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Explanatory Memorandum to Pensions (Northern Ireland) Order 2005

Background and Policy Objectives

3.The Order makes provision for Northern Ireland corresponding to provisions of the Pensions Act 2004 (“the Act”). It is intended to improve members’ security while ensuring, through simplification and deregulation in some areas, that the costs of providing good schemes do not rise.

4.The Order has 9 Parts comprising 294 Articles and 11 Schedules.

5.The Act establishes a new UK-wide Non-Departmental Public Body (NDPB), the Pensions Regulator (“the Regulator”) to replace the Occupational Pensions Regulatory Authority (Opra). The Regulator will take over Opra’s responsibilities for the regulation of occupational pensions and of certain functions of personal pensions and stakeholder pensions. Like Opra, the Regulator will be funded by a levy on schemes. The Regulator will also assume a number of new functions. The Act also establishes the Pensions Regulator Tribunal to deal with references from determinations by the Regulator.

6.The Act sets up a second NDPB: the Board of the Pension Protection Fund (PPF). The PPF will provide compensation for members of defined benefit (normally final salary) and hybrid occupational pension schemes in the event of a scheme’s sponsoring employer becoming insolvent, leaving the scheme with insufficient funds to pay its members the pension they were expecting. The PPF will also be funded by levy. The Act establishes the PPF Ombudsman as the external appeals body in relation to the PPF. The Board of the PPF will subsume the functions of the Pensions Compensation Board (PCB).

7.This Order makes provision for the functions of these bodies in relation to Northern Ireland (Parts II and III).

8.New provisions in Part IV replace the Minimum Funding Requirement with a new scheme specific system, allowing schemes greater flexibility in developing funding strategies appropriate to their circumstances.

9.The Act provides for a new function of the Secretary of State for Work and Pensions and the Department to promote and facilitate financial retirement planning. Part V of the Order makes provision for disclosure of certain information to facilitate such planning. There is provision for reserve powers to require employers to provide employees with access to pension planning information and to compel occupational or personal pension schemes to provide combined pension forecasts incorporating state pensions data.

10.Part VI covers a number of matters relating to the administration of occupational and personal pension schemes.

11.Part VII provides for cross-border activities within the European Union. It introduces regulatory measures that will support the operation of pan-European occupational pension schemes.

12.Part VIII deals with State Pensions: in particular it improves the position of pensioners who defer taking their State Pension. Plans for an increase in increments, originally planned for 2010, have been brought forward to 2005. It also introduces the option for deferrers to take the deferred pension as a lump sum.

13.Part IX deals with a number of ancillary matters.

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