The Occupational Pension Schemes (Pensions Compensation Provisions) Regulations 1997

Modifications for money purchase schemes

10.—(1) In the case of a money purchase scheme, and subject to paragraph (2)—

(a) the compensation provisions shall have effect as if—

(i) for paragraph (d) of section 81(1) there were substituted—

“(d) in the case of a money purchase scheme, immediately before the date of the application the value of the assets of the scheme, as reported by the auditor, is less than 90 per cent. of their value immediately before the reduction falling within paragraph (c), where the value of the assets immediately before that reduction is adjusted by the auditor so as to take account of subsequent alterations in their value (if any) which occur prior to the date of the application, but disregarding the alteration in their value attributable to the reduction itself, and”,

(ii) for paragraph (b) of section 83(3) there were substituted—

“(b) in the case of a money purchase scheme, must not exceed the amount, as reported by the auditor, which on the settlement date is required to be paid to the trustees of the scheme in order to secure that the value on that date of the assets of the scheme is equal to 90 per cent. of their value immediately before the reduction falling within section 81(1)(c), where the value of the assets of the scheme immediately before that reduction is adjusted by the auditor so as to take account of subsequent alterations in their value (if any) which occur prior to the settlement date, but disregarding the alteration in their value attributable to the reduction itself.”; and

(b) these Regulations shall have effect as if for paragraph (5) of regulation 5 there were substituted—

“(5) For the purposes of section 83(3)(b) (amount required to secure that assets are equal to 90 per cent. of their pre-loss value), the amount required to be paid to the trustees of the scheme shall be calculated in accordance with the formula—

T × 90% - V

where—

• (a)

  T is—

  (i)

  the value of the assets (excluding unallocated assets) as stated in the audited accounts which most immediately precede the loss, adjusted by the auditor so as to take into account subsequent alterations in their value (if any) which occur prior to the settlement date, but disregarding the alteration in their value attributable to the loss itself, or

  (ii)

  if there are no such audited accounts, the value of the assets (excluding unallocated assets) immediately before the loss, as reported by the auditor, adjusted in the same manner as for the calculation under head (i), and

  (b)

  V is the value of the assets at the settlement date as reported by the auditor;

  and the same principles are used to value the assets for the purposes of T and V.”.

(2) In the case of an ear-marked scheme—

(a) the compensation provisions shall have effect as if—

(i) for paragraph (d) of section 81(1) there were substituted—

“(d) in the case of an ear-marked scheme, immediately before the date of the application the value of the assets of the scheme, as certified by the relevant insurer, is less than 90 per cent. of their value immediately before the reduction falling within paragraph (c), where the value of the assets immediately before that reduction is adjusted so as to take account of subsequent alterations in their value (if any) which occur prior to the date of the application, including those which would have occurred if the reduction had not taken place, and”,

(ii) after paragraph (b) of section 81(3) there were inserted—

“(bb) “ear-marked scheme” means an occupational pension scheme which is a money purchase scheme under which all the benefits are secured by one or more policies of insurance or annuity contracts and such policies or contracts are specifically allocated to the provision of benefits for individual members or any other person who has a right to benefits under the scheme,”,

(iii) after paragraph (f) of section 81(3) there were inserted—

“(g) “relevant insurer” means, in relation to an annuity contract or policy of insurance under which scheme benefits are or were secured, the person with whom the contract is made.”,

(iv) for paragraph (b) of section 83(3) there were substituted—

“(b) in the case of an ear-marked scheme, must not exceed the amount, as certified by the relevant insurer, which on the settlement date is required to be paid to the trustees of the scheme in order to secure that the value on that date of the assets of the scheme is equal to 90 per cent. of their value immediately before the reduction falling within section 81(1)(c), where the value of the assets of the scheme immediately before that reduction is adjusted so as to take account of subsequent alterations in their value (if any) which occur prior to the settlement date, including those which would have occurred if that reduction had not taken place.”; and

(b) these Regulations shall have effect as if for paragraph (5) of regulation 5 there were substituted—

“(5) For the purposes of section 83(3)(b) (amount required to secure that assets are equal to 90 per cent. of their pre-loss value), the amount required to be paid to the trustees of the scheme shall be calculated in accordance with the formula—

where—

• (a)

  T is the value of the assets (excluding unallocated assets) on such date as immediately precedes the loss, adjusted so as to take into account the loss, and other alterations in their value (if any) between that date and the settlement date, as certified by the relevant insurer,

  (b)

  S is the value of the assets constituting the loss on such date as immediately precedes its occurrence, adjusted so as to reflect any alteration in the value of those assets which would have occurred had they remained in the scheme until the settlement date, as certified by the relevant insurer,

  (c)

  V is the value of the assets at the settlement date, as certified by the relevant insurer,

  and the same principles are used to value the assets for the purposes of T, S and V.”.