The Occupational Pension Schemes (Preservation of Benefit) Regulations 1991

Bought out benefits

9.—(1) The scheme may provide for benefits different from those required to constitute short service benefit to be appropriately secured by a transaction to which section 52C of the Social Security Pensions Act 1975 applies (extinguishment of liability of scheme for pensions secured by insurance policies or annuity contracts).

(2) Any scheme rule that allows the alternative described in this regulation must require the trustees or managers of the scheme to be reasonably satisfied that, except where paragraph (3) below applies, the payment made to the insurance company is at least equal to the amount described in regulation 11.

(3) The exception to paragraph (2) is where the member is requiring the trustees or managers to provide the alternative by exercising a right to a cash equivalent, as described in Part II of Schedule 1A to the Social Security Pensions Act 1975(1) (transfer values).

(4) A scheme may allow the alternative described in this regulation to be provided without the member’s consent where—

(a) the member will be able to assign or surrender the insurance policy or annuity contract on the conditions set out in regulation 2 of the Occupational Pension Schemes (Discharge of Liability) Regulations 1985(2) (conditions on which policies of insurance and annuity contracts may be assigned or surrendered); and

(b) the requirements of paragraph (5) are satisfied.

(5) The requirements of this paragraph are that—

(a) the scheme is being wound up; or

(b) the member has less than “5 years' qualifying service” (as defined in paragraph 7 of Schedule 16 immediately before the coming into force of section 10 of the Social Security Act 1986(3) (changes to preservation requirements)) and the requirements of paragraph (6) are satisfied; or

(c) the Occupational Pensions Board consider that, in the circumstances, it is reasonable for the scheme to provide the alternative without the member’s consent and the requirements of paragraph (6) are satisfied.

(6) The requirements of this paragraph are that all the conditions set out in subparagraphs (a) to (d) are satisfied, namely—

(a) the member’s rights under the scheme do not include “protected rights”, as defined in section 66 of the Social Security Pensions Act 1975(4) (interpretation);

(b) the insurance policy is taken out or the annuity contract entered into more than 12 months after the member’s pensionable service terminates;

(c) the trustees or managers of the scheme give the member at least 30 days' written notice of their intention to take out the insurance policy or enter into the annuity contract unless the member exercises a right to a cash equivalent, as described in Part II of Schedule 1A to the Social Security Pensions Act 1975 (the notice being sent to the member at his last known address or delivered to the member personally); and

(d) when the trustees or managers of the scheme agree with the insurance company to take out the insurance policy or enter into the annuity contract, there is no outstanding application by the member for a cash equivalent.

(7) For the purposes of this regulation, “appropriately secured” means the same as in section 52C of the Social Security Pensions Act 1975 except that a policy of insurance or annuity contract which is taken out or entered into with an “authorised friendly society” (as defined for the purposes of regulation 6), but which otherwise satisfies the conditions for being “appropriate” for the purposes of section 52C, is to be treated as if it were appropriate for the purposes of that section.

(1)

1975 c. 60. Schedule 1A was inserted by paragraph 3 of Schedule 1 to the Social Security Act 1985 (c. 53). lt has been amended by subsequent Social Security Acts and modified by the Personal and Occupational Pension Schemes (Modification of Enactments) Regulations 1987 (S.I. 1987/1116).

(2)

S.I. 1985/1929; the relevant amending instruments are S.I. 1986/2171, 1987/1114 and 1988/1016.

(3)

1986 c. 50. Section 10 came into force on 6th April 1988.

(4)

1975 c. 60. The definition of “protected rights” was inserted by paragraph 11 of Schedule 2 to the Social Security Act 1986 (c. 50).