The Contracting-out (Transfer and Transfer Payment) Regulations 1996

Made: 5th June 1996

Laid before Parliament: 11th June 1996

Coming into force: 6th April 1997

The Secretary of State for Social Security, in exercise of the powers conferred on him by sections 12C(1)(a), 20(1), (2) and (3), 181(1) and 182(2) and (3) of the Pension Schemes Act 1993 and of all other powers enabling him in that behalf, after agreement with the Occupational Pensions Board that certain proposals within these Regulations need not be referred to them, by this instrument, which otherwise contains regulations made only for the purpose of consolidating regulations revoked by them and regulations made under section 12C(1)(a) of the Pension Schemes Act 1993 as inserted by section 136 of the Pensions Act 1995 and which are made before the end of the period of 6 months beginning with the coming into force of that section, hereby makes the following Regulations:

PART I — GENERAL

Citation, commencement and interpretation

1

• (1) These Regulations may be cited as the Contracting-out (Transfer and Transfer Payment) Regulations 1996 and shall come into force on 6th April 1997.

• (2) In these Regulations—

“the 1993 Act" means the Pension Schemes Act 1993;

“accrued rights", for the purposes of Parts II and IV of these Regulations, has the meaning given to that expression in section 20(6) of the 1993 Act;

...

“ Administration Act ” means the Social Security Administration Act 1992;

“appropriate policy" means a policy of insurance or an annuity contract such as is described in section 19(4) of the 1993 Act;

“appropriately secured" has the meaning given to that expression in section 19(3) of the 1993 Act;

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

“connected employer transfer” and “connected employer transfer payment” mean respectively a transfer of guaranteed minimum pensions from one salary-related scheme to another and a transfer payment in respect of section 9(2B) rights from one salary-related scheme to another where either—

...

“earner" includes an earner who is not in employment at the time of the transfer or transfer payment;

...

“overseas arrangement" means a scheme or arrangement, other than an occupational pension scheme, which—

• (a) has effect, or is capable of having effect, so as to provide benefits on termination of employment or on death or retirement to or in respect of earners; and

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (c) is administered wholly or primarily outside the United Kingdom;

“overseas scheme” means—

• (a) an occupational pension scheme which has its main administration outside the United Kingdom; ...

• (b) ...

but does not include a scheme that was a salary-related contracted-out scheme ....

“the principal appointed day" has the meaning given to that expression in section 181(1) of the 1993 Act;

“regulated apportionment arrangement” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Employer Debt) Regulations 2005 (interpretation);

...

...

“salary-related scheme” means a scheme which—

“scheme" means an occupational pension scheme or a personal pension scheme;

“section 9(2B) rights” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Schemes that were Contracted-out) (No.2) Regulations 2015

“trustees", in relation to a scheme which is not set up or established under a trust, means the managers of the scheme.

PART II — TRANSFERS OF AND TRANSFER PAYMENTS IN RESPECT OF GUARANTEED MINIMUM PENSIONS

General

2

• (1) A transfer or transfer payment from an occupational pension scheme of or in respect of the accrued rights of an earner to guaranteed minimum pensions may be made in accordance with whichever of regulations 3 to 6 is applicable and no such transfer or transfer payment may otherwise be made from such a scheme.

• (2) A transfer or transfer payment from an appropriate policy of or in respect of the accrued rights of an earner to guaranteed minimum pensions which are appropriately secured may be made in accordance with whichever of regulations 3, 5 or 6 is applicable and no such transfer or transfer payment may otherwise be made from such a policy.

• (3) A transfer of liability for the payment of guaranteed miniumum pensions to or in respect of any person who has become entitled to them may be made from an occupational pension scheme in accordance with whichever of regulations 3, 4 or 6A is applicable and no such transfer may be made otherwise.

• (3A) A transfer payment from an occupational pension scheme in respect of the payment of guaranteed minimum pensions to or in respect of a person who has become entitled to them may be made in accordance with regulation 6A and no such transfer payment may be made otherwise.

• (4) In regulations 3 to 6A “transfer" means a transfer, of accrued rights or liability, such as is described in this regulation and “transfer payment" means a payment in respect of the payment of guaranteed minimum pensions or a payment in respect of accrued rights such as is described in this regulation.

Transfers of guaranteed minimum pensions to schemes that were salary-related contracted-out schemes

3

A transfer may be made to a scheme that was a salary-related contracted-out scheme if—

• (a) the earner or person concerned consents in writing;

• (b) in the case of a transfer of the accrued rights of an earner—

• (i) the earner is employed by an employer who is a contributor to the receiving scheme, or

• (ii) the earner has previously been a member of the receiving scheme;

• (c) ... the conditions specified in paragraphs 1 to 4 of Schedule 1 are satisfied, unless the transfer is from an appropriate policy in which case the condition set out in paragraph 5 of Schedule 1 must be satisfied;

• (d) in the case of a transfer of the accrued rights of an earner from an appropriate policy, the receiving scheme does not make provision under section 16(2) and (3) of the 1993 Act (revaluation of earnings factors for purposes of section 14: early leavers etc.), or any analogous provision, in relation to the rights transferred where the effect would be to increase them at a different rate from that at which they would have been increased had the transfer not taken place; and

• (e) in the case of a transfer of liability for the payment of guaranteed minimum pensions to or in respect of a person who has become entitled to them, the transfer is from a scheme and the conditions set out in paragraph 6 of Schedule 1 are satisfied.

Connected employer transfers of guaranteed minimum pensions

4

A connected employer transfer may be made ... subject to the conditions set out in regulation 3(c) and (e).

Transfer payments in respect of guaranteed minimum pensions to occupational and personal pension schemes

5

A transfer payment in respect of a guaranteed minimum pension may be made to a scheme which is not ... an overseas scheme or overseas arrangement, if—

• (a) the earner consents in writing;

• (b) the transfer payment (whether or not it forms part of a larger payment in respect of both guaranteed minimum pensions and other rights) is of an amount at least equal to the cash equivalent of the earner’s accrued rights to guaranteed minimum pensions, as calculated and verified in a manner consistent with regulations made under section 97 of the 1993 Act (calculation of cash equivalents); and—

• (c) the earner has acknowledged in writing to the transferring scheme that the earner has received a statement from the receiving scheme showing the benefits to be awarded in respect of the transfer payment, and that the earner accepts that—

• (i) the benefits to be provided by the receiving scheme may be in a different form and of a different amount to those which would have been payable by the transferring scheme, and

• (ii) there is no statutory requirement on the receiving scheme to provide for survivor’s benefits out of the transfer payment.

Transfer payments in respect of guaranteed minimum pensions to overseas schemes

6

A transfer payment may be made to an overseas scheme or an overseas arrangement if—

• (a) the earner consents in writing;

• (b) the trustees of the transferring scheme have taken reasonable steps to satisfy themselves (or, if the transfer payment is from an appropriate policy, the transferring insurance company has taken reasonable steps to satisfy itself) that, where the receiving scheme is an occupational pension scheme, the earner is in employment to which the receiving scheme applies;

• (c) the transfer payment (whether or not it forms part of a larger payment in respect of both guaranteed minimum pensions and other rights) is of an amount at least equal to the cash equivalent of the earner’s accrued rights to guaranteed minimum pensions, as calculated and verified in a manner consistent with regulations made under section 97 of the 1993 Act;

• (d) the earner has acknowledged in writing that he accepts that the scheme or arrangement to which the transfer payment is to be made may not be regulated in any way by the law of the United Kingdom and that as a consequence there may be no obligation under that law on the receiving scheme or arrangement or its trustees or administrators to provide any particular value or benefit in return for the transfer payment; and

• (e) the trustees of the transferring scheme have taken reasonable steps to satisfy themselves (or, if the transfer payment is from an appropriate policy, the transferring insurance company has taken reasonable steps to satisfy itself) that the earner has received a statement from the receiving scheme or arrangement showing the benefits to be awarded in respect of the transfer payment and the conditions (if any) on which these could be forfeited or withheld.

PART III — TRANSFERS OF LIABILITY IN RESPECT OF SECTION 9(2B) RIGHTS

General

7

• (1) A transfer of liability—

• (a) from ... a salary-related ... scheme ... ... in respect of the accrued section 9(2B) rights of an earner; or

• (b) from ... a salary-related ... scheme ... for the payment to or in respect of a person who has become entitled to them of pensions under that scheme deriving from section 9(2B) rights

may be made in accordance with arrangements which satisfy paragraph (2) and no such transfer may be made otherwise.

• (2) The arrangements referred to in paragraph (1) must result in there being made—

• (a) in the case of a transfer referred to in paragraph (1)(a), a transfer payment to the receiving scheme or overseas arrangement, in accordance with whichever of regulations 8 to 11 is applicable, of at least the cash equivalent of the accrued section 9(2B) rights in respect of which the transfer is being made, as calculated and verified in a manner consistent with regulations made under section 97 of the 1993 Act; and

• (b) in the case of a transfer referred to in paragraph (1)(b), a connected employer transfer payment ... in accordance with regulation 9 or a transfer in accordance with regulation 11A.

• (2A) A transfer payment from a salary-related scheme in respect of the payment of pensions under that scheme deriving from section 9(2B) rights to or in respect of a person who has become entitled to them may be made in accordance with regulation 11A and no such transfer payment may be made otherwise.

• (3) In this regulation and regulations 8 to 11A “transfer payment" means a payment to effect a transfer of liability such as is referred to in paragraph (1) or a payment in respect of pensions deriving from section 9(2B) rights such as is referred to in paragraph (2A).

Transfer payments to salary-related contracted-out schemes in respect of section 9(2B) rights

8

A transfer payment in respect of an earner’s accrued section 9(2B) rights may be made to a scheme that was a salary-related contracted-out scheme which was contracted-out by virtue of section 9(2B) of the 1993 Act if—

• (a) the earner consents in writing;

• (b) the earner—

• (i) is employed by an employer who is a contributor to the receiving scheme, or

• (ii) has previously been a member of the receiving scheme; and

• (c) the transfer payment is applied to provide rights for the earner or person concerned which, had they accrued in the receiving scheme, would be provided in accordance with the rules of the receiving scheme relating to earners who are in employment which was contracted-out in relation to the receiving scheme on or after the principal appointed day.

Connected employer transfer payments

9

A connected employer transfer payment may be made subject to the condition set out in regulation 12(3) of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 (requirement for an actuarial certificate), irrespective of whether that condition would otherwise apply to the member concerned, and either—

• (a) for a transfer to a scheme that was a salary-related contracted-out scheme, the condition set out in regulation 8(c); or

• (b) for a transfer to a scheme that has never been a contracted-out scheme, the condition that the benefits (including benefits for the earner’s widow, widower or surviving civil partner) to be credited in the receiving scheme in respect of that part of the transfer payment which relates to the earner’s accrued section 9(2B) rights, or pensions in payment deriving from section 9(2B) rights, must be such as would have complied with section 12A(1) of the 1993 Act (the statutory standard) as it had effect immediately before 6th April 2016.

Transfer payments to money purchase contracted-out schemes and appropriate personal pension schemes in respect of section 9(2B) rights

10

A transfer payment in respect of an earner’s accrued section 9(2B) rights may be made to a scheme which is not ... an overseas scheme or overseas arrangement, if—

• (a) the earner consents in writing; and

• (b) the earner has acknowledged in writing to the transferring scheme that the earner has received a statement from the receiving scheme showing the benefits to be awarded in respect of the transfer payment, and that the earner accepts that—

• (i) the benefits to be provided by the receiving scheme may be in a different form and of a different amount to those which would have been payable by the transferring scheme, and

• (ii) there is no statutory requirement on the receiving scheme to provide for survivor’s benefits out of the transfer payment.

Transfer payments to overseas schemes or arrangements in respect of section 9(2B) rights

11

A transfer payment in respect of an earner’s accrued section 9(2B) rights may be made to an overseas scheme or overseas arrangement if—

• (a) the earner consents in writing;

• (b) the trustees of the transferring scheme have taken reasonable steps to satisfy themselves that ..., where the receiving scheme is an occupational pension scheme, the earner has entered employment to which the receiving scheme applies;

• (c) the earner has acknowledged in writing that he accepts that the scheme or arrangement to which the transfer payment is to be made may not be regulated in any way by the law of the United Kingdom and that as a consequence there may be no obligation under that law on the receiving scheme or arrangement or its trustees or administrators to provide any particular value or benefit in return for the transfer payment; and

• (d) the trustees of the transferring scheme have taken reasonable steps to satisfy themselves that the earner has received a statement from the receiving scheme or arrangement showing the benefits to be awarded in respect of the transfer payment and the conditions (if any) on which these could be forfeited or withheld.

PART IV — MODIFICATION OF PART III OF THE 1993 ACT

Modifications of Part III of the 1993 Act on transfers of and transfer payments in respect of guaranteed minimum pensions from occupational pension schemes

12

Where a transfer to ... a salary-related ... scheme, or a transfer payment to an overseas scheme, has taken place from an occupational pension scheme in accordance with regulations 3, 4 or 6 (or with regulation 2 of the Contracting-out (Transfer) Regulations 1985 ), the 1993 Act shall have effect subject to the following modifications—

• (a) where the transfer was of the accrued rights to guaranteed minimum pensions of an earner who was in employment which was contracted-out by reference to the receiving scheme, the modification of section 14(1) (earner’s guaranteed minimum) specified in paragraph 3 of Schedule 2;

• (b) in the case of any other a transfer of the accrued rights of an earner to guaranteed minimum pensions, the modifications of sections 8(2) (meaning of “guaranteed minimum pension"), 24A(1)(a) (conversion of guaranteed minimum pension into other benefits: introduction) 20(6) (transfer of accrued rights: meaning of “accrued rights") and 159 (inalienability of guaranteed minimum pension and protected rights payments) specified in paragraphs 1, 1A, 4 and 5 of Schedule 2;

• (c) in the case of any transfer of the liability for payment of guaranteed minimum pensions to or in respect of a person who had become entitled to them, the modifications of sections 8(2), 24A(1)(a) and 159 specified in paragraphs 1, 1A and 5 of Schedule 2;