump sum under it, means the age specified in the admissible rules as the earliest age at which the pension or lump sum becomes payable without actuarial adjustment (disregarding any admissible rule making special provision as to early payment on the grounds of ill health or otherwise).

(2) Where different ages are specified in relation to different parts of a pension or lump sum—

(a) this Schedule has effect as if those parts were separate pensions or, as the case may be, lump sums, and

(b) references in relation to a part of the pension or lump sum to the normal pension age are to be read as references to the age specified in the admissible rules as the earliest age at which that part becomes payable under the scheme without actuarial adjustment (disregarding any special provision as to early payment on grounds of ill health or otherwise).

(3) In any case where the Board is satisfied that it is not possible to identify the normal pension age from the admissible rules of the scheme, it may, having regard to those rules, determine how the normal pension age is to be determined.

Scheme rules, admissible rules etc

35

(1) In this Schedule, in relation to the scheme, the following expressions have the meaning given by this paragraph—

“admissible rules”;

“recent rule changes”;

“recent discretionary increase”.

(2) The “admissible rules” means the scheme rules disregarding—

(a) in the case of a scheme to which sub-paragraph (3) applies, any recent rule changes, and

(b) in any case, any scheme rule which comes into operation on, or operates by reference, to the winding up of the scheme or any associated event.

(3) This sub-paragraph applies to a scheme if, in calculating the protected liabilities in relation to the scheme at the relevant time, the effect of taking into account any recent rule changes is that those liabilities are greater than they otherwise would be.

(3A) This sub-paragraph applies to a scheme if, in calculating the protected liabilities in relation to the scheme at the relevant time, the effect of taking into account any recent discretionary increases is that those liabilities are greater than they otherwise would be.

(4) In sub-paragraphs (3) and (3A) “the relevant time” means the time immediately before the assessment period which begins on the assessment date.

(5) Subject to sub-paragraph (6), “recent rule changes” means—

(a) changes to the scheme rules which took effect in the period of three years ending with the assessment date, or were made in that period and took effect by reference to an earlier time, and

(b) any scheme rules which come into operation on, or operate by reference to—

(i) an insolvency event in relation to the employer or any associated event, or

(ii) any prescribed event relating to the future of the employer as a going concern.

(6) “Recent rule changes” does not include—

(a) any scheme rules or changes attributable to paragraph 3 of Schedule 5 to the Social Security Act 1989 (c. 24), section 129 of the Pension Schemes Act 1993 (c. 48), section 117 of the Pensions Act 1995 (c. 26), section 31(4) of the Welfare Reform and Pensions Act 1999 (c. 30) or section 306 of this Act (overriding requirements),

(b) any enactment, or any scheme rules or changes which are required or reasonably necessary to comply with an enactment,

(c) any scheme rules or changes that come into operation on, or operate by reference to, the winding up of the scheme or any associated event, and

(d) any scheme rules or changes of a prescribed description.

(7) “Recent discretionary increase” means an increase in the rate of any pension in payment or postponed pension under the scheme rules which took effect in the period mentioned in sub-paragraph (5)(a).

(8) For the purposes of sub-paragraph (7) an increase (“the relevant increase”) in the rate of a pension in payment or postponed pension is to be disregarded to the extent that it does not exceed—

(a) the amount by which the pension in question is required to be increased by virtue of—

(i) the admissible rules, or

(ii) sections 13(1) and 109 of the Pension Schemes Act 1993 (requirement to index and pay guaranteed minimum pensions), or

(b) if greater, the appropriate percentage of the rate of that pension.

(9) For the purposes of sub-paragraph (8)(a), no increase in the rate of a pension which is made at the discretion of the trustees or managers of the scheme, the employer or any other person is to be regarded as an increase required by virtue of the admissible rules.

(10) For the purposes of sub-paragraph (8)(b), “the appropriate percentage” is the percentage increase in the general level of prices in Great Britain during the period—

(a) beginning when the rate of the pension was last increased or, if there has been no previous increase, the date the pension first became payable (or would have been payable but for its being postponed), and

(b) ending with the time the relevant increase was made.

Accrual rate, pensionable service and pensionable earnings

36

(1) In this Schedule, in relation to a member’s entitlement to benefits under the scheme, each of the following expressions has the meaning given by this paragraph—

“accrual rate”;

“pensionable earnings”;

“pensionable service”.

(2) “Accrual rate” means the rate at which under the admissible rules rights to the benefits accrue over time by reference to periods of pensionable service.

(3) “Pensionable earnings” means the earnings by reference to which the benefits are calculated under the admissible rules.

(4) Subject to sub-paragraph (5), “pensionable service” means—

(a) actual service in any description of employment to which the scheme applies which qualifies the member for benefits under the scheme, and

(b) any notional service allowed in respect of the member under the admissible rules which qualifies the member for such benefits.

(5) The service within sub-paragraph (4)(b) does not include—

(a) service attributable (directly or indirectly) to a pension credit (except for the purposes of paragraphs 21 and 21A), or

(b) service of a prescribed description.

Other definitions

37

(1) In this Schedule—

“deferred member”, in relation to the scheme, means a person who, under the admissible rules, has accrued rights other than—an active member, ora person who in respect of his pensionable service is entitled to the present payment of pension or other benefits;

“normal benefit age”, in relation to the scheme and a person with rights to a pension or lump sum under it attributable (directly or indirectly) to a pension credit, means the age specified in the admissible rules as the earliest age at which that pension or lump sum becomes payable without actuarial adjustment (disregarding any scheme rule making special provision as to early payment on grounds of ill health or otherwise);

“pension credit member”, in relation to the scheme, means a person who has rights under the scheme which are attributable (directly or indirectly) to a pension credit;

“pension credit rights”, in relation to the scheme, means rights to future benefits under the scheme which are attributable (directly or indirectly) to a pension credit;

“the scheme” is to be construed in accordance with paragraph 1.

(2) For the purposes of this Schedule the accrued rights of a member of the scheme at any time are the rights (other than rights attributable (directly or indirectly) to a pension credit) which, in accordance with the admissible rules, have accrued to or in respect of him at that time to future benefits.

(3) In this Schedule references to a pension or lump sum under the admissible rules of the scheme, or a right to such a pension or lump sum, do not include a pension or lump sum, or right to a pension or lump sum, which is a money purchase benefit.

(4) In this Schedule references to “ill health” are to be construed in accordance with regulations under this sub-paragraph.

SCHEDULE 8

SCHEDULE 9

1

The issue of a determination notice under section 123 approving a notice issued under section 122.

2

The failure to issue a determination notice under section 123.

3

The issue of, or failure to issue, a notice under section 122 by the Board by virtue of section 124 (Board’s duty where failure to comply with section 122).

4

The issue of, or failure to issue—

(a) a scheme failure notice under subsection (2) of section 130 (scheme rescue not possible), or

(b) a withdrawal notice under subsection (3) of that section (scheme rescue has occurred).

5

Any direction given under subsection (2) of section 134 (directions during an assessment period) or any variation or revocation of such a direction under subsection (4) of that section.

6

The issue of a notice under section 136(2) (power to validate contraventions of section 135).

7

The making of a loan under section 139(2) (loans to pay scheme benefits), the amount of any such loan or the failure to make such a loan.

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

The approval of, or failure to approve, a valuation in respect of an eligible scheme under section 144(2).

10

The issue of, or failure to issue, a withdrawal notice under or by virtue of—

(a) section 146 (schemes which become eligible schemes), or

(b) section 147 (new schemes created to replace existing schemes).

11

The issue of, or failure to issue, a withdrawal notice under section 148 (no insolvency event has occurred or is likely to occur).

12

The issue of, or failure to issue, a determination notice under section 152(3) (whether value of scheme assets less than aggregate of liabilities etc).

13

The issue of, or failure to issue, a determination notice under section 153(6) (authorisation to continue as closed scheme).

14

Any direction given under section 154(7) (directions about winding up of scheme with sufficient assets to meet protected liabilities) and any variation or revocation of such a direction.

15

The failure by the Board to give a transfer notice under section 160.

16

Any determination by the Board of a person’s entitlement to compensation under the pension compensation provisions or the failure in any case to make such a determination.

17

Any failure by the Board to make a payment required by section 163(4)(b) (adjustments to be made where Board assumes responsibility for a scheme).

18

Any determination by the Board under section 181(3)(a) (the eligible schemes in respect of which the initial levy or the pension protection levy is imposed) or the failure to make such a determination.

19

The amount of the initial levy or any pension protection levy payable in respect of an eligible scheme determined by the Board under section 181(3)(b).

20

The making of a fraud compensation payment under section 182(1), the amount of any such payment or the failure to make such a payment.

21

The issue of, or failure to issue, a notice under section 183(2) (scheme rescue not possible or having occurred in case of scheme which is not eligible etc).

22

Any settlement date determined by the Board under section 184(2) (recovery of value) or the failure to determine a settlement date under that provision.

23

Any determination by the Board under section 184(4) (recovery of value: whether amount received in respect of particular act or omission) or the failure to make such a determination.

24

The making of a payment under section 186(1) (interim payments), the amount of any such payment or the failure to make such a payment.

25

Any term or condition imposed by the Board—

(a) under section 185(2) on the making of a fraud compensation payment, or

(b) under subsection (4) of section 186 (interim payments) on the making of a payment under subsection (1) of that section.

26

Any determination by the Board under section 186(3)(b) (interim payments) that the amount of a payment was excessive.

27

Any date determined by the Board under section 187(4) (earliest date for making a fraud compensation transfer payment).

28

Any determination by the Board under section 187(6) (fraud compensation transfer payments: whether payment is received in respect of particular act or omission).

29

Any determination by the Board under section 189(7)(a) (occupational pension schemes in respect of which any fraud compensation levy is imposed) or the failure to make such a determination.

30

The amount of any fraud compensation levy payable in respect of an occupational pension scheme determined by the Board under section 189(7)(b).

SCHEDULE 10

Use of information held by Secretary of State etc

1

(1) Section 3 of the Social Security Act 1998 (c. 14) (use of information) is amended as follows.

(2) In subsection (1), for the words from “social security” to “training” substitute “ any of the matters specified in subsection (1A) below ”.

(3) After subsection (1) insert—

(1A) The matters are— (a) social security, child support or war pensions; (b) employment or training; (c) private pensions policy; (d) retirement planning.

(4) In subsection (2)(a), for the words from “social security” to “training” substitute “ any of the matters specified in subsection (1A) above ”.

(5) After subsection (4) insert—

(5) In this section— “private pensions policy” means policy relating to occupational pension schemes or personal pension schemes (within the meaning given by section 1 of the Pension Schemes Act 1993); “retirement planning” means promoting financial planning for retirement.

Supply of information held by tax authorities

2

(1) This paragraph applies to information which is held—

(a) by the Commissioners of Inland Revenue;

(b) by a person providing services to the Commissioners of Inland Revenue, in connection with the provision of those services;

(d) by a person providing services to the Commissioners of Customs and Excise, in connection with the provision of those services.

(2) Information to which this paragraph applies may be supplied—

(a) to the Secretary of State or the Northern Ireland Department, or

(b) to a person providing services to the Secretary of State or the Northern Ireland Department,

for use for the purposes of functions relating to private pensions policy or retirement planning.

(3) In this paragraph—

“private pensions policy” means policy relating to occupational pension schemes or personal pension schemes;

“retirement planning” means promoting financial planning for retirement;

“the Northern Ireland Department” means the Department for Social Development in Northern Ireland.

Supply of housing benefit and council tax benefit information

3

(1) Section 122D of the Social Security Administration Act 1992 (c. 5) (supply of information by authorities administering housing benefit or council tax benefit) is amended as follows.

(2) In subsection (1) for “or employment or training” substitute “ employment or training, private pensions policy or retirement planning ”.

(3) After subsection (2) insert—

(2A) Information supplied under subsection (2) may be used for any purpose relating to private pensions policy or retirement planning.

(4) After subsection (5) insert—

(6) In this section— “private pensions policy” means policy relating to occupational pension schemes or personal pension schemes (within the meaning given by section 1 of the Pension Schemes Act 1993); “retirement planning” means promoting financial planning for retirement.

SCHEDULE 11

1

In this Part of this Schedule “the principal Act” means the Social Security Contributions and Benefits Act 1992.

2

Schedule 5 to the principal Act (increase of pension where entitlement is deferred) is amended as follows.

3

For the heading, substitute “ PENSION INCREASE OR LUMP SUM WHERE ENTITLEMENT TO RETIREMENT PENSION IS DEFERRED ”.

4

Before paragraph 1 insert—

(A1) (1) Where a person’s entitlement to a Category A or Category B retirement pension is deferred and the period of deferment is at least 12 months, the person shall, on claiming his pension or within a prescribed period after claiming it, elect in the prescribed manner either— (a) that paragraph 1 (entitlement to increase of pension) is to apply in relation to the period of deferment, or (b) that paragraph 3A (entitlement to lump sum) is to apply in relation to the period of deferment. (2) If no election under sub-paragraph (1) is made within the period prescribed under that sub-paragraph, the person is to be treated as having made an election under sub-paragraph (1)(b). (3) Regulations— (a) may enable a person who has made an election under sub-paragraph (1) (including one that the person is treated by sub-paragraph (2) as having made) to change the election within a prescribed period and in a prescribed manner, if prescribed conditions are satisfied, and (b) if they enable a person to make an election under sub-paragraph (1)(b) in respect of a period of deferment after receiving any increase of pension under paragraph 1 by reference to that period, may for the purpose of avoiding duplication of payment— (i) enable an amount determined in accordance with the regulations to be recovered from the person in a prescribed manner and within a prescribed period, or (ii) provide for an amount determined in accordance with the regulations to be treated as having been paid on account of the amount to which the person is entitled under paragraph 3A. (4) Where the Category A or Category B retirement pension includes any increase under paragraphs 5 to 6, no election under sub-paragraph (1) applies to so much of the pension as consists of that increase (an entitlement to an increase of pension in respect of such an increase after a period of deferment being conferred either by paragraphs 1 and 2 or by paragraph 2A).

5

For paragraph 1 (increase of pension where pensioner’s entitlement is deferred) substitute—

(1) (1) This paragraph applies where a person’s entitlement to a Category A or Category B retirement pension is deferred and one of the following conditions is met— (a) the period of deferment is less than 12 months, or (b) the person has made an election under paragraph A1(1)(a) in relation to the period of deferment. (2) The rate of the person’s Category A or Category B retirement pension shall be increased by an amount equal to the aggregate of the increments to which he is entitled under paragraph 2, but only if that amount is enough to increase the rate of the pension by at least 1 per cent.

6

(1) In paragraph 2 (calculation of increment), in sub-paragraph (5)(b), for “83 or” substitute “ 83A or ”.

(2) In relation to any incremental period (within the meaning of Schedule 5 to the principal Act) beginning before 6th April 2010, the reference in paragraph 2(5)(b) of that Schedule to section 83A of that Act is to be read as a reference to section 83 or 84 of that Act.

7

After paragraph 2 insert—

(2A) (1) This paragraph applies where— (a) a person’s entitlement to a Category A or Category B retirement pension is deferred, (b) the pension includes an increase under paragraphs 5 to 6, and (c) the person has made (or is treated as having made) an election under paragraph A1(1)(b) in relation to the period of deferment. (2) The rate of the person’s Category A or Category B retirement pension shall be increased by an amount equal to the aggregate of the increments to which he is entitled under sub-paragraph (3). (3) For each complete incremental period in the person’s period of deferment, the amount of the increment shall be 1/5th per cent. of the weekly rate of the increase to which the person would have been entitled under paragraphs 5 to 6 for the period if his entitlement to the Category A or Category B retirement pension had not been deferred.

8

(1) After paragraph 3 insert—

(3A) (1) This paragraph applies where— (a) a person’s entitlement to a Category A or Category B retirement pension is deferred, and (b) the person has made (or is treated as having made) an election under paragraph A1(1)(b) in relation to the period of deferment. (2) The person is entitled to an amount calculated in accordance with paragraph 3B (a “lump sum”). (3B) (1) The lump sum is the accrued amount for the last accrual period beginning during the period of deferment. (2) In this paragraph— - ‘accrued amount’ means the amount calculated in accordance with sub-paragraph (3); - ‘accrual period’ means any period of seven days beginning with a prescribed day of the week, where that day falls within the period of deferment. (3) The accrued amount for an accrual period for a person is— $$(A+P)×(1+R100)52$where—A is the accrued amount for the previous accrual period (or, in the case of the first accrual period beginning during the period of deferment, zero);P is the amount of the Category A or Category B retirement pension to which the person would have been entitled for the accrual period if his entitlement had not been deferred;R is—a percentage rate two per cent. higher than the Bank of England base rate, orif regulations so provide, such higher rate as may be prescribed.$ (4) For the purposes of sub-paragraph (3), any change in the Bank of England base rate is to be treated as taking effect— (a) at the beginning of the accrual period immediately following the accrual period during which the change took effect, or (b) if regulations so provide, at such other time as may be prescribed. (5) For the purposes of the calculation of the lump sum, the amount of Category A or Category B retirement pension to which the person would have been entitled for an accrual period— (a) includes any increase under section 47(1) and any increase under paragraph 4 of this Schedule, but (b) does not include— (i) any increase under section 83A or 85 or paragraphs 5 to 6 of this Schedule, (ii) any graduated retirement benefit, or (iii) in prescribed circumstances, such other amount of Category A or Category B retirement pension as may be prescribed. (6) The reference in sub-paragraph (5)(a) to any increase under subsection (1) of section 47 shall be taken as a reference to any increase that would take place under that subsection if subsection (2) of that section and section 46(5) of the Pensions Act were disregarded.

(2) In relation to any accrual period (within the meaning of Schedule 5 to the principal Act as amended by this paragraph) ending before 6th April 2010 the reference in paragraph 3B(5)(b) of that Schedule to section 83A of that Act is to be read as a reference to section 83 or 84 of that Act.

9

After paragraph 3B (inserted by paragraph 8 of this Schedule) insert—

(3C) (1) Subject to paragraph 8, this paragraph applies where— (a) a widow or widower (“W”) is entitled to a Category A or Category B retirement pension, (b) W was married to the other party to the marriage (“S”) when S died, (c) S’s entitlement to a Category A or Category B retirement pension was deferred when S died, and (d) S’s entitlement had been deferred throughout the period of 12 months ending with the day before S’s death. (2) W shall within the prescribed period elect in the prescribed manner either— (a) that paragraph 4 (entitlement to increase of pension) is to apply in relation to S’s period of deferment, or (b) that paragraph 7A (entitlement to lump sum) is to apply in relation to S’s period of deferment. (3) If no election under sub-paragraph (2) is made within the period prescribed under that sub-paragraph, W is to be treated as having made an election under sub-paragraph (2)(b). (4) Regulations— (a) may enable a person who has made an election under sub-paragraph (2) (including one that the person is treated by sub-paragraph (3) as having made) to change the election within a prescribed period and in a prescribed manner, if prescribed conditions are satisfied, and (b) if they enable a person to make an election under sub-paragraph (2)(b) in respect of a period of deferment after receiving any increase of pension under paragraph 4 by reference to that period, may for the purpose of avoiding duplication of payment— (i) enable an amount determined in accordance with the regulations to be recovered from the person in a prescribed manner and within a prescribed period, or (ii) provide for an amount determined in accordance with the regulations to be treated as having been paid on account of the amount to which the person is entitled under paragraph 7A. (5) The making of an election under sub-paragraph (2)(b) does not affect the application of paragraphs 5 to 6 (which relate to an increase in pension where the pensioner’s deceased spouse had deferred an entitlement to a guaranteed minimum pension).

10

(1) Paragraph 4 (increase of pension where pensioner’s deceased spouse has deferred entitlement) is amended as follows.

(2) For sub-paragraph (1) substitute—

(1) Subject to paragraph 8, this paragraph applies where a widow or widower (“W”) is entitled to a Category A or Category B retirement pension and was married to the other party to the marriage (“S”) when S died and one of the following conditions is met— (a) S was entitled to a Category A or Category B retirement pension with an increase under this Schedule, (b) W is a widow or widower to whom paragraph 3C applies and has made an election under paragraph 3C(2)(a), or (c) paragraph 3C would apply to W but for the fact that the condition in sub-paragraph (1)(d) of that paragraph is not met. (1A) Subject to sub-paragraph (3), the rate of W’s pension shall be increased— (a) in a case falling within sub-paragraph (1)(a), by an amount equal to the increase to which S was entitled under this Schedule, apart from paragraphs 5 to 6, (b) in a case falling within sub-paragraph (1)(b), by an amount equal to the increase to which S would have been entitled under this Schedule, apart from paragraphs 5 to 6, if the period of deferment had ended immediately before S’s death and S had then made an election under paragraph A1(1)(a), or (c) in a case falling within sub-paragraph (1)(c), by an amount equal to the increase to which S would have been entitled under this Schedule, apart from paragraphs 5 to 6, if the period of deferment had ended immediately before S’s death.

11

(1) After paragraph 7 insert—

(7A) (1) This paragraph applies where a person to whom paragraph 3C applies (“W”) has made (or is treated as having made) an election under paragraph 3C(2)(b). (2) W is entitled to an amount calculated in accordance with paragraph 7B (a “widowed person’s lump sum”). (7B) (1) The widowed person’s lump sum is the accrued amount for the last accrual period beginning during the period which— (a) began at the beginning of S’s period of deferment, and (b) ended on the day before S’s death. (2) In this paragraph— - ‘S’ means the other party to the marriage; - ‘accrued amount’ means the amount calculated in accordance with sub-paragraph (3); - ‘accrual period’ means any period of seven days beginning with a prescribed day of the week, where that day falls within S’s period of deferment. (3) The accrued amount for an accrual period for W is— $$(A+P)×(1+R100)52$where—A is the accrued amount for the previous accrual period (or, in the case of the first accrual period beginning during the period mentioned in sub-paragraph (1), zero);P is—the basic pension, andhalf of the additional pension,to which S would have been entitled for the accrual period if his entitlement had not been deferred during the period mentioned in sub-paragraph (1);R is—a percentage rate two per cent. higher than the Bank of England base rate, orif regulations so provide, such higher rate as may be prescribed.$ (4) For the purposes of sub-paragraph (3), any change in the Bank of England base rate is to be treated as taking effect— (a) at the beginning of the accrual period immediately following the accrual period during which the change took effect, or (b) if regulations so provide, at such other time as may be prescribed. (5) For the purposes of the calculation of the widowed person’s lump sum, the amount of Category A or Category B retirement pension to which S would have been entitled for an accrual period— (a) includes any increase under section 47(1) and any increase under paragraph 4 of this Schedule, but (b) does not include— (i) any increase under section 83A or 85 or paragraphs 5 to 6 of this Schedule, (ii) any graduated retirement benefit, or (iii) in prescribed circumstances, such other amount of Category A or Category B retirement pension as may be prescribed. (6) The reference in sub-paragraph (5)(a) to any increase under subsection (1) of section 47 shall be taken as a reference to any increase that would take place under that subsection if subsection (2) of that section and section 46(5) of the Pensions Act were disregarded. (7) In any case where— (a) there is a period between the death of S and the date on which W becomes entitled to a Category A or Category B retirement pension, and (b) one or more orders have come into force under section 150 of the Administration Act during that period, the amount of the lump sum shall be increased in accordance with that order or those orders.

(2) In relation to any accrual period (within the meaning of Schedule 5 to the principal Act) ending before 6th April 2010 the reference in paragraph 7B(5)(b) of that Schedule to section 83A of that Act is to be read as a reference to section 83 or 84 of that Act.

12

After paragraph 7B (inserted by paragraph 11 of this Schedule) insert—

(7C) (1) Any lump sum calculated under paragraph 3B or 7B must be rounded to the nearest penny, taking any 1/2p as nearest to the next whole penny above. (2) In prescribing a percentage rate for the purposes of paragraphs 3B and 7B, the Secretary of State must have regard to— (a) the national economic situation, and (b) any other matters which he considers relevant.

13

For the heading immediately preceding paragraph 8 substitute “Married couples”.

14

In paragraph 8 (married couples)—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) for sub-paragraph (4) substitute—

(4) The conditions in paragraph 3C(1)(c) and 4(1)(a) are not satisfied by a Category B retirement pension to which S was or would have been entitled by virtue of W’s contributions. (5) Where the Category A retirement pension to which S was or would have been entitled includes an increase under section 51A(2) attributable to W’s contributions, the increase or lump sum to which W is entitled under paragraph 4(1A) or 7A(2) is to be calculated as if there had been no increase under that section. (6) In sub-paragraphs (4) and (5), “W” and “S” have the same meaning as in paragraph 3C, 4 or 7A, as the case requires.

15

After Schedule 5 to the principal Act insert—

SCHEDULE 5A (1) (1) Where a person’s entitlement to a shared additional pension is deferred and the period of deferment is at least 12 months, the person shall, on claiming his pension or within a prescribed period after claiming it, elect in the prescribed manner either— (a) that paragraph 2 (entitlement to increase of pension) is to apply in relation to the period of deferment, or (b) that paragraph 4 (entitlement to lump sum) is to apply in relation to the period of deferment. (2) If no election under sub-paragraph (1) is made within the period prescribed under that sub-paragraph, the person is to be treated as having made an election under sub-paragraph (1)(b). (3) Regulations— (a) may enable a person who has made an election under sub-paragraph (1) (including one that the person is treated by sub-paragraph (2) as having made) to change the election within a prescribed period and in a prescribed manner, if prescribed conditions are satisfied, and (b) if they enable a person to make an election under sub-paragraph (1)(b) in respect of a period of deferment after receiving any increase of pension under paragraph 2 by reference to that period, may for the purpose of avoiding duplication of payment— (i) enable an amount determined in accordance with the regulations to be recovered from the person in a prescribed manner and within a prescribed period, or (ii) provide for an amount determined in accordance with the regulations to be treated as having been paid on account of the amount to which the person is entitled under paragraph 4. (2) (1) This paragraph applies where a person’s entitlement to a shared additional pension is deferred and either— (a) the period of deferment is less than 12 months, or (b) the person has made an election under paragraph 1(1)(a) in relation to the period of deferment. (2) The rate of the person’s shared additional pension shall be increased by an amount equal to the aggregate of the increments to which he is entitled under paragraph 3, but only if that amount is enough to increase the rate of the pension by at least 1 per cent. (3) (1) A person is entitled to an increment under this paragraph for each complete incremental period in his period of deferment. (2) The amount of the increment for an incremental period shall be 1/ 5th per cent. of the weekly rate of the shared additional pension to which the person would have been entitled for the period if his entitlement had not been deferred. (3) Amounts under sub-paragraph (2) shall be rounded to the nearest penny, taking any 1/2p as nearest to the next whole penny. (4) Where an amount under sub-paragraph (2) would, apart from this sub-paragraph, be a sum less than 1/2p, the amount shall be taken to be zero, notwithstanding any other provision of this Act, the Pensions Act or the Administration Act. (5) In this paragraph “incremental period” means any period of six days which are treated by regulations as days of increment for the purposes of this paragraph in relation to the person and pension in question. (6) Where one or more orders have come into force under section 150 of the Administration Act during the period of deferment, the rate for any incremental period shall be determined as if the order or orders had come into force before the beginning of the period of deferment. (7) The sums which are the increases in the rates of shared additional pension under this paragraph are subject to alteration by order made by the Secretary of State under section 150 of the Administration Act. (4) (1) This paragraph applies where— (a) a person’s entitlement to a shared additional pension is deferred, and (b) the person has made (or is treated as having made) an election under paragraph 1(1)(b) in relation to the period of deferment. (2) The person is entitled to an amount calculated in accordance with paragraph 5 (a “lump sum”). (5) (1) The lump sum is the accrued amount for the last accrual period beginning during the period of deferment. (2) In this paragraph— - ‘accrued amount’ means the amount calculated in accordance with sub-paragraph (3); - ‘accrual period’ means any period of seven days beginning with a prescribed day of the week, where that day falls within the period of deferment. (3) The accrued amount for an accrual period for a person is— $$(A+P)×(1+R100)52$where—A is the accrued amount for the previous accrual period (or, in the case of the first accrual period beginning during the period of deferment, zero);P is the amount of the shared additional pension to which the person would have been entitled for the accrual period if his entitlement had not been deferred;R is—a percentage rate two per cent. higher than the Bank of England base rate, orif a higher rate is prescribed for the purposes of paragraphs 3B and 7B of Schedule 5, that higher rate.$ (4) For the purposes of sub-paragraph (3), any change in the Bank of England base rate is to be treated as taking effect— (a) at the beginning of the accrual period immediately following the accrual period during which the change took effect, or (b) if regulations so provide, at such other time as may be prescribed. (5) For the purpose of the calculation of the lump sum, the amount of the shared additional pension to which the person would have been entitled for an accrual period does not include, in prescribed circumstances, such amount as may be prescribed. (6) The lump sum must be rounded to the nearest penny, taking any 1/2p as nearest to the next whole penny.

Part 2 — Consequential amendments

16

The Social Security Contributions and Benefits Act 1992 is amended as follows.

17

In section 62(1) (graduated retirement benefit)—

(a) in paragraph (a), for “paragraphs 1 to 3” substitute “ paragraphs A1 to 3B and 7C ”, and

(b) after paragraph (b) insert—

(c) for amending that section in order to make provisions corresponding to those of paragraphs 3C, 4(1) and (1A) and 7A to 7C of Schedule 5 to this Act enabling a widowed person to elect to receive a lump sum, rather than an increase in the weekly rate of retirement pension, in respect of the graduated retirement benefit of his or her deceased spouse.

18

In section 122(1) (interpretation of Parts 1 to 6)—

(a) before the definition of “beneficiary” insert—

“Bank of England base rate” means— (a) the rate announced from time to time by the Monetary Policy Committee of the Bank of England as the official dealing rate, being the rate at which the Bank is willing to enter into transactions for providing short term liquidity in the money markets, or (b) where an order under section 19 of the Bank of England Act 1998 is in force, any equivalent rate determined by the Treasury under that section;

, and

(b) for the definitions of “deferred” and “period of deferment” substitute—

“deferred” and “period of deferment”— (a) in relation to a Category A or Category B retirement pension, have the meanings given by section 55(3), and (b) in relation to a shared additional pension, have the meanings given by section 55C(3);

19

In section 176 (parliamentary control of subordinate legislation) in subsection (1) (affirmative procedure), after paragraph (b) insert—

(bb) regulations prescribing a percentage rate for the purposes of— (i) paragraph 3B(3) or 7B(3) of Schedule 5, or (ii) paragraph 5(3) of Schedule 5A;

20

The Social Security Administration Act 1992 is amended as follows.

21

In section 150 (annual up-rating of benefits)—

(a) in subsection (1), after paragraph (d) insert—

(dza) which are lump sums to which surviving spouses will become entitled under paragraph 7A of that Schedule on becoming entitled to a Category A or Category B retirement pension;

(b) in subsection (1)(da), for “section 55C of” substitute “ paragraph 2 of Schedule 5A to ”, and

22

In section 151 (up-rating—supplementary) in subsection (2)—

(a) for “subsection (1)(d) or (e)” substitute “ subsection (1)(d), (dza) or (e) ”, and

(b) after “apart from the order and” insert “ , in the case of the sums mentioned in subsection (1)(d) or (e) of that section, ”.

Welfare Reform and Pensions Act 1999 (c. 30)

23

The Welfare Reform and Pensions Act 1999 is amended as follows.

24

In section 50, omit subsection (2) (which amends provisions relating to the deferment of shared additional pensions and is superseded by Part 1 of this Schedule).

25

In section 52(2) (power to make regulations preserving rights in respect of additional pensions), in paragraph (b)—

(a) after “increase of pension” insert “ or payment of lump sum ”, and

(b) after “constituent element of an increase” insert “ or of a lump sum ”.

Part 3 — Transitional provisions

Widowers' entitlement to increase of pension or widowed person’s lump sum

26

In the case of a widower or surviving civil partner who attains pensionable age before 6th April 2010, paragraphs 3C, 4 and 7A of Schedule 5 to the Social Security Contributions and Benefits Act 1992 (c. 4) (entitlement to increase of pension or widowed person’s or surviving civil partner's lump sum) shall not apply unless the widower or surviving civil partner was over pensionable age when his wife or, as the case may be, his or her civil partner, died .

Transitional provision

27

(1) The Secretary of State may by regulations make such transitional provision as he thinks fit in connection with the coming into force of this Schedule.

(2) Regulations under this paragraph may, in particular, modify the preceding provisions of this Schedule in relation to cases where the retirement pension or shared additional pension of a person is deferred and the period of deferment begins before 6th April 2005 and continues on or after that day.

(3) In this paragraph “deferred” and “period of deferment” are to be read in accordance with section 55 or 55C of the Social Security Contributions and Benefits Act 1992, as the case requires.

SCHEDULE 12

Public Records Act 1958 (c. 51)

1

In Schedule 1 to the Public Records Act 1958 (definition of public records), in Part 2 of the Table in paragraph 3 insert at the appropriate place—

“The Pensions Regulator.”

“The Board of the Pension Protection Fund.”

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