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Part IIIE+W+S Certification of Pension Schemes and Effects on Members’ State Scheme Rights and Duties

Modifications etc. (not altering text)

C2Pt. III: power to modify conferred (1.6.1996 for specified purposes, 6.4.1997 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 149(1), 180(1); S.I. 1996/778, art. 2(6); S.I. 1997/664, art. 2(3), Sch. Pt. 2

Chapter IE+W+S Certification

Requirements for certification of occupational and personal money purchase schemesE+W+S

26 Persons who may establish scheme.E+W+S

The Secretary of State may prescribe descriptions of persons by whom or bodies by which the scheme may be established and, if he does so, the scheme may only be established by a person or body of a prescribed description.

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

27 Identification and valuation of protected rights.E+W+S

(1)Where the rules of the scheme make such provision as is mentioned in section 10(2) or (3), they must also make provision for the identification of the protected rights.

(2)The value of such protected rights as are mentioned in section 10(2) or (3) must be calculated in a manner no less favourable than that in which the value of any other rights of the member to money purchase benefits under the scheme are calculated.

(3)Subject to subsection (2), the value of protected rights must be calculated and verified in such manner as may be prescribed.

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

28 Ways of giving effect to protected rights.E+W+S

(1)The rules of the scheme must provide for effect to be given to the protected rights of a member—

(a)in any case where subsection (3) so requires, by the purchase of such an annuity as is mentioned in that subsection, and

F1(aa). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)in any other case, in such of the ways [F2provided for] by the following subsections as the rules may specify,

and they must not provide for any part of a member’s protected rights to be discharged otherwise than in accordance with those subsections.

(1A)[F3Where the scheme is a personal pension scheme which provides for the member to elect to receive payments in accordance with this subsection, and the member so elects, effect shall be given to his protected rights during the interim period by the making of payments under an interim arrangement which—

(a)complies with section 28A, and

(b)satisfies such conditions as may be prescribed;

and in such a case subsections (2) to (4) accordingly apply as regards giving effect to his protected rights as from the end of that period.]

(2)Effect may be given to protected rights—

(a)by the provision by the scheme of a pension which—

(i)complies with the pension requirements (within the meaning of section 29(1)), and

(ii)satisfies such conditions as may be prescribed; or

(b)in such circumstances and subject to such conditions as may be prescribed, by the making of a transfer payment—

(i)in the case of an occupational pension scheme, to another occupational pension scheme [F4, to a personal pension scheme or to an overseas arrangement], and

(ii)in the case of a personal pension scheme, to another personal pension scheme [F5, to an occupational pension scheme or to an overseas arrangement],

where the scheme to which the payment is made satisfies such requirements as may be prescribed.

(3)Subject to subsections (5) and (7), if—

(a)the rules of the scheme do not provide for a pension; or

(b)the member [F6or, where section 28A(2) applies, the member’s [F7widow, widower or surviving civil partner]] so elects,

then, except to the extent that effect is given to protected rights in accordance with subsection [F8(1A)] [F9or (4)], effect shall be given to them by the purchase by the scheme of an annuity which—

(i)complies with the annuity requirements (within the meaning of section 29(3)), and

(ii)satisfies such conditions as may be prescribed.

(4)Effect may be given to protected rights by the provision of a lump sum [F10, subject to such restrictions as may be prescribed,] if—

(a)[F11the lump sum is payable on a date which is—

(i)in the case of an occupational pension scheme, a date not earlier than that on which the member attains the age of 60 nor later than that on which he attains the age of [F1265 or such later date as has been agreed by him, or

(ii)in the case of a personal pension scheme, where the member has elected to receive payments under an interim arrangement, the date by reference to which the member elects to terminate that arrangement, and otherwise such date as has been agreed by him and is not earlier than his 60th birthday nor later than his 75th birthday.]]

(b)[F11the annual rate of a pension under subsection (2) or an annuity under subsection (3) giving effect to the protected rights and commencing on the date on which the lump sum is payable would not exceed the prescribed amount;]

(c)the circumstances are such as may be prescribed; and

[F13(d)the amount of the lump sum is equal to the value on that date of the protected rights to which effect is being given.][F14; and

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

[F15(4A)[F16Subject to subsection (4B), in the case of an occupational pension scheme, effect may be given to protected rights by the provision of a lump sum if—

(a)the trustees or managers of the scheme are satisfied that the member is terminally ill and likely to die within the period of twelve months beginning with the date on which the lump sum becomes payable; and

(b)the amount of the lump sum is equal to the value on that date of the protected rights to which effect is being given.]

(4B)[F16The value of the protected rights to which effect may be given under subsection (4A) in a case in which the member is [F17married or a civil partner] on the date on which the lump sum becomes payable shall not exceed one half of the value on that date of all the member’s protected rights.]]

(5)If the member has died without effect being given to protected rights under subsection [F18(1A)] (2), (3) [F19or (4)], effect may be given to them in such manner as may be prescribed.

(6)No transaction is to be taken to give effect to protected rights unless it falls within this section.

F20(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F21(8)In this section and sections 28A, 28B and 29—

[F25(9)This section is subject to section 32A]

Textual Amendments

F1S. 28(1)(aa) repealed (11.11.1999 for specified purposes, 1.1.2002 in so far as not already in force) by Welfare Reform and Pensions Act 1999 (c. 30), s. 89(5)(a), Sch. 2 para. 5(2)(a), Sch. 13 Pt. I; S.I. 2001/4049, art. 2(1)(a)

F2Words in s. 28(1)(b) substituted (11.11.1999 for specified purposes, 1.1.2002 in so far as not already in force) by Welfare Reform and Pensions Act 1999 (c. 30), s. 89(5)(a), Sch. 2 para. 5(2)(b); S.I. 2001/4049, art. 2(1)(a)

F3S. 28(1A) substituted (11.11.1999 for specified purposes, 1.1.2002 in so far as not already in force) by Welfare Reform and Pensions Act 1999 (c. 30), s. 89(5)(a), Sch. 2 para. 5(3); S.I. 2001/4049, art. 2(1)(a)

F6Words in s. 28(3)(b) inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 142(4)(a), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F8Words in s. 28(3) substituted (11.11.1999 for specified purposes, 1.1.2002 in so far as not already in force) by Welfare Reform and Pensions Act 1999 (c. 30), s. 89(5)(a), Sch. 2 para. 5(4); S.I. 2001/4049, art. 2(1)(a)

F9Words in s. 28(3) substituted (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(5), 322(1) (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F10Words in s. 28(4) inserted (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(3)(a), 322(1) (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F12Words in s. 28(4)(a) substituted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 142(5), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F14S. 28(4)(e) and word inserted (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(3)(c), 322(1) (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F18Word in s. 28(5) inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 142(6), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F19Words in s. 28(5) substituted (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(5), 322(1) (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F20S. 28(7) omitted (6.4.1997) by virtue of Pensions Act 1995 (c. 26), s. 180(1), Sch. 5 para. 34(b), Sch. 7 Pt. III; S.I. 1997/664, art. 2(3), Sch. Pt. 2

F21S. 28(8) added (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 142(7), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F22Words in s. 28(8) repealed (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(6), 322(1), Sch. 13 (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F25S. 28(9) inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 146(2), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

Modifications etc. (not altering text)

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

[F2628ARequirements for interim arrangementsE+W+S

(1)An interim arrangement must provide for payments to be made to the member, and, where subsection (2) applies, to the member’s [F27widow, widower or surviving civil partner], throughout the interim period, at intervals not exceeding twelve months.

(2)This subsection applies where the member dies during the interim period and is survived by a [F28widow, widower or surviving civil partner] who at the date of the member’s death has not yet attained the age of 75 years.

(3)The aggregate amount of payments made to a person under an interim arrangement in each successive period of twelve months must not be—

(a)greater than the annual amount of the annuity which would have been purchasable by him on the relevant reference date, or

(b)less than the prescribed percentage of that amount.

(4)The percentage prescribed under subsection (3)(b) may be zero.

(5)For the purposes of this section—

(a)the annual amount of the annuity which would have been purchasable by a person on any date shall be calculated in the prescribed manner by reference to—

(i)the value on that date, determined by or on behalf of the trustees or managers of the scheme, of the person’s protected rights, and

(ii)the current published tables of rates of annuities prepared in the prescribed manner by the Government Actuary for the purposes of this section, and

(b)the relevant reference date is—

(i)in relation to payments made to the member during the three years beginning with the member’s starting date, that date, and in relation to such payments made during each succeeding period of three years, the first day of the period of three years in question, or

(ii)where subsection (2) applies, in relation to payments made to the member’s [F29widow, widower or surviving civil partner] during the three years beginning with the date of the member’s death, that date, and in relation to such payments made during each succeeding period of three years, the first day of the period of three years in question.

Textual Amendments

F26Ss. 28A, 28B inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 143, 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

28BInformation about interim arrangementsE+W+S

(1)The trustees or managers of a personal pension scheme must, if required to do so by the [F30Inland Revenue], produce any document relevant to—

(a)the level of payments made under any interim arrangement, or

(b)the value of protected rights to which such an arrangement gives effect,

or otherwise connected with the making of payments under such an arrangement.

(2)In this section, “document” includes information recorded in any form, and the reference to the production of a document, in relation to information recorded otherwise than in legible form, is a reference to producing a copy of the information in legible form.]

Textual Amendments

F26Ss. 28A, 28B inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 143, 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F30Words in s. 28B(1) substituted (25.2.1999 for specified purposes, 1.4.1999 in so far as not already in force) by Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), s. 28(2)(a), Sch. 1 para. 41; S.I. 1999/527, art. 2(b), Sch. 2 (with arts. 3-6)

29 The pension and annuity requirements.E+W+S

(1)For the purposes of section 28 a pension complies with the pension requirements if—

[F31(a)in the case of an occupational pension scheme it commences on a [F32date that is not later than the member’s 65th birthday, or on] such later date as has been agreed by him, and continues until the date of his death, or

(aa)in the case of a personal pension scheme—

(i)where the member has elected under section 28(1A) to receive payments under an interim arrangement, it commences on the termination date, and continues until the date of the member’s death or, where section 28A(2) applies, until the death of the member’s widow or widower, or

(ii)otherwise, it commences on such a date as has been agreed by the member F33... and continues until the date of his death;]

(b)in a case where the member dies while it is payable to him and is survived by a [F34widow, widower or surviving civil partner]—

(i)it is payable to the [F34widow, widower or surviving civil partner] in prescribed circumstances and for the prescribed period at an annual rate which at any given time is one-half of the rate at which it would have been payable to the member if the member had been living at that time; or

(ii)where that annual rate would not exceed a prescribed amount and the circumstances are such as may be prescribed, a lump sum calculated in [F35the prescribed manner] is provided in lieu of it.

(2)As respects the period of 5 years beginning with the commencement of the pension referred to in subsection (1), that subsection shall have effect in relation to that pension as if the words “at least” were inserted immediately before the words “one-half” in paragraph (b)(i).

(3)For the purposes of section 28 an annuity complies with the annuity requirements if—

(a)it satisfies the requirements mentioned in subsections (1) and (2) (taking the references in those subsections to pensions as references to annuities); and

(b)it is provided by an [F36insurer] which—

(i)satisfies prescribed conditions;

(ii)complies with such conditions as may be prescribed as to the calculation of annuities provided by it and as to the description of persons by or for whom they may be purchased; and

(iii)subject to subsection (4), has been chosen by the member [F37or, where section 28A(2) applies, the member’s [F38widow, widower or surviving civil partner]].

(4)A member [F39(or a member’s [F40widow, widower or surviving civil partner])] is only to be taken to have chosen an [F41insurer] if he gives notice of his choice to the trustees or managers of the scheme within the prescribed period and in such manner and form as may be prescribed, and with any such supporting evidence as may be prescribed; and, if he does not do so, the trustees or managers may themselves choose the [F41insurer] instead.

Textual Amendments

F31S. 29(1)(a)(aa) substituted for s. 29(1)(a) (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 144(2), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F32Words in s. 29(1)(a) substituted (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(7)(a), 322(1) (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F33Words in s. 29(1)(aa)(ii) repealed (1.7.2005 for specified purposes) by Pensions Act 2004 (c. 35), ss. 284(7)(b), 322(1), Sch. 13 (with s. 313); S.I. 2005/1720, art. 2(15)(a), Sch. Pt. 2

F35Words in s. 29(1)(b)(ii) substituted (6.4.1996 for specified purposes, 6.4.1997 in so far as not already in force) by Pensions Act 1995 (c. 26), s. 180(1), Sch. 5 para. 35; S.I. 1996/778, art. 2(5)(a), Sch. Pt. 5; S.I. 1997/664, art. 2(3), Sch. Pt. 2

F37Words in s. 29(3)(b)(iii) inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 144(3), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

F39Words in s. 29(4) inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 144(4), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

30 Securing of liability for protected rights.E+W+S

(1)The [F42Inland Revenue] must be satisfied that the scheme complies with any such requirements as may be prescribed for meeting the whole or a prescribed part of any liability in respect of protected rights under the scheme which the scheme is unable to meet from its own resources—

(a)by reason of the commission by any person of a criminal offence;

(b)in such other circumstances as may be prescribed.

(2)Subsection (1) does not apply to a public service pension scheme.

Textual Amendments

F42Words in s. 30(1) substituted (25.2.1999 for specified purposes, 1.4.1999 in so far as not already in force) by Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), s. 28(2)(a), Sch. 1 para. 42; S.I. 1999/527, art. 2(b), Sch. 2 (with arts. 3-6)

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

31 Investment and resources of schemes.E+W+S

F43(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)The scheme must comply with such requirements as may be prescribed as regards the part—

(a)of any payment that is made to the scheme by or on behalf of a member of the scheme;

(b)of any income or capital gain arising from the investment of such a payment; or

(c)of the value of rights under the scheme,

that may be used—

(i)to defray the administrative expenses of the scheme;

(ii)to pay commission; or

(iii)in any other way which does not result in the provision of benefits for or in respect of members.

(3)Subject to subsection (4)—

(a)in the case of an occupational pension scheme, all minimum payments [F44and payments under section 42A(3)] and any payments made by the [F45Inland Revenue] under section 7 of the M1Social Security Act 1986, and

(b)in the case of a personal pension scheme, all minimum contributions,

which are paid to a scheme in respect of one of its members must be applied so as to provide money purchase benefits for or in respect of that member, except so far as they are used—

(i)to defray the administrative expenses of the scheme; or

(ii)to pay commission.

(4)If regulations are made under subsection (2), the payments mentioned in paragraph (a) of subsection (3) and the contributions mentioned in paragraph (b) of that subsection may be used in any way which the regulations permit, but not in any way not so permitted except to provide money purchase benefits for or in respect of the member.

[F46(5)Any minimum contributions required by reason of this section to be applied so as to provide money purchase benefits for or in respect of a member of a scheme must be so applied in the prescribed manner and within the prescribed period.]

Textual Amendments

F43S. 31(1) repealed (1.6.1996 for specified purposes, 6.4.1997 in so far as not already in force) by Pensions Act 1995 (c. 26), s. 180(1), Sch. 5 para. 36(a), Sch. 7 Pt. III; S.I. 1996/1412, art. 2(2), Sch. Pt. II; S.I. 1997/664, art. 2(3), Sch. Pt. II

F44Words in s. 31(3)(a) inserted (1.6.1996 for specified purposes, 6.4.1997 in so far as not already in force) by Pensions Act 1995 (c. 26), s. 180(1), Sch. 5 para. 36(b); S.I. 1996/1412, art. 2(2), Sch. Pt. 2; S.I. 1997/664, art. 2(3), Sch. Pt. 2

F45Words in s. 31(3)(a) substituted (25.2.1999 for specified purposes, 1.4.1999 in so far as not already in force) by Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), s. 28(2)(a), Sch. 1 para. 43; S.I. 1999/527, art. 2(b), Sch. 2 (with arts. 3-6)

F46S. 31(5) added (1.6.1996 for specified purposes, 6.4.1997 in so far as not already in force) by Pensions Act 1995 (c. 26), s. 180(1), Sch. 5 para. 36(c); S.I. 1996/1412, art. 2(2); S.I. 1997/664, art. 2(3), Sch. Pt. 2

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

Marginal Citations

32 Suspension or forfeiture.E+W+S

Except in such circumstances as may be prescribed, the rules of the scheme must not permit the suspension or forfeiture of a member’s protected rights or of payments giving effect to them.

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

[F4732ADischarge of protected rights on winding up: insurance policiesE+W+S

(1)Where an occupational pension scheme is being wound up and such conditions as may be prescribed are satisfied, effect may be given to the protected rights of a member of the scheme (in spite of section 28) by—

(a)taking out an appropriate policy of insurance, or a number of such policies, under which the member is the beneficiary, or

(b)assuring the benefits of a policy of insurance, or a number of such policies, to the member, where the policy assured is an appropriate policy.

(2)A policy of insurance is appropriate for the purposes of this section if—

(a)the [F48insurer] with which it is or was taken out or entered into—

(i)is, or was at the time when the policy was taken out or (as the case may be) the benefit of it was assured, carrying on F49... long-term insurance business F49... in the United Kingdom or any other Member State, and

(ii)satisfies, or at that time satisfied, prescribed requirements, and

(b)it may not be assigned or surrendered except on conditions which satisfy such requirements as may be prescribed, and

(c)it contains or is endorsed with terms whose effect is that the amount secured by it may not be commuted except on conditions which satisfy such requirements as may be prescribed, and

(d)it satisfies such other requirements as may be prescribed]

Textual Amendments

F47S. 32A inserted (13.3.1996 for specified purposes, 1.4.1996 in so far as not already in force) by Pensions Act 1995 (c. 26), ss. 146(1), 180(1); S.I. 1996/778, art. 2(2), Sch. Pt. 2

33 Tax requirements to prevail over certification requirements.E+W+S

Nothing in sections 26 to 32 shall be taken to prejudice any requirements with which a scheme must comply if it is to qualify for tax-exemption or tax-approval.

Commencement Information

I1Ss. 1-187 in force at 7.2.1994 by S.I. 1994/86, art. 2

[F5033AAppropriate schemes: “Blowing the whistle”E+W+S

(1)If any person acting as an auditor or actuary of an appropriate scheme has reasonable cause to believe that—

(a)any requirement which, in the case of the scheme, is required by section 9(5)(a) to be satisfied is not satisfied, and

(b)the failure to satisfy the requirement is likely to be of material significance in the exercise by the [F51Inland Revenue] of any of [F52their] functions relating to appropriate schemes,

that person must immediately give a written report of the matter to the [F51Inland Revenue].

(2)No duty to which a person acting as auditor or actuary of an appropriate scheme is subject shall be regarded as contravened merely because of any information or opinion contained in a written report under this section.]

Textual Amendments

F50S. 33A inserted (6.4.1997) by Pensions Act 1995 (c. 26), ss. 147, 180(1); S.I. 1997/664, art. 2(3), Sch. Pt. 2

F51Words in s. 33A(1) substituted (25.2.1999 for specified purposes, 1.4.1999 in so far as not already in force) by Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), s. 28(2)(a), Sch. 1 para. 44(a); S.I. 1999/527, art. 2(b), Sch. 2 (with arts. 3-6)

F52Word in s. 33A(1) substituted (25.2.1999 for specified purposes, 1.4.1999 in so far as not already in force) by Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), s. 28(2)(a), Sch. 1 para. 44(b); S.I. 1999/527, art. 2(b), Sch. 2 (with arts. 3-6)