The Occupational Pension Schemes (Fraud Compensation Payments and Miscellaneous Amendments) Regulations 2005

Made: 4th August 2005

Laid before Parliament: 11th August 2005

Coming into force: 1st September 2005

The Secretary of State for Work and Pensions, in exercise of the powers conferred upon him by sections 182(1)(a) and (b), (4)(c) and (5), 183(6), 185(4)(a), 186(1)(a)(ii), (2) and (3), 190(1), 203(1), 206(2)(a) and (3), 207(1), 307(1)(a) and (b) and (3), 315(2), (4) and (5) and 318(1) and (4)(a) of the Pensions Act 2004 and paragraph 1(6) of Schedule 1 to the Welfare Reform and Pensions Act 1999 , and of all other powers enabling him in that behalf, by this instrument, which contains regulations made before the end of the period of six months beginning with the coming into force of the provisions of the Pensions Act 2004 by virtue of which they are made , makes the following Regulations:

Citation, commencement and interpretation

1

• (1) These Regulations may be cited as the Occupational Pension Schemes (Fraud Compensation Payments and Miscellaneous Amendments) Regulations 2005 and shall come into force on 1st September 2005.

• (2) Save where the context otherwise requires, any reference in these Regulations to a numbered section or Chapter of Part 2 is to the section or Chapter of Part 2 of the Pensions Act 2004 bearing that number.

• (3) In these Regulations—

• “the 1988 Act” means the Income and Corporation Taxes Act 1988 ;

• “the 1993 Act” means the Pension Schemes Act 1993 ;

• “the 1995 Act” means the Pensions Act 1995 ;

• “the 1999 Act” means the Welfare Reform and Pensions Act 1999;

• “the 2004 Act” means the Finance Act 2004 ;

• “accrued rights” has the meaning given in section 124(2) of the 1995 Act (interpretation);

• “application date” means the date on which an application was made in accordance with the requirements of section 182(1)(d) and (e) (requirements for applications);

• “approved scheme” means a scheme which is approved or was formerly approved under section 590 or 591 (conditions for approval of retirement benefit schemes and discretionary approval respectively) of the 1988 Act , or in respect of which an application for such approval has been duly made and which has not yet been determined;

• “assessment date” means the date on which the assessment period in relation to the scheme or section, or (where there has been more than one such assessment period), the last one, began;

• “beneficiary” means a person, other than a member of the scheme, who is entitled to the payment of benefits under the scheme;

• “ear-marked scheme” means a scheme—under which all of the benefits, other than death benefits, are money purchase benefits,all of the benefits are secured by one or more policies of insurance, or annuity contracts, andsuch policies, or contracts, are specifically allocated to the provision of benefits for an individual member, or any other person, who has a right to benefits under the scheme;

• “the Entry Rules Regulations” means the Pension Protection Fund (Entry Rules) Regulations 2005 ;

• “fraud compensation provisions” means sections 182 to 186 (fraud compensation);

• “guaranteed minimum pension” has the meaning given in section 8(2) of the 1993 Act (meaning of guaranteed minimum pension);

• “the Information Regulations” means the Pension Protection Fund (Provision of Information) Regulations 2005 ;

• “the loss” means the reduction falling within section 182(1)(b) (reduction of scheme assets);

• “the Multi-Employer Regulations” means the Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 ;

• “multi-employer scheme” means a scheme in relation to which there is more than one employer;

• “normal pension age” has the meaning given in section 180 of the 1993 Act (normal pension age);

• “partially guaranteed scheme” means an eligible scheme in respect of which a relevant public authority has—given a guarantee in relation to—any part of the scheme;any benefits payable under the scheme rules; orany members of the scheme; ormade any other arrangements for the purposes of securing that the assets of the scheme are sufficient to meet any part of its liabilities;

• “PPF valuation” means an actuarial valuation obtained under section 143(2)(b) (valuation of assets and protected liabilities);

• “public body” means a government department or any non-departmental public body established by an Act of Parliament or by a statutory instrument made under an Act of Parliament to perform functions conferred on it under or by virtue of that Act or instrument or any other Act or instrument;

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

• “relevant benefits” has the meaning given in section 612(1) of the 1988 Act (other interpretative provisions);

• “relevant insurer” means, in relation to an annuity contract or policy of insurance under which scheme benefits are or were secured, the person with whom the contract is made;

• “relevant public authority” has the meaning given in section 307(4);

• “relevant statutory scheme” has the meaning given in section 611A of the 1988 Act (definition of relevant statutory scheme);

• “the Reviewable Matters Regulations” means the Pension Protection Fund (Reviewable Matters) Regulations 2005 ;

• “the Review and Reconsideration Regulations” means the Pension Protection Fund (Review and Reconsideration of Reviewable Matters) Regulations 2005 ;

• “scheme” means an occupational pension scheme;

• “segregated part” means, in relation to—a non-segregated scheme, a part of the scheme which is created when the rules of the scheme require the trustees or managers, in circumstances where an employer in relation to the scheme ceases to participate in the scheme, to segregate such part of the assets of the scheme as is attributable to the liabilities of the scheme to provide pensions or other benefits to or in respect of the pensionable service of members of the scheme by reference to that employer;a multi-employer section of a segregated scheme, a part of the section which is created when the rules of the scheme relating to that section require the trustees or managers of the section, in circumstances where an employer in relation to the section ceases to participate in the scheme, to segregate such part of the assets of the section as is attributable to the liabilities of the section to provide pensions or other benefits to or in respect of the pensionable service of members of the section by reference to that employer;

• “segregated scheme” means a multi-employer scheme which is divided into two or more sections where—any contributions payable to the scheme by an employer in relation to the scheme or by a member are allocated to that employer's or that member's section, anda specified proportion of the assets of the scheme is attributable to each section of the scheme and cannot be used for the purposes of any other section,and non-segregated scheme shall be read accordingly;

• “stakeholder pension scheme” means a stakeholder pension scheme within the meaning of section 1 of the 1999 Act (meaning of stakeholder pension scheme) which is established under a trust;

• “transfer notice” is to be construed in accordance with section 160 (transfer notice);

• “transfer payment” means a fraud compensation transfer payment made under section 187(2) (Board’s powers to make fraud compensation transfer payments);

• “unsecured part” means any part of a partially guaranteed scheme—in respect of which no guarantee has been given by a relevant public authority; andwhich relates to benefits payable under the scheme in respect of which—no such guarantee has been given; andno other arrangements as are mentioned in section 307(3)(b) have been made.

• (4) In these Regulations, “employer”, in relation to—

• (a) a scheme which is not a multi-employer scheme; or

• (b) a single-employer section of a segregated scheme,

which has no active members, includes the person who was the employer of persons in the description of employment to which the scheme or section relates immediately before the time at which the scheme or section ceased to have any active members in relation to it.

• (5) In these Regulations “employer”, in relation to a non-segregated scheme or a multi-employer section of a segregated scheme—

• (a) in an assessment period, includes any person who before the assessment date has ceased to be the employer of persons in the description of employment to which the scheme or section relates unless condition A, B, C or D is satisfied where—

• (i) condition A is that a debt under section 75 of the 1995 Act (deficiencies in the assets) became due from that employer and the full amount of the debt has been paid before the assessment date;

• (ii) condition B is that—

• (aa) such a debt became due,

• (bb) a legally enforceable agreement has been entered into the effect of which is to reduce the amount which may be recovered in respect of the debt, and

• (cc) the reduced amount has been paid in full before the assessment date;

• (iii) condition C is that such a debt became due but before the assessment date it is excluded from the value of the assets of the scheme or section because it is unlikely to be recovered without disproportionate costs or within a reasonable time;

• (iv) condition D is that at the time at which any such person ceased to be the employer of persons in the description of employment to which the scheme or section relates the value of the assets of the scheme or section was such that no such debt was treated as becoming due;

• (b) in any other case, includes any person who has ceased to be the employer of persons in the description of employment to which the scheme or section relates unless condition A, B, C or D is satisfied where—

• (i) condition A is that a debt under section 75 of the 1995 Act became due from that employer and the full amount of the debt has been paid;

• (ii) condition B is that—

• (aa) such a debt became due,

• (bb) a legally enforceable agreement has been entered into the effect of which is to reduce the amount which may be recovered in respect of the debt, and

• (cc) the reduced amount has been paid in full;

• (iii) condition C is that such a debt became due but it is excluded from the value of the assets of the scheme or section because it is unlikely to be recovered without disproportionate costs or within a reasonable time;

• (iv) condition D is that at the time at which any such person ceased to be the employer of persons in the description of employment to which the scheme or section relates the value of the assets of the scheme or section was such that no such debt was treated as becoming due.

Prescribed schemes

2

• (1) For the purposes of section 182(1)(a) the Board shall not make a fraud compensation payment in respect of a scheme if it is—

• (a) a scheme which has less than two members;

• (b) a scheme which is made under section 7 of the Superannuation Act 1972 (superannuation of persons employed in local government service etc.) which provides pensions to persons employed in local government service;

• (c) a scheme which is made under section 2 of the Parliamentary and Other Pensions Act 1987 (power to provide for pensions for Members of the House of Commons etc.);

• (ca) a scheme, provision for which is made by virtue of section 81(3) of the Scotland Act 1998 (remuneration of members of the Parliament and Executive);

• (d) a scheme—

• (i) the only benefits provided by which are death benefits, and

• (ii) under the provisions of which no member has accrued rights;

• (e) a scheme which—

• (i) before 6th April 2006 provides relevant benefits but is neither an approved scheme nor a relevant statutory scheme; or

• (ii) on or after 6th April 2006 is not a registered pension scheme;

• (f) a scheme with fewer than 12 members where all of the members are trustees of the scheme and either—

• (i) the provisions of the scheme provide that any decision made by the trustees is made by the unanimous agreement of the trustees who are members of the scheme; or

• (ii) the scheme has a trustee who is independent in relation to the scheme for the purposes of section 23 of the 1995 Act (power to appoint independent trustees) and is registered in the register maintained by the Authority in accordance with regulations made under subsection (4) of that section;

• (g) a scheme with fewer than 12 members where a company is the sole trustee of the scheme, and all of the members of the scheme are directors of the company and either—

• (i) the provisions of the scheme provide that any decision made by the company in its capacity as trustee is made by the unanimous agreement of the directors who are members of the scheme; or

• (ii) one of the directors of the company is independent in relation to the scheme for the purposes of section 23 of the 1995 Act and is registered in the register maintained by the Authority in accordance with regulations made under subsection (4) of that section;

• (h) a scheme with such a superannuation fund as is mentioned in section 615(6) of the 1988 Act (exemption from tax in respect of certain pensions);

• (i) a public service pension scheme under the provisions of which there is no requirement for assets related to the intended rate or amount of benefit under the scheme to be set aside in advance (disregarding requirements relating to additional voluntary contributions);

• (j) a scheme in respect of which any relevant public authority has given a guarantee or made any other arrangements for the purpose of securing that the assets of the scheme are sufficient to meet its liabilities;...

• (k) the Chatsworth Settlement Estate Pension Scheme;... or

• (ka) a pension scheme established under section 67 of the Pensions Act 2008.

• (l) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) Where a section of a segregated scheme or a segregated part is treated as if it were a separate scheme which falls within paragraph 1(a) to (ka), it is a scheme for the purpose of section 182(1)(a) to which a fraud compensation payment shall not be made.

Relevant offences

3

For the purpose of section 182(1)(b) (cases where fraud compensation payments can be made: reduction of scheme assets attributable to a prescribed offence), a prescribed offence is any offence involving dishonesty, and for these purposes dishonesty shall include an intent to defraud.

Employers who are unlikely to continue as a going concern

4

• (1) For the purpose of section 182(4)(c) (prescribed requirements to be met where an employer is unlikely to continue as a going concern) the prescribed requirements are that the employer is—

• (a) a public body—

• (i) in relation to which it is not possible for an insolvency event to occur, and

• (ii) which is not the employer in relation to a scheme in respect of which a relevant public authority has either—

• (aa) given a guarantee in relation to any part of the scheme, any benefits payable under the scheme or any member of the scheme, or

• (bb) made any other arrangements for the purposes of securing that the assets of the scheme are sufficient to meet any part of its liabilities;

• (b) a charity which is not a company or other body corporate; or

• (c) a trade union within the meaning of section 1 of the Trade Union and Labour Relations (Consolidation) Act 1992 (meaning of trade union) in relation to which it is not possible for an insolvency event to occur.

Applications for fraud compensation payments

5

• (1) An application, for fraud compensation payments, under section 182(1)(d) (applications) must—

• (a) be made in writing by a person specified in paragraph (2), and

• (b) must contain all of the information specified in paragraph (3), other than any such information which the Board already has and in such a case the application need not contain that information.

• (2) Subject to paragraph (5), an application must be made by—

• (a) the trustees or managers of the scheme, or their representative;

• (b) a person connected with the administration of, or the provision of benefits under, the scheme, or his representative; or

• (c) a member of, or beneficiary under, the scheme or his representative.

• (3) An application must contain—

• (a) the name and address of the person making the application and, where relevant, of the person on behalf of whom the application is made;

• (b) the name, address and pension scheme registration number of the scheme;

• (c) the name and address, or location of a place of business, of the employer in relation to the scheme;

• (d) details of the type of benefits provided;

• (e) the date of the qualifying insolvency event referred to in section 182(2)(a) (qualifying insolvency event) or the date an employer was unlikely to continue as a going concern;

• (f) the date the loss was discovered; and

• (g) any additional information the Board may consider appropriate in the circumstances.

• (4) In the case of a stakeholder pension scheme paragraph (3)(c) and (e) shall not apply where there is no employer in relation to the scheme.

• (5) In the case of—

• (a) a section of a segregated scheme, or a segregated part, applications must be made by—

• (i) the trustees or managers with ultimate responsibility for the section, or the segregated part, or their representative;

• (ii) a person connected with the administration of, or provision of benefits under the section, or the segregated part, or his representative; or

• (iii) a member of, or beneficiary under the section or the segregated part or his representative;