The Transfer of Employment (Pension Protection) Regulations 2005

Citation, commencement, application and interpretation

1.—(1) These Regulations may be cited as the Transfer of Employment (Pension Protection) Regulations 2005 and shall come into force on 6th April 2005.

(2) These Regulations apply in the case of a person (“the employee”) in relation to whom section 257 of the Act (conditions for pension protection) applies, that is to say a person who, in the circumstances described in subsection (1) of that section, ceases to be employed by the transferor of an undertaking or part of an undertaking and becomes employed by the transferee.

(3) In these Regulations “the Act” means the Pensions Act 2004.

Requirements concerning a transferee’s pension scheme

2.—(1) In a case where these Regulations apply, and the transferee is the employer in relation to a pension scheme which is not a money purchase scheme, that scheme complies with section 258(2)(c)(ii) of the Act (alternative standard for a scheme which is not a money purchase scheme) if it provides either—

(a) for members to be entitled to benefits the value of which equals or exceeds 6 per cent. of pensionable pay for each year of employment together with the total amount of any contributions made by them, and, where members are required to make contributions to the scheme, for them to contribute at a rate which does not exceed 6 per cent. of their pensionable pay; or

(b) for the transferee to make relevant contributions to the scheme on behalf of each employee of his who is an active member of it.

(2) In this regulation—

“pensionable pay” means that part of the remuneration payable to a member of a scheme by reference to which the amount of contributions and benefits are determined under the rules of the scheme.

Requirements concerning a transferee’s pension contributions

3.—(1) In a case where these Regulations apply, the transferee’s pension contributions are relevant contributions for the purposes of section 258(2)(b) of the Act in the case of a money purchase scheme, section 258(3) to (5) of the Act in the case of a stakeholder pension scheme, and regulation 2(1)(b) above in the case of a scheme which is not a money purchase scheme, if—

(a) the contributions are made in respect of each period for which the employee is paid remuneration, provided that the employee also contributes to the scheme in respect of that period, and

(b) the amount contributed in respect of each such period is—

(i) in a case where the employee’s contribution in respect of that period is less than 6 per cent. of the remuneration paid to him, an amount at least equal to the amount of the employee’s contribution;

(ii) in a case where the employee’s contribution in respect of that period equals or exceeds 6 per cent. of the remuneration paid to him, an amount at least equal to 6 per cent. of that remuneration.

(2) In calculating the amount of an employee’s remuneration for the purposes of paragraph (1)—

(a) only payments made in respect of basic pay shall be taken into account, and bonus, commission, overtime and similar payments shall be disregarded, and

(b) no account shall be taken of any deductions which are made in respect of tax, national insurance or pension contributions.

(3) In calculating the amount of a transferee’s pension contributions for the purposes of paragraph (1) in the case of a scheme which is contracted-out by virtue of section 9 of the Pension Schemes Act 1993(1), minimum payments within the meaning of that Act shall be disregarded.

Signed by authority of the Secretary of State for Work and Pensions.

Malcolm Wicks

Minister of State,

Department for Work and Pensions

10th March 2005