Occupational Pension Schemes (Contracting-out) Regulations 1996

Explanatory Note

(This note is not part of the Regulations)

These Regulations replace the Occupational Pension Schemes (Contracting-out) Regulations 1984 and other related regulations which are now revoked. The Regulations supplement the changes introduced by the Pensions Act 1995 to Part III of the Pension Schemes Act 1993. They also consolidate and amend those provisions of the 1984 Regulations which remain relevant. The regulations made by virtue of Part III of the Pensions Act 1995 are made within six months of those provisions coming into force and as a consequence there is no requirement to consult. As regards other regulations, the Occupational Pensions Board has agreed that proposals to make regulations need not be referred to it.

Part II of these Regulations provides for the procedure for employers to make elections to contract out employments, for notice and consultation requirements and the issue of contracting-out certificates by the Secretary of State.

Part III concerns the new requirements applying to salary-related contracted-out schemes from 6th April 1997. Provision is made as to the level of resources required (regulation 18), payment of lump sums and commutation of benefits (regulations 19 and 20), the age at which benefits can be paid (regulation 21) and meeting the statutory standard in accordance with section 9(2B)(a) of the Pension Schemes Act 1993 (regulations 22 to 27).

Part IV concerns money purchase contracted-out schemes. Provision is made for further requirements applying to such schemes (regulation 30); the deduction, payment and calculation of minimum payments (regulations 31, 32 and 33); the manner of calculating or estimating earnings (regulation 34); the manner and adjustment of age-related payments and the circumstances in which such payments are not to be made (regulations 35, 37 and 38); verification of age (regulation 36); the circumstances in which a money purchase scheme can change mode of contracting-out (regulation 39) and schemes which may not be contracted-out (regulation 40).

Part V provides for additional requirements applying to all schemes and special requirements applying to overseas schemes. Provision is made for requirements concerning information about resources (regulation 41); alteration of scheme rules (regulation 42); termination of contracted-out employment (regulation 43); notifications to the Secretary of State (regulation 44); approval and supervision of schemes which cease contracting-out (regulations 45 and 46); variation and cancellation of certificates (regulation 47); and overseas schemes (regulation 48).

Part VI concerns the restoration of rights in the State scheme. It provides for cases where a scheme is insolvent (regulations 49 and 50) and carries forward some provisions relating to contributions equivalent premiums (regulations 51 to 54).

Part VII provides for requirements applying to guaranteed minimum pensions which have accrued up until 6th April 1997. It carries forward the requirements applying to guaranteed minimum pensions which were previously contained in the Occupational Pension Schemes (Contracting-out) Regulations 1984.

Part VIII concerns transitional arrangements and savings. Provision is made in relation to the transitional arrangements for certification of schemes (regulation 70); the renewal of certificates by salary-related schemes during a transitional period (regulation 71); transitional requirements as to resources for salary-related schemes (regulation 72); transitional arrangements and savings for salary-related schemes which have commenced winding up before 6th April 1997 (regulation 73); transitional arrangements concerning approval of schemes ceasing to be contracted-out before 6th April 1997 (regulation 74); transitional modifications relating to issue and cancellation of further certificates (regulation 75); the prevention of recovery of Class 1 contributions in certain circumstances (regulation 76). Savings are made in respect of transitional arrangements for state scheme premiums (regulation 77).

Revocations are made in regulation 78 and Schedule 2.

An assessment of the compliance cost for employers of the measures arising from the Pensions Act 1995, including these Regulations, has been placed in the libraries of both Houses of Parliament. Copies can be obtained by post from the Department of Social Security, Private Pensions Directorate, 11th floor, The Adelphi, 1-11 John Adam Street, London WC2N 6HT.