Pensions Act 2004 (c. 35)

(The document as of February, 2008)

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(1) Section 40 of the Welfare Reform and Pensions Act 1999 (c. 30) (power of the Secretary of State to increase pensions provided to give effect to certain rights) is amended as follows.

(2) In subsection (1), for "5%" substitute "the maximum percentage".

(3) In subsection (2), for "This" substitute "Subject to subsection (2A), this".

(4) After subsection (2) insert--

" (2A) Subsection (2) does not apply to pensions which--

(a) are money purchase benefits, and

(b) become pensions in payment on or after the commencement day.

(2B) For the purposes of subsection (1) the "maximum percentage" means--

(a) 5% in a case where--

(i) the pension is in payment before the commencement day, or

(ii) the pension is not in payment before the commencement day but the entitlement to the relevant pension credit arose before that day, and

(b) 2.5% in a case where the entitlement to the relevant pension credit arises on or after the commencement day. "

(5) In subsection (3), at the appropriate places insert--

" "commencement day" means the day appointed for the coming into force of section 280 of the Pensions Act 2004 (amendments to section 40); "

" "money purchase benefit" has the meaning given by section 181(1) of the Pension Schemes Act 1993; "

" "relevant pension credit" means the pension credit to which the eligible pension credit rights or, as the case may be, the safeguarded rights are (directly or indirectly) attributable; " .

Revaluation

281 Exemption from statutory revaluation requirement

(1) Section 84 of the Pension Schemes Act 1993 (c. 48) (basis of revaluation) is amended as follows.

(2) In subsection (5), after paragraph (a) insert " or

(b) under any arrangement which maintains the value of the pension or other benefit by reference to the rise in the retail prices index during that period, " .

(3) After that subsection add--

" (6) In subsection (5)(b), "retail prices index" means--

(a) the general index of retail prices (for all items) published by the Office for National Statistics, or

(b) where that index is not published for a month, any substituted index or figures published by that Office. "

Contracting out

282 Meaning of "working life" in Pension Schemes Act 1993

In section 181 of the Pension Schemes Act 1993 (c. 48) (general interpretation), in subsection (1) for the definition of "working life" substitute--

" "working life", in relation to a person, means the period beginning with the tax year in which the person attains the age of 16 and ending with--

(a) the tax year before the one in which the person attains the age of 65 in the case of a man or 60 in the case of a woman, or

(b) if earlier, the tax year before the one in which the person dies. "

283 Power to prescribe conditions by reference to Inland Revenue approval

In section 9 of the Pension Schemes Act 1993 (requirements for certification of schemes: general), after subsection (5) insert--

" (5A) Regulations about pension schemes made under this Chapter may contain provisions framed by reference to whether or not a scheme--

(a) is approved under Chapter 1 (retirement benefit schemes) of Part 14 of the Income and Corporation Taxes Act 1988, or is a relevant statutory scheme within the meaning of that Chapter, or

(b) is approved under Chapter 4 (personal pension schemes) of that Part. "

284 Restrictions on commutation and age at which benefits may be received

(1) For section 21(1) of the Pension Schemes Act 1993 (commutation of guaranteed minimum pensions) substitute--

" (1) A scheme may, in such circumstances and subject to such restrictions and conditions as may be prescribed, provide for the payment of a lump sum instead of a pension required to be provided by the scheme in accordance with section 13 or 17. "

(2) In section 17 of that Act (minimum pensions for widows and widowers), at the end insert--

" (8) Where--

(a) a lump sum is paid to an earner under provisions included in a scheme by virtue of section 21(1), and

(b) those provisions are of a prescribed description,

the earner shall be treated for the purposes of this section as having any guaranteed minimum under section 14 that he would have had but for that payment. "

(3) In section 28 of that Act (ways of giving effect to protected rights), in subsection (4) (provision of a lump sum)--

(a) after "provision of a lump sum" insert ", subject to such restrictions as may be prescribed,",

(b) omit paragraphs (a) and (b), and

(e) such other conditions as may be prescribed are satisfied. "

(4) Omit subsections (4A) and (4B) of that section.

(5) In subsections (3) and (5) of that section, for ", (4) or (4A)" substitute "or (4)".

(6) In subsection (8) of that section, in the definition of "the starting date" omit ", which must not be earlier than the member's 60th birthday,".

(7) In section 29(1) of that Act (how a pension may comply with "the pension requirements" for the purposes of section 28)--

(a) in paragraph (a), for the words from "date" to "or on" substitute "date that is not later than the member's 65th birthday, or on", and

(b) in paragraph (aa)(ii) omit the words from "and is not" to "75th birthday,".

Stakeholder pensions

285 Meaning of "stakeholder pension scheme"

(1) Section 1 of the Welfare Reform and Pensions Act 1999 (c. 30) (meaning of "stakeholder pension scheme") is amended in accordance with subsections (2) to (4).

(2) In subsection (1) (requirements to be met by stakeholder pension schemes), in paragraph (a) for "to (9)" substitute "to (10)".

(3) In subsection (5) (prescribed requirements relating to administrative expenses of scheme), in paragraph (a) for "by or on behalf of" substitute "by, or on behalf or in respect of,".

(4) After subsection (9) insert--

" (10) The ninth condition is that--

(a) if the scheme is an occupational pension scheme, it is specified in a contracting-out certificate in relation to all categories of employment to which the scheme relates, and

(b) if the scheme is a personal pension scheme, it is an appropriate scheme within the meaning of section 7(4) of the 1993 Act. "

(5) In section 2 of that Act (registration of stakeholder pension), in subsection (2)(b)(i) for "to (9)" substitute "to (10)".

Part 6 Financial assistance scheme for members of certain pension schemes

286 Financial assistance scheme for members of certain pension schemes

(1) The Secretary of State must make provision, by regulations, for a scheme for making payments to, or in respect of, qualifying members of qualifying pension schemes ("the financial assistance scheme").

(2) For the purposes of this section--

"qualifying member", in relation to a qualifying pension scheme, means a person--
(a)
who, at such time as may be prescribed, is a member of the scheme in respect of whom the scheme's pension liabilities are unlikely to be satisfied in full because the scheme has insufficient assets, or
(b)
who, at such time as may be prescribed, had ceased to be a member of the scheme and in respect of whom the scheme's pension liabilities were not satisfied in full, before he ceased to be such a member, because the scheme had insufficient assets,

and in respect of whom prescribed conditions are satisfied at such time as may be prescribed;
"qualifying pension scheme" means an occupational pension scheme (including such a scheme which has been fully wound up)--
(a)
which, at such time as may be prescribed, is not--
(i)
a money purchase scheme, or
(ii)
a scheme of a prescribed description,
(b)
the winding up of which began during the prescribed period ending immediately before the day appointed under section 126(2),
(c)
the employer in relation to which satisfies such conditions as may be prescribed at such time as may be prescribed, and
(d)
prescribed details of which have been notified to such person as may be prescribed by a person of a prescribed description--
(i)
in the prescribed form and manner, and
(ii)
before the prescribed date;
"scheme's pension liabilities", in respect of a member of a qualifying pension scheme, means the liabilities of the scheme to, or in respect of, the member in respect of pensions or other benefits (including increases in pensions);

and a qualifying pension scheme has, or had, insufficient assets if the assets of the scheme are, or were, insufficient to satisfy in full the liabilities of the scheme calculated in the prescribed manner.

(3) Regulations under subsection (1) may, in particular, make provision--

(a) for the financial assistance scheme to be managed by the Secretary of State, a body established by or for the purposes of the regulations or such other person as may be prescribed;

(b) for the person who manages the financial assistance scheme ("the scheme manager") to hold (whether on trust or otherwise), manage and apply a fund in accordance with the regulations or, where the fund is held on trust, the deed of trust;

(c) for the property, rights and liabilities of qualifying pension schemes to be transferred to the scheme manager in prescribed circumstances and for the trustees or managers of a qualifying pension scheme in respect of which such a transfer has occurred to be discharged from prescribed liabilities;

(d) prescribing the circumstances in which payments are to be made by the scheme manager to, or in respect of, qualifying members of qualifying pension schemes and the manner in which the amount of any payment is to be determined, and, where the fund is held by the fund manager on trust, the circumstances and manner may be prescribed by reference to the deed of trust;

(e) authorising the Secretary of State--

(i) where he is not the scheme manager, to pay grants to the scheme manager;

(ii) where he is the scheme manager, to pay amounts into the fund held by him in accordance with the regulations;

(iii) to pay grants to other prescribed persons in connection with the financial assistance scheme;

(f) prescribing the circumstances in which amounts are to be paid into or out of the fund held by the scheme manager;

(g) for or in connection with--

(i) the review of, or appeals against, any determination, or failure to make a determination, in connection with the financial assistance scheme, or

(ii) the investigation of complaints relating to the financial assistance scheme,

and for the establishment of a body or the appointment of a person or persons to hear such appeals or conduct such investigations;

(h) conferring functions in relation to the financial assistance scheme on the Pensions Regulator or the Board of the Pension Protection Fund;

(i) providing for a person to exercise a discretion in dealing with any matter in relation to the financial assistance scheme;

(j) applying any provision of Part 1 or 2 with such modifications as may be prescribed;

and such regulations may make different provision for different cases or descriptions of case and include such incidental, supplementary, consequential or transitional provision as appears to the Secretary of State to be expedient.

(4) Any amount which, by virtue of subsection (3)(e), the Secretary of State pays under regulations under subsection (1) is to be to paid out of money provided by Parliament.

(5) Regulations under subsection (1) may not make provision for the imposition of a levy or charge on any person for the purpose of funding, directly or indirectly, the financial assistance scheme.

(6) Regulations under subsection (1) may not require any income or capital of a qualifying member of a qualifying pension scheme (other than income or capital which derives, directly or indirectly, from that scheme) to be taken into account when determining whether the member is entitled to a payment under the financial assistance scheme or the amount of any payment to which the member is entitled.

(7) For the purposes of subsection (6), regulations may prescribe the circumstances in which a qualifying member of a qualifying pension scheme is to be regarded as having income or capital which derives, directly or indirectly, from that scheme.

(8) A time or period prescribed under subsection (2) may fall (or, in the case of a period, wholly or partly fall) at a time before the passing of this Act.

(9) Nothing in this section prejudices the operation of section 315 (subordinate legislation (general provisions)).

Part 7 Cross-border activities within European Union

UK occupational pension scheme receiving contributions from European employer

287 Occupational pension scheme receiving contributions from European employer

(1) The trustees or managers of an occupational pension scheme must not accept any contribution to the scheme from a European employer unless all the following conditions are met.

(2) Condition A is that the trustees or managers of the scheme are authorised by the Regulator under section 288.

(3) Condition B is that the trustees or managers of the scheme are approved by the Regulator under section 289 in relation to the European employer.

(4) Condition C is that either--

(a) the period of two months beginning with the date on which the Regulator notified the trustees or managers of the scheme under section 289(2)(a)(ii) has expired, or

(b) before the end of that period, the trustees or managers have received information forwarded to them by the Regulator in accordance with section 290(1).

(5) If the trustees or managers of a scheme fail to comply with subsection (1), section 10 of the Pensions Act 1995 (c. 26) (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.

(6) In this Part--

"European employer" has the prescribed meaning;
"host member State", in relation to a European employer, means a member State determined in accordance with regulations.

288 General authorisation to accept contributions from European employers

(1) An application by the trustees or managers of an occupational pension scheme for authorisation under this section must be made to the Regulator in the prescribed form and in the prescribed manner.

(2) On receipt of the application, the Regulator must--

(a) where the Regulator is satisfied that the applicant meets prescribed conditions, grant the authorisation, and

(b) in any other case, refuse the authorisation.

(3) Regulations may make provision as to--

(a) the revocation by the Regulator of authorisation under this section, and

(b) the criteria to be applied by the Regulator in reaching any decision relating to the revocation of authorisation.

289 Approval in relation to particular European employer

(1) An application by the trustees or managers of an occupational pension scheme for approval under this section in relation to a European employer is made by the trustees or managers of the scheme giving the Regulator in the prescribed manner a notice ("the notice of intention") in the prescribed form which--

(a) specifies the European employer ("the specified employer"),

(b) states their intention, subject to approval under this section, to accept contributions from the specified employer,

(d) contains other prescribed information.

(2) On receipt of the notice of intention, the Regulator must within three months--

(a) where the Regulator is satisfied that the persons giving the notice of intention meet prescribed conditions--

(i) notify the competent authority of the host member State of the receipt by the Regulator of the notice of intention and of the contents of the notice, and

(ii) notify the persons who gave the notice of intention that they are approved for the purposes of this section in relation to the specified employer, or

(b) in any other case, notify the persons who gave the notification that they are not so approved.

(3) If the Regulator does not act under subsection (2)(a) or (b) within the period of three months beginning with the day on which the notice of intention was received, the persons who gave the notice of intention are to be taken to have been approved for the purposes of this section in relation to the specified employer at the end of the period.

(4) Regulations may make provision as to--

(a) the revocation by the Regulator of approval under this section, and

(b) the criteria to be applied by the Regulator in reaching any decision relating to the revocation of approval.

290 Notification of legal requirements of host member State outside United Kingdom

(1) Where--

(a) the Regulator has notified the competent authority of the host member State under subsection (2)(a)(i) of section 289, and

(b) in pursuance of Article 20(5) of the Directive, the Regulator receives information from the competent authority as to requirements of the social and labour law of the host member State and as to the other matters referred to in Article 20(5),

the Regulator must as soon as reasonably practicable forward that information to the person who gave the notice of intention under section 289.

(2) Where--

(a) the trustees or managers of an occupational pension scheme are approved under section 289 in relation to a European employer, and

(b) in pursuance of Article 20(8) of the Directive the Regulator receives information ("the new information") from the competent authority of the host member State as to changes affecting any information previously forwarded under subsection (1),

the Regulator must as soon as reasonably practicable forward the new information to the trustees or managers.

291 Duty of trustees or managers to act consistently with law of host member State

(1) Where the trustees or managers of an occupational pension scheme receive contributions to the scheme from a European employer, the trustees or managers must ensure that the scheme, so far as it relates to members who are or have been employed by the employer, is operated in a way which is consistent with the requirements of the social and labour law of the host member State.

(2) Regulations may modify any provision of pensions legislation in its application to members of an occupational pension scheme in respect of which the employer is a European employer.

(3) If the trustees or managers of a scheme fail to comply with subsection (1), section 10 of the Pensions Act 1995 (c. 26) (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.

(4) In this section "pensions legislation" means--

(a) the Pension Schemes Act 1993 (c. 48),

(b) Part 1 of the Pensions Act 1995, other than sections 62 to 66A of that Act (equal treatment),

(d) this Act.

292 Power of Regulator to require ring-fencing of assets

(1) Where the trustees or managers of an occupational pension scheme receive contributions to the scheme from a European employer, the Regulator may in prescribed circumstances issue a notice ("a ring-fencing notice") to the trustees or managers of the scheme directing them to take, or refrain from taking, such steps of a prescribed description as are specified in the notice for the purpose of ring-fencing some or all of the assets or liabilities (or both) of the scheme.

(2) In subsection (1), "ring-fencing" has the same meaning as in the Directive.

(3) If the trustees or managers of an occupational pension scheme fail to comply with a ring-fencing notice given to them, section 10 of the Pensions Act 1995 (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.

European occupational pension scheme receiving contributions from UK employer

293 Functions of Regulator in relation to institutions administered in other member States

(1) Where a UK employer makes (or proposes to make) contributions to a European pensions institution, any function which Article 20 of the Directive requires or authorises to be exercised by the competent authorities of the host member State is exercisable by the Regulator.

(2) If the Regulator receives a notification in pursuance of Article 20(4) of the Directive from the competent authority in another member State, the Regulator must within two months inform that authority of any relevant legal requirements.

(3) Where there is a significant change in any relevant legal requirements, the Regulator must as soon as reasonably practicable inform any competent authority in relation to which it has provided information under subsection (2) of that change.

(4) Where a UK employer makes contributions to a European pensions institution, the Regulator must--

(a) monitor the compliance of that institution with the relevant legal requirements, and

(b) if the Regulator becomes aware of any contravention by the institution of any relevant legal requirements, inform the competent authority of the member State in which the institution has its main administration of the failure.

(5) If the Regulator is satisfied that a European pensions institution which receives contributions from a UK employer is contravening any relevant legal requirements, the Regulator may issue a notice to the UK employer directing him--

(a) to take or refrain from taking such steps as are specified in the notice in order to remedy the failure by the institution, or

(b) to cease to make further contributions to the institution.

(6) Regulations may make further provision about the effect of a notice under subsection (5)(b), including provision conferring functions on the Regulator.

(7) Section 10 of the Pensions Act 1995 (civil penalties) applies to any UK employer who, without reasonable excuse, fails to comply with a notice under subsection (5).

(8) In this section--

"European pensions institution" means an institution for occupational retirement provision, as defined by Article 6(a) of the Directive, that has its main administration in a member State other than the United Kingdom;
"relevant legal requirements" means such requirements of the law relating to occupational pension schemes, as it applies in any part of the United Kingdom, as may be prescribed;
"UK employer" means an employer who--
(a)
in the case of a body corporate, is incorporated under the law of the United Kingdom or any part of the United Kingdom, or
(b)
in any other case, is resident in the United Kingdom.

Assistance for other European regulators

294 Stopping disposal of assets of institutions administered in other member States

(1) This section applies if the Regulator receives a request from the competent authority of a member State for assistance in prohibiting the free disposal of UK-held assets of a European pensions institution that has its main administration in that member State.

(2) The court may on an application made by the Regulator with respect to UK-held assets of the institution grant--

(a) an injunction restraining a defendant, or

(b) in Scotland, an interdict prohibiting a defender (or, in proceedings by petition, a respondent),

from disposing of, or otherwise dealing with, assets to which the application relates.

(3) If the court grants an injunction or interdict under subsection (2), it may by subsequent orders make provision for such incidental, consequential and supplementary matters as it considers necessary to enable the competent authority that sent the request to perform any of its functions in relation to assets subject to the injunction or interdict.

(4) If the institution is not a party to proceedings under subsection (2) or (3), the institution--

(a) has the same rights to notice of the proceedings as a defendant (or, in Scotland, as a defender or, as the case may be, as a respondent), and

(b) may take part as a party in the proceedings.

(5) In deciding any question as to costs or expenses, a court before which any proceedings take place--

(a) may take account of any additional expense which it considers that any party to the proceedings has incurred as a result of the participation of the institution in pursuance of subsection (4)(b), and

(b) may award the whole or part of the additional expense as costs or (as the case may be) expenses to the party who incurred it (whatever the outcome of the Regulator's application).

(6) For the purposes of this section--

"European pensions institution" has the meaning given by section 293;
"UK-held assets" of a European pensions institution are assets of the institution held by a depositary or custodian located in the United Kingdom, and here "assets", "depositary", "custodian" and "located" have the same meaning as in Article 19(3) of the Directive.

(7) The jurisdiction conferred by subsections (2) and (3) is exercisable by the High Court or the Court of Session.

Interpretation

295 Interpretation of Part

In this Part--

"competent authority", in relation to a member State other than the United Kingdom, means a national authority designated in accordance with the law of that State to carry out the duties provided for in the Directive;
"the Directive" means Directive 2003/41/EC of the European Parliament and of the Council on the activities and supervision of institutions for occupational retirement provision;
"European employer" has the meaning given by section 287(6);
"host member State", in relation to a European employer, has the meaning given by section 287(6);
"social and labour law", in relation to a member State other than the United Kingdom, means the social and labour law (within the meaning of Article 20 of the Directive) of that State relevant to occupational pension schemes (within the meaning of that Article).

Part 8 State pensions

Entitlement to more than one pension

296 Persons entitled to more than one Category B retirement pension

In section 43(3) of the Social Security Contributions and Benefits Act 1992 (c. 4) (persons entitled to more than one retirement pension)--

(a) for paragraph (a) substitute--

" (a) to both a Category A retirement pension and one or more Category B retirement pensions under this Part for the same period,

(aa) to more than one Category B retirement pension (but not a Category A retirement pension) under this Part for the same period, or " , and

(b) for the words from "paragraph (a)" to "above" substitute "paragraph (a), (aa) or (b) (as the case may be)".

Deferral of state pension

297 Deferral of retirement pensions and shared additional pensions

(1) For section 55 of the Social Security Contributions and Benefits Act 1992 (increase of retirement pension where entitlement is deferred) substitute--

" 55 Pension increase or lump sum where entitlement to retirement pension is deferred

(1) Where a person's entitlement to a Category A or Category B retirement pension is deferred, Schedule 5 to this Act has effect.

(2) In that Schedule--

paragraph A1 makes provision enabling an election to be made where the pensioner's entitlement is deferred
paragraphs 1 to 3 make provision about increasing pension where the pensioner's entitlement is deferred
paragraphs 3A and 3B make provision about lump sum payments where the pensioner's entitlement is deferred
paragraph 3C makes provision enabling an election to be made where the pensioner's deceased spouse has deferred entitlement
paragraphs 4 to 7 make provision about increasing pension where the pensioner's deceased spouse has deferred entitlement
paragraphs 7A and 7B make provision about lump sum payments where the pensioner's deceased spouse has deferred entitlement
paragraphs 7C to 9 make supplementary provision.

(3) For the purposes of this Act a person's entitlement to a Category A or Category B retirement pension is deferred if and so long as that person--

(a) does not become entitled to that pension by reason only--

(i) of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim), or

(ii) in the case of a Category B retirement pension payable by virtue of a spouse's contributions, of the spouse not satisfying those conditions with respect to his Category A retirement pension, or

(b) in consequence of an election under section 54(1), falls to be treated as not having become entitled to that pension,

and, in relation to any such pension, "period of deferment" shall be construed accordingly. "

(2) For section 55C of that Act (increase of shared additional pension where entitlement is deferred) substitute--

" 55C Pension increase or lump sum where entitlement to shared additional pension is deferred

(1) Where a person's entitlement to a shared additional pension is deferred, Schedule 5A to this Act has effect.

(2) In that Schedule--

paragraph 1 makes provision enabling an election to be made where the person's entitlement is deferred
paragraphs 2 and 3 make provision about increasing pension where the person's entitlement is deferred
paragraphs 4 and 5 make provision about lump sum payments where the person's entitlement is deferred.

(3) For the purposes of this Act, a person's entitlement to a shared additional pension is deferred--

(a) where he would be entitled to a Category A or Category B retirement pension but for the fact that his entitlement is deferred, if and so long as his entitlement to such a pension is deferred, and

(b) otherwise, if and so long as he does not become entitled to the shared additional pension by reason only of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim),

and, in relation to a shared additional pension, "period of deferment" shall be construed accordingly. "

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