C6C5C7C8Part 2The Board of the Pension Protection Fund

Annotations:
Modifications etc. (not altering text)
C8

Pt. 2 applied in part (24.7.2014) by The Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014 (S.I. 2014/1711), regs. 1(1), 42(1), 53, 57 (with regs. 6, 41, 44(1), 47(1), 69(2), 72(1), 76(1)); coming into force immediately after s. 29 of 2011 c. 19 - see S.I. 2014/1683, art. 2

C2C1C4Chapter 3Pension protection

Annotations:
Modifications etc. (not altering text)
C2

Pt. 2 modified in part (9.3.2005 for specified purposes, 1.4.2005 for specified purposes, 6.4.2005 in so far as not already in force (except ch. 4)) by The Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (S.I. 2005/441), regs. 1, 2-60, 71, 72

C1

Pt. 2 modified (8.3.2005 for specified purposes, 6.4.2005 in so far as not already in force) by The Pension Protection Fund (Partially Guaranteed Schemes) (Modification) Regulations 2005 (S.I. 2005/277), regs. 1(1), 2-11

C4

Pt. 2 applied in part (with modifications) (20.7.2005 for specified purposes, 1.9.2005 for specified purposes, 5.12.2005 for specified purposes) by The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986), regs. 1(1), 4, Sch. 1

Assumption of responsibility for a scheme

C1C2C3160C1C2C4Transfer notice

I41

This section applies where the Board is required to assume responsibility for a scheme under section 127, 128, 152 or 158.

I42

The Board must give the trustees or managers a notice (a “transfer notice”).

I43

In a case to which section 127 or 128 applies, a transfer notice may not be given until the F3determination made or valuation obtained under section 143(2) is binding.

I174

In a case to which section 158 applies, a transfer notice may not be given until the F4determination made or valuation obtained under subsection (3) of that section is binding.

I45

A transfer notice may not be given in relation to a scheme during any period when the issue of, or failure to issue, a withdrawal notice under or by virtue of section 146 or 147 (refusal to assume responsibility) is reviewable (see section 149(6)(b)).

I46

The Board must give a copy of any notice given under subsection (2) to—

a

the Regulator, and

b

any insolvency practitioner in relation to the employer or, if there is no such insolvency practitioner, the employer.

I5I157

This section is subject to section F1172(2) (no transfer notice F2... when fraud compensation application is pending).

161C1C2C4Effect of Board assuming responsibility for a scheme

I111

Where a transfer notice is given to the trustees or managers of an eligible scheme, the Board assumes responsibility for the scheme in accordance with this Chapter.

2

The effect of the Board assuming responsibility for a scheme is that—

I11a

the property, rights and liabilities of the scheme are transferred to the Board, without further assurance, with effect from the time the trustees or managers receive the transfer notice,

I11b

the trustees or managers of the scheme are discharged from their pension obligations from that time, and

I6c

from that time the Board is responsible for securing that compensation is (and has been) paid in accordance with the pension compensation provisions,

and, accordingly, the scheme is to be treated as having been wound up immediately after that time.

3

In subsection (2)(a) the reference to liabilities of the scheme does not include any liability to, or in respect of, any member of the scheme, other than—

I11a

liabilities in respect of money purchase benefits, and

I19b

such other liabilities as may be prescribed.

I114

In subsection (2)(b) “pension obligations” in relation to the trustees or managers of the scheme means—

a

their obligations to provide pensions or other benefits to or in respect of persons (including any obligation to provide guaranteed minimum pensions within the meaning of the Pension Schemes Act 1993 (c. 48)), and

b

their obligations to administer the scheme in accordance with the scheme rules and this or any other enactment.

I145

Schedule 6 makes provision in respect of the transfer of the property, rights and liabilities of a scheme under subsection (2)(a).

I116

Regulations may make further provision regarding such transfers.

I117

Without prejudice to the generality of subsection (6), regulations may authorise the Board to modify a term of a relevant contract of insurance if—

a

any rights or liabilities under the contract are transferred to the Board by virtue of subsection (2)(a), and

b

as a result of the transfer, the Board is required, by reason of that term, to pay a specified amount or specified amounts to a specified person who, immediately before the time mentioned in subsection (2)(a), was a member of the scheme or a person entitled to benefits in respect of such a member.

I118

In subsection (7)—

  • “relevant contract of insurance” means a contract of insurance which—

    1. a

      is entered with a view to securing the whole or part of the scheme’s liability for—

      1. i

        any pension or other benefit payable to or in respect of one particular person whose entitlement to payment of a pension or other benefit has arisen, and

      2. ii

        any benefit which will be payable in respect of that person on his death, and

    2. b

      is a contract—

      1. i

        which may not be surrendered, or

      2. ii

        in respect of which the amount payable on surrender does not exceed the liability secured;

  • “specified” means specified in, or determined in accordance with, the contract of insurance.

I2I7C1C2162C1C2C4The pension compensation provisions

1

Schedule 7 makes provision for compensation to be paid in relation to a scheme for which the Board assumes responsibility in accordance with this Chapter, including provision for—

a

periodic compensation to be paid to or in respect of members,

b

lump sum compensation to be paid to members,

F5c

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and

d

annual increases to be made to periodic compensation.

C92

In this Part references to the pension compensation provisions are to the provisions of, and the provisions made by virtue of, this section, sections 140 to 142, 161(2)(c), 164 and 168 and Schedule 7.

(Those references do not include any provision of, or made by virtue of, section 170 (discharge of liabilities in respect of money purchase benefits).)

163C1C2C4Adjustments to be made where the Board assumes responsibility for a scheme

I121

This section applies where the Board assumes responsibility for an eligible scheme in accordance with this Chapter.

I122

Any benefits (other than money purchase benefits) which—

a

were payable under the scheme rules to any member, or to any person in respect of any member, during the period beginning with the assessment date and ending with the receipt by the trustees or managers of the transfer notice, and

b

have been paid before the trustees or managers receive the transfer notice,

are to be regarded as going towards discharging any liability of the Board to pay compensation to the member or, as the case may be, person in accordance with the pension compensation provisions.

I123

Regulations may provide that, in prescribed circumstances, where—

a

a member of the scheme died before the commencement of the assessment period, and

b

during the period mentioned in subsection (2)(a), a person became entitled under the scheme rules to a benefit of a prescribed description in respect of the member,

the benefit, or any part of it, is, for the purposes of subsection (2), to be treated as having become payable before the assessment date.

I124

The Board must—

a

if any amount paid, during the period mentioned in subsection (2)(a), by the trustees or managers of the scheme to a member, or to a person in respect of a member, exceeded the entitlement of that member or person under the pension compensation provisions, take such steps as it considers appropriate (including adjusting future compensation payments made in accordance with those provisions) to recover an amount equal to the aggregate of—

i

the amount of the excess, and

ii

interest on that amount, at the prescribed rate, for the period which begins when the excess was paid by the trustees or managers and ends with the recovery of the excess, and

b

if any amount so paid was less than that entitlement (or no amount was paid in respect of that entitlement), pay an amount to the member or person concerned equal to the aggregate of—

i

the amount of the shortfall, and

ii

interest on that amount, at the prescribed rate, for the period which begins when the shortfall ought to have been paid by the trustees or managers and ends with the payment of the shortfall by the Board.

5

In subsection (4) references to an amount paid do not include—

I12a

an amount paid in respect of any money purchase benefit, or

b

any other amount of a prescribed description.

I126

Nothing in subsection (4) requires the Board—

a

to recover any amount from a person in such circumstances as may be prescribed, or

b

to recover from any person any amount which it considers to be trivial.

I127

In this section “assessment date” is to be construed in accordance with Schedule 7.

Annotations:
Commencement Information
I12

S. 163(1)-(4)(5)(a)(6)(7) in force at 1.1.2006 for specified purposes and 6.4.2006 in so far as not already in force by S.I. 2005/3331, art. 2(5), Sch. Pt. 5

I8C1C2164C1C2C4Postponement of compensation entitlement for the assessment period

1

Regulations may provide that, where the Board assumes responsibility for an eligible scheme, the entitlement of any member of the scheme to compensation under this Chapter is, in such circumstances as may be prescribed, postponed for the whole or any part of the assessment period for which he continued in employment after attaining normal pension age.

2

Regulations under subsection (1) may provide that the postponement is on such terms and conditions (including those relating to increments) as may be prescribed.

3

In subsection (1) the reference to “normal pension age” is to normal pension age, within the meaning of paragraph 34 of Schedule 7, in relation to the pension or lump sum in respect of which the entitlement to compensation arises.

I16165C1C2C4Guaranteed minimum pensions

1

The Board must notify the Commissioners of Inland Revenue where, by reason of it assuming responsibility for an eligible scheme in accordance with this Chapter, the trustees or managers of the scheme are discharged from their liability to provide a guaranteed minimum pension (within the meaning of the Pension Schemes Act 1993 (c. 48)) to or in respect of a member of the scheme.

2

Notification under subsection (1) must be given as soon as reasonably practicable.

3

In section 47 of the Pension Schemes Act 1993 (further provision concerning entitlement to a guaranteed minimum pension for the purposes of section 46), after subsection (7) insert—

8

For the purposes of section 46, a person shall be treated as entitled to a guaranteed minimum pension to which he would have been entitled but for the fact that the trustees or managers were discharged from their liability to provide that pension on the Board of the Pension Protection Fund assuming responsibility for the scheme.

166C1C2C4Duty to pay scheme benefits unpaid at assessment date etc

I131

This section applies where the Board assumes responsibility for a scheme in accordance with this Chapter.

I132

Subject to subsection (4), the Board must pay any amount by way of pensions or other benefits which a person had become entitled to payment of under the scheme rules before the assessment date but which remained unpaid at the time the transfer notice was received by the trustees or managers of the scheme.

I133

If, immediately before the assessment date, the person is entitled to the amount but has postponed payment of it, subsection (2) does not apply.

I134

Subsection (2) does not apply in relation to the amount of—

a

any transfer payment, or

b

any payment in respect of a refund of contributions.

I135

Regulations may provide that, in prescribed circumstances, where—

a

a member of the scheme died before the commencement of the assessment period, and

b

during the period beginning with the assessment date and ending with the receipt by the trustees or managers of the transfer notice, a person became entitled under the scheme rules to a benefit of a prescribed description in respect of the member,

that person’s entitlement to the benefit, or to any part of it, is, for the purposes of subsection (2), to be treated as having arisen before the assessment date.

I186

Regulations may make provision requiring the Board, in such circumstances as may be prescribed, to take such steps (including making payments) as may be prescribed in respect of rights of prescribed descriptions to which members of the scheme were entitled immediately before the commencement of the assessment period.

I187

For the purposes of regulations made under subsection (6)—

a

this Chapter (other than this subsection), and

b

the scheme rules (including any relevant legislative provision within the meaning of section 318(3)),

are to have effect subject to such modifications as may be prescribed.

I138

In this section “assessment date” is to be construed in accordance with Schedule 7.

167C1C2C4Modification of Chapter where liabilities discharged during assessment period

I11

Regulations may modify any of the provisions of this Chapter as it applies to cases—

a

where any liability to provide pensions or other benefits to or in respect of any member or members under a scheme is discharged during an assessment period in relation to the scheme by virtue of—

i

regulations under section 135(4), or

ii

the Board validating any action mentioned in section 135(9), or

b

where, in prescribed circumstances, any such liability of a prescribed description is discharged on the assessment date but before the commencement of the assessment period.

I32

In this section “assessment date” is to be construed in accordance with Schedule 7.

Annotations:
Commencement Information
I1

S. 167(1) in force for the purpose only of conferring power to make regulations, orders or rules, as the case may be, 10.2.2005; and for all other purposes at 6.4.2005 in so far as not already in force by S.I. 2005/275, art. 2(3), Sch. Pt. 3

I3

S. 167(2) in force at 6.4.2005 by S.I. 2005/275, art. 2(7), Sch. Pt. 7

I9C4168C1C2C4Administration of compensation

I101

Regulations may make further provision regarding the operation and administration of this Chapter.

2

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

I10a

prescribing the manner in which and time when compensation is to be paid (including provision requiring periodic compensation to be paid by instalments);

I10b

for calculating the amounts of compensation according to a prescribed scale or otherwise adjusting them to avoid fractional amounts or facilitate computation;

I10c

prescribing the circumstances and manner in which compensation to which a person (“the beneficiary”) is entitled may be made to another person on behalf of the beneficiary for any purpose (including the discharge in whole or in part of an obligation of the beneficiary or any other person);

d

for the payment or distribution of compensation to or among persons claiming to be entitled on the death of any person and for dispensing with strict proof of their title;

I10e

for the recovery of amounts of compensation paid by the Board in excess of entitlement (together with interest on such amounts for the period from payment until recovery);

I10f

specifying the circumstances in which payment of compensation can be suspended.

I103

In this section “compensation” means compensation payable under Schedule 7 or under section 141(2).