The Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014

Made: 1st July 2014

Laid before Parliament: 3rd July 2014

Coming into force in accordance with regulation 1(1)

In accordance with section 185(1) of the Pension Schemes Act 1993[^f00022], section 120(1) of the Pensions Act 1995, section 83(11) of the Welfare Reform and Pensions Act 1999 and section 317(1) of the Pensions Act 2004, the Secretary of State has consulted such persons as the Secretary of State considers appropriate.

PART 1

Citation, commencement, extent and interpretation

1

• (1) These Regulations may be cited as the Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014 and come into force immediately after section 29 of the Pensions Act 2011 (definition of money purchase benefits) comes into force.

• (2) Part 15 of these Regulations (Financial Assistance Scheme) extends to Northern Ireland.

• (3) In these Regulations—

• “the Act” means the Pensions Act 2011;

• “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 Pensions Act 2004;

• “the applicable rules” has the meaning given by section 94(2) of the 1993 Act (right to cash equivalent)[^f00023];

• “the appointed day” is the day appointed for the coming into force of section 29 of the Act (definition of money purchase benefits);

• “assessment period” is to be construed in accordance with section 132(2) to (6) of the 2004 Act;

• “the Board” means the Board of the Pension Protection Fund established under section 107 of the 2004 Act;

• “cash balance underpin benefits” are cash balance benefits to which, under an occupational pension scheme, a member only has rights if the amount of the cash balance underpin benefits exceeds a defined benefit minimum promised to the member;

• “cash equivalent” means a cash equivalent or guaranteed cash equivalent mentioned in section 93A(1) (salary related schemes: right to statement of entitlement)[^f00024] or 94(1)[^f00025] of the 1993 Act;

• “defined benefit minimum” except in Part 2 and regulation 9 (money purchase underpin benefits and top-up benefits) means— in relation to money purchase underpin benefits or cash balance underpin benefits, benefits which are not money purchase benefits, but which accrue or may accrue under an occupational pension scheme in respect of the same period of a member’s pensionable service as the member’s rights to money purchase underpin benefits or cash balance underpin benefits; or in relation to top-up benefits, a specified minimum value or amount, where, under an occupational pension scheme, a member is promised that the member’s rights to money purchase benefits or cash balance benefits will be at least equal to that specified minimum value or amount;

• “eligible scheme” has the meaning given by section 126 of the 2004 Act (eligible schemes);

• “further assessment period” means the assessment period mentioned in section 159(3) of the 2004 Act (closed schemes: further assessment periods);

• “money purchase underpin benefits” are money purchase benefits to which, under an occupational pension scheme, a member only has rights if the amount of the money purchase benefits exceeds a defined benefit minimum promised to the member;

• “multi-employer scheme”, except in Part 7 (deficiencies in the assets) has the meaning given by section 307(4) of the 2004 Act (modification of this Act in relation to certain categories of schemes)[^f00026];

• “the Regulator” means the Pensions Regulator established under section 1 of the 2004 Act;

• “top-up benefit”, except in Part 2 and regulation 9, is a benefit— the value or amount of which is greater than nil; and to which, under an occupational pension scheme, a member only has rights where the amount of the member’s rights to money purchase benefits falls short of a defined benefit minimum promised to the member; and

• “value or amount” includes in particular a rate of pension, whether specified under the scheme or determined by reference to external criteria, such as a statutory minimum requirement.

Meaning of “cash balance benefit”

2

• (1) For the purposes of these Regulations, a benefit is a “cash balance benefit” if conditions 1 and 2 are met.

• (2) Condition 1 is that a sum of money (“the available sum”) is available under the scheme for the provision of the benefit to or in respect of the member.

• (3) Condition 2 is that under the scheme—

• (a) there is a promise about the amount of the available sum; but

• (b) there is no promise about the rate or amount of any pension to be provided from the available sum.

• (4) The promise mentioned in paragraph (3)(a) includes in particular a promise about the change in the value of, or the return from, payments made under the scheme by the member or by any other person in respect of the member.

• (5) The promise mentioned in paragraph (3)(b) includes a promise that—

• (a) the amount of the available sum will be sufficient to provide a pension of a particular rate or amount; and

• (b) the rate or amount of a pension will represent a particular proportion of the available sum.

• (6) But a benefit is not prevented from being a cash balance benefit merely because under the scheme there is a promise that—

• (a) the rate or amount of the benefit payable in respect of a deceased member will be a particular proportion of the rate or amount of the benefit which was (or would have been) payable to the member; or

• (b) the amount of a lump sum payable to a member, or in respect of a deceased member, will represent a particular proportion of the available sum.

PART 2 — Money purchase underpin benefits and top-up benefits

Interpretation and application of this Part

3

• (1) This Part—

• (a) applies in relation to any period after 1st January 1997; and

• (b) is subject to the contrary provision for transitional purposes made by these Regulations.

• (2) In this Part—

• (a) “defined benefit minimum” means—

• (i) in relation to money purchase underpin benefits, benefits which are not money purchase benefits, but which accrue or may accrue under an occupational pension scheme in respect of the same period of a member’s pensionable service as the member’s rights to money purchase underpin benefits; or

• (ii) in relation to top-up benefits, a specified minimum value or amount, where, under the scheme, a member is promised that the member’s rights to money purchase benefits will be at least equal to that specified minimum value or amount; and

• (b) a “top-up benefit” is a benefit—

• (i) the value or amount of which is greater than nil; and

• (ii) to which, under an occupational pension scheme, a member only has rights where the amount of the member’s rights to money purchase benefits falls short of a defined benefit minimum promised to the member.

Money purchase underpin benefits

4

• (1) If, at the relevant date, a member of an occupational pension scheme has rights under the scheme to money purchase underpin benefits, the existence of a contingent promise under the scheme to provide a defined benefit minimum to the member does not prevent the money purchase underpin benefits from being money purchase benefits for as long as the defined benefit minimum is of equal or lower value than the amount of the member’s rights to money purchase underpin benefits.

• (2) In this regulation “the relevant date” means the date as at which the amount of the money purchase underpin benefits and the value of a defined benefit minimum promised under the scheme is being compared (for any purpose) in order to determine which is greater.

Top-up benefits

5

• (1) If, at the relevant date, a member of an occupational pension scheme has rights to—

• (a) money purchase benefits, the amount of which is less than a defined benefit minimum promised to the member under the scheme; and

• (b) a top-up benefit,

the amount of the member’s rights to money purchase benefits by reference to which the top-up benefit is calculated and the value of the top-up benefit must be aggregated to form a single benefit, which is not a money purchase benefit.

• (2) In this regulation “the relevant date” means the date as at which the amount of the member’s rights to money purchase benefits and the amount of the top-up benefit is being calculated (for any purpose).

PART 3 — Application of Part 4 of the Act and these Regulations to the Imperial Home Decor Pension Scheme

6

No provision of Part 4 of the Act (money purchase benefits) or of these Regulations applies to or in relation to the Imperial Home Decor Scheme.

PART 4 — Protected rights

Schemes which provided protected rights as cash balance benefits etc

7

• (1) This regulation applies to an occupational pension scheme—

• (a) which was contracted-out in relation to an earner’s employment under section 9(3) of the 1993 Act (requirements for certification of schemes: general)[^f00027] in relation to a period before the appointed day; and

• (b) which provided protected rights in the form of—

• (i) cash balance benefits;

• (ii) a defined benefit minimum (in relation to money purchase underpin benefits or cash balance underpin benefits); or

• (iii) top-up benefits,

in relation to the earner’s pensionable service under the scheme.

• (2) Where this regulation applies, Part 3 of the 1993 Act (certification of pension schemes and effects on members’ state scheme rights and duties) has effect (in relation to periods before, including or after 6th April 2012) as if—

• (a) references in Part 3 of that Act and regulations made under that Part to—

• (i) “money purchase benefits” included cash balance benefits, a defined benefit minimum or top-up benefits (as the case may be);

• (ii) “money purchase scheme” included a scheme which included cash balance benefits, top-up benefits or defined benefit minima (as the case may be); and

• (iii) “money purchase contracted-out scheme” included a scheme which was contracted-out on a money purchase basis (whether or not the scheme included only money purchase benefits); and

• (b) in section 31 of the 1993 Act (investment and resources of schemes)[^f00028] the reference in subsection (2) to “income or capital gain” was a reference to “notional income or capital gain”.

• (3) In this regulation “protected rights” has the meaning given by section 10(1) of the 1993 Act (protected rights and money purchase benefits) as that section stood immediately before 6th April 2012[^f00029], subject to the modifications specified in paragraph (2).

PART 5 — Modification of schemes

The subsisting rights provisions

8

• (1) This regulation applies where—

• (a) on or after 6th April 2006 but before the appointed day, a power under an occupational pension scheme to which section 67 of the 1995 Act (the subsisting rights provisions)[^f00030] applies has been exercised so as to modify the scheme by replacing or converting a right or entitlement to any of the benefits specified in paragraph (2) with or to a right or entitlement to money purchase benefits (“the scheme modification”);

• (b) if section 29 of the Act had been in force at the time that the scheme modification took effect (and if this regulation did not apply), the modification would have been a protected modification; and

• (c) the consent requirements (see section 67B(3) of the 1995 Act[^f00031]) were not satisfied before the scheme modification took effect.

• (2) The benefits specified in this paragraph are—

• (a) cash balance benefits;

• (b) a defined benefit minimum (in relation to money purchase underpin benefits or cash balance underpin benefits); and

• (c) top-up benefits.

• (3) Where this regulation applies and the requirements specified by—

• (a) section 67(2)(b) and (c) of the 1995 Act (trustee approval and reporting requirements); and

• (b) in the case of each affected member, the actuarial equivalence requirements (within the meaning of section 67C of that Act (the actuarial equivalence requirements)[^f00032],

are satisfied, section 67A(3)(a) of that Act (the subsisting rights provisions: interpretation)[^f00033] applies as if the right or entitlement to a benefit specified in paragraph (2) which was replaced by or converted to a right or entitlement to money purchase benefits were a right or entitlement to money purchase benefits.

Money purchase underpin benefits and top-up benefits

9

• (1) This regulation applies in relation to any time on or after the appointed day when a member of an occupational pension scheme or a survivor of a member has under the scheme a right or entitlement to—

• (a) money purchase underpin benefits; or

• (b) money purchase benefits, where, under the scheme, the member has a contingent right to a top-up benefit if the amount of the member’s rights to money purchase benefits falls short of a defined benefit minimum promised to the member.

• (2) Where this regulation applies, section 67A of the 1995 Act applies as if—

• (a) in subsection (6)—

• (i) in paragraph (a)(i) the second “or” were omitted; and

• (ii) after paragraph (a)(i), there were inserted—

(ia) any contingent right under the scheme rules to a defined benefit minimum (in relation to money purchase underpin benefits) or to a top-up benefit (to which, under the scheme, a member only has rights where the amount of the member’s rights to money purchase benefits falls short of a defined benefit minimum promised to the member); or

• (b) after subsection (6), there were inserted—

(6A) In subsection (6)— (a) “defined benefit minimum” and “top-up benefit” have the meaning given by regulation 3(2) of the Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014; and (b) “money purchase underpin benefits” has the meaning given by regulation 1(4) of those Regulations.

• (c) in subsection (7), after “At any time when the pensionable service of a member of an occupational pension scheme is continuing,”, there were inserted “subject to subsection (7A)”; and

• (d) after subsection (7), there were inserted—

(7A) Where a contingent right specified in subsection (6)(a)(ia) would be extinguished if a member had opted to terminate pensionable service under the scheme, the member’s subsisting right to that contingent benefit is to be determined as if the member had not opted to terminate that pensionable service.

• (3) In this regulation “defined benefit minimum” and “top-up benefit” have the meaning given by regulation 3(2) (interpretation and application of Part 2).

PART 6 — Winding Up

Application of this Part in relation to multi-employer schemes

10

Where, by virtue of regulation 12 of the Occupational Pension Schemes (Winding Up) Regulations 1996 (winding up of sectionalised schemes etc)[^f00034], section 73 of the 1995 Act (preferential liabilities on winding up)[^f00035] applied or applies to a scheme as if a section or part of the scheme were separate schemes (or would do or have done so, but for these Regulations), this Part also so applies.

Schemes treated as money purchase schemes: winding up commencing before 6th April 2005

11

• (1) This regulation applies where—

• (a) an occupational pension scheme began to wind up before 6th April 2005 (whether or not the scheme has completed winding up before the appointed day); and

• (b) if it were not for this regulation, the trustees or managers of the scheme would have been required to wind up the scheme in accordance with section 73 of the 1995 Act.

• (2) Where the conditions specified in paragraph (3) are met in relation to the scheme, section 73 of that Act (as it stood on the date that the scheme began to wind up) has effect in relation to the scheme as if after subsection (1) there were inserted—

(1A) In subsection (1) “salary related occupational pension scheme” does not include a scheme which provides— (a) cash balance benefits; (b) money purchase benefits; or (c) pensions derived from money purchase or cash balance benefits, and no benefits other than those specified in paragraphs (a) to (c) or death benefits. (1B) In subsection (1A) “cash balance benefit” has the meaning given by regulation 2 of the Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014.

• (3) The conditions specified in this paragraph are that, immediately before the scheme began winding up—

• (a) the scheme included cash balance benefits or pensions derived from money purchase or cash balance benefits;

• (b) the scheme included no benefits other than those specified in sub-paragraph (a), money purchase benefits or death benefits; and

• (c) the trustees or managers of the scheme treated the scheme as a money purchase scheme.

Non-money purchase schemes providing benefits treated as money purchase benefits: winding up commencing before 6th April 2005

12

• (1) This regulation applies where an occupational pension scheme not treated by the trustees or managers of the scheme as a money purchase scheme began to wind up before 6th April 2005 (whether or not winding up has been completed by the appointed day).

• (2) Where the conditions specified in paragraph (3) are met in relation to the scheme, regulation 13 of the Occupational Pension Schemes (Winding Up) Regulations 1996 (hybrid schemes)[^f00036] has effect in relation to the scheme as if—

• (a) in paragraph (1)(b), after “relevant money purchase benefits” there were inserted “or relevant cash balance benefits”;

• (b) in paragraph (2), for ““relevant money purchase benefits” means money purchase benefits” there were substituted ““relevant money purchase benefits” and “relevant cash balance benefits” means (as the case may be) money purchase benefits or cash balance benefits”;

• (c) for paragraph (3) there were substituted—