The Occupational Pension Schemes (Discharge of Liability) Regulations 1997

PART II DISCHARGE OF LIABILITY WHERE GUARANTEED MINIMUM PENSIONS, SHORT SERVICE BENEFITS AND ALTERNATIVES TO SHORT SERVICE BENEFITS ARE SECURED BY INSURANCE POLICIES OR ANNUITY CONTRACTS

Requirements applying to policies of insurance and annuity contracts

2.—(1) The requirements referred to in section 19(4)(a)(ii) of the 1993 Act (requirements applying to policies of insurance or annuity contracts for the purposes of discharging liabilities for guaranteed minimum pensions) are that the insurance policy is taken out or the annuity contract is entered into with

[F1 (a) a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance; F2 ...]

F2 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F3 (2) [F4 Sub-paragraph (a)] of paragraph (1) must be read with—

(a) section 22 of the Financial Services and Markets Act 2000;

(b) any relevant order under that section; and

(c) Schedule 2 to that Act.]

Textual Amendments

F1 Words in reg. 2(1) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649), arts. 1, 553(1)

F2 Reg. 2(1)(b) and word omitted (31.12.2020) by virtue of The Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/192), regs. 1, 12(2)(a); 2020 c. 1, Sch. 5 para. 1(1)

F3 Reg. 2(2) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649), arts. 1, 553(2)

F4 Words in reg. 2(2) substituted (31.12.2020) by The Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/192), regs. 1, 12(2)(b); 2020 c. 1, Sch. 5 para. 1(1)

Conditions on which policies of insurance and annuity contracts may be assigned or surrendered

3.  The conditions referred to in section 19(4)(b) of the 1993 Act (policy of insurance or annuity contract appropriate for the purposes if it may not be assigned or surrendered except on conditions which satisfy prescribed requirements) are—

(a) that the written consent of the earner or, if the earner has died, the earner’s [F5 widow, widower or surviving civil partner] to the assignment or surrender is obtained; and

(b) that in consideration of the assignment or surrender the benefits previously secured by the policy of insurance or annuity contract become secured, or are replaced by benefits which are secured, by one or more of the following means—

(i) another policy of insurance or annuity contract which is appropriate within the meaning of section 19(4) of the 1993 Act,

(ii) subject to regulations 3, 5 and 6 of the Contracting-out (Transfer and Transfer Payment) Regulations 1996 M1 in the case of benefits which include guaranteed minimum pensions, the award of supplementary credits under an occupational pension scheme which applies to the employment of the earner at the time of the assignment or surrender or the granting of rights to money purchase benefits under a personal pension scheme, or

(iii) in the case only of benefits which are not, and do not include guaranteed minimum pensions, the award of rights to money purchase benefits under a self-employed pension arrangement within the meaning of regulation 12(6)(a) of the Occupational Pension Schemes (Transfer Values) Regulations 1996 M2 or regulation 2A of the Personal Pension Schemes (Transfer Values) Regulations 1987 M3 .

Textual Amendments

F5 Words in reg. 3(a) substituted (5.12.2005) by The Civil Partnership (Contracted-out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005 (S.I. 2005/2050), art. 1(3), Sch. 2 para. 39

Marginal Citations

M1 S.I. 1996/1462.

M2 S.I. 1996/1847.

M3 S.I. 1987/1112; relevant amending instrument is S.I. 1988/1016.

Conditions on which policies of insurance and annuity contracts may be commuted

4.— [F6 (1) The requirements referred to in section 19(4)(c) of the 1993 Act (policy of insurance or annuity contract appropriate where commutation conditional on satisfying prescribed requirements) are that—

(a) the amount secured by the policy of insurance or annuity contract does not exceed the amount for the time being permitted for a lump sum payment by—

(i) the lump sum rule in section 166 of the Finance Act 2004 and qualifies as a trivial commutation lump sum for the purposes of paragraph 7 of Part 1 of Schedule 29 to that Act; or

(ii) the lump sum death benefit rule in section 168 of that Act and qualifies as a trivial commutation lump sum death benefit for the purposes of paragraph 20 of Part 2 of Schedule 29 to that Act; or

(b) subject to paragraph (2), the earner requests or consents to the amount secured by the policy of insurance or annuity contract being paid as a lump sum and that payment does not exceed the amount for the time being permitted for a lump sum payment by the lump sum rule in section 166 of that Act and qualifies as a serious ill-health lump sum for the purposes of paragraph 4 of Part 1 of Schedule 29 to that Act[F7 ; or]]

[F8 (c) subject to paragraph (2A)—

(i) the benefits secured by the policy of insurance or annuity contract have become payable;

(ii) the earner requests or consents to the amount secured by the policy of insurance or annuity contract being paid as a lump sum; and

(iii) that payment does not exceed the amount for the time being permitted for a lump sum payment by the lump sum rule in section 166 of the Finance Act 2004 and qualifies as a pension commencement lump sum for the purposes of paragraph 1 of Part 1 of Schedule 29 to that Act.]

(2) The commutation referred to in paragraph (1)(b) does not apply to that part of the benefits which consist of F9 ... the earner’s [F10 widow's, widower’s or surviving civil partner's] guaranteed minimum pensions.

[F11 (2A) The commutation referred to in paragraph (1)(c) does not apply to that part of the benefits which consist of the earner’s and the earner’s widow’s, widower’s or surviving civil partner’s guaranteed minimum pensions.]

(3) For the purposes of paragraph (1)(a)—

F12 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) any benefit secured by means of another policy of insurance or annuity contract which is appropriate for the purposes of section 19(4) of the 1993 Act shall be treated as payable or prospectively payable under the occupational pension scheme which was liable to provide it before it was so secured; and

(c) any guaranteed minimum pension which is prospectively payable shall be reckoned as having the value that it will have (in accordance with the provisions of the occupational pension scheme in question) when the earner reaches pensionable age.

F13 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Reg. 4(1) substituted (6.4.2006) by The Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006 (S.I. 2006/744), arts. 1, 13(2)(a)

F7 Word in reg. 4(1)(b) inserted (6.4.2014) by The Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/540), regs. 1, 3(2)(a)

F8 Reg. 4(1)(c) inserted (6.4.2014) by The Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/540), regs. 1, 3(2)(b)

F9 Words in reg. 4(2) omitted (6.4.2006) by virtue of The Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006 (S.I. 2006/744), arts. 1, 13(2)(b)

F10 Words in reg. 4(2) substituted (5.12.2005) by The Civil Partnership (Contracted-out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005 (S.I. 2005/2050), art. 1(3), Sch. 2 para. 40(b)

F11 Reg. 4(2A) inserted (6.4.2014) by The Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/540), regs. 1, 3(2)(c)

F12 Reg. 4(3)(a) omitted (6.4.2006) by virtue of The Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006 (S.I. 2006/744), arts. 1, 13(2)(c)

F13 Reg. 4(4) omitted (6.4.2006) by virtue of The Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006 (S.I. 2006/744), arts. 1, 13(2)(d)

Other requirements applying to policies of insurance and annuity contracts

[F14 5.— (1) The requirements referred to in section 19(4)(d) of the 1993 Act (policy of insurance or annuity contract appropriate if it satisfies such other requirements as may be prescribed) are—

(a) that the insurance company with which the policy is taken out or the contract entered into assumes an obligation to the earner in question or to trustees of a trust for the benefit of the earner and, if appropriate, dependants of his, to pay the benefits secured by the policy or contract to him or, as the case may be, to dependants of his, or to the trustees of such a trust;

(b) [F15 that the policy or contract contains, or is endorsed with, terms so as to provide for such increase (if any) in the payments under the policy or contract as is required by paragraph (2);]

(c) that, if any guaranteed minimum pension is due or prospectively due to the earner in question, the policy or contract contains, or is endorsed with, terms so as to provide—

(i) that the annuity to be paid thereunder to or for his benefit will be at least equal to the guaranteed minimum pension due to him, or, as the case may be, prospectively due to him, at pensionable age, subject to section 15 (increase of guaranteed minimum pension) or section 16 (revaluation of earnings factors) of the 1993 Act, and

(ii) in the case where the earner dies leaving a [F16 widow, widower or surviving civil partner] , that the annuity payable for the [F17 widow's, widower’s or surviving civil partner's] will be at least equal to the guaranteed minimum pension due or prospectively due to the [F16 widow, widower or surviving civil partner] , and

(iii) in each case mentioned in sub-paragraphs (i) and (ii), that any increase of guaranteed minimum pension under Chapter II of Part V of the 1993 Act M4 results in a similar increase in the annuity.

[F18 (2) For the purposes of paragraph (1)(b)—

(a) an increase is required if sections 51 and 52 of the 1995 Act, and regulations made under those sections, would apply to payments under the policy or contract if those payments were benefits payable under an occupational pension scheme (and for this purpose, the provisions of the 1995 Act shall be construed in accordance with regulation 11(6)(a) to (d)); and

(b) such an increase shall be payable at the same rate, and to the same extent, as would be required under those provisions.]]

Textual Amendments

F14 Reg. 5(1): reg. 5 renumbered as reg. 5(1) (6.4.2005) by The Personal and Occupational Pension Schemes (Indexation and Disclosure of Information) (Miscellaneous Amendments) Regulations 2005 (S.I. 2005/704), regs. 1(2), 12(2)

F15 Reg. 5(1)(b) substituted (6.4.2005) by The Personal and Occupational Pension Schemes (Indexation and Disclosure of Information) (Miscellaneous Amendments) Regulations 2005 (S.I. 2005/704), regs. 1(2), 12(3)

F16 Words in reg. 5(1)(c)(ii) substituted (5.12.2005) by The Occupational and Personal Pension Schemes (Civil Partnership) (Miscellaneous Amendments) Regulations 2005 (S.I. 2005/3164), regs. 1(1), 4(a)(i)

F17 Words in reg. 5(1)(c)(ii) substituted (5.12.2005) by The Occupational and Personal Pension Schemes (Civil Partnership) (Miscellaneous Amendments) Regulations 2005 (S.I. 2005/3164), regs. 1(1), 4(a)(ii)

F18 Reg. 5(2) added (6.4.2005) by The Personal and Occupational Pension Schemes (Indexation and Disclosure of Information) (Miscellaneous Amendments) Regulations 2005 (S.I. 2005/704), regs. 1(2), 12(4)

Marginal Citations

M4 Chapter II Part V was amended by sections 53(4) and 55 of the Pensions Act 1995.

Further conditions on which liability may be discharged

6.—(1) The conditions referred to in section 19(5)(c)(ii) of the 1993 Act (further conditions on which liability may be discharged) are that the requirements of one or more of paragraphs (2) to (5) are satisfied.

(2) The requirements of this paragraph are satisfied if—

(a) the earner is dead and benefit is payable to a person other than [F19 the earner’s widow, widower or surviving civil partner]; and

(b) the arrangement for securing the benefit by means of the policy or contract was made at the written request of the person entitled to it, or with the consent of that person given in writing in the form set out in Schedule 1 to these Regulations.

(3) The requirements of this paragraph are satisfied if the benefit is provided as an alternative to short service benefit by virtue of a provision that conforms with the requirements of regulation 9(4) of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 (bought out benefits without consent)M5 .

(4) In a case where an occupational pension scheme is being wound up and sections 73 and 74 of the 1995 Act and regulations made under those sections do not apply, the requirements of this paragraph are satisfied if the earner is able to assign or surrender the policy of insurance or annuity contract and the conditions specified in regulation 3 are satisfied.

(5) The requirements of this paragraph are satisfied if the conditions set out in sub-paragraphs (a) and (b) are satisfied, namely—

(a) the benefit concerned includes a guaranteed minimum pension that is payable to the earner’s [F20 widow, widower or surviving civil partner];

(b) the trustees—

(i) give the [F20 widow, widower or surviving civil partner] at least 30 days written notice (“the notice") of their intention to take out the insurance policy or enter into the annuity contract, and

(ii) send the notice to the [F20 widow, widower or surviving civil partner] [F21 in accordance with regulations 26 to 28 of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (giving information and documents)] or deliver the notice to the [F20 widow, widower or surviving civil partner] personally.

Textual Amendments

F19 Words in reg. 6(2)(a) substituted (5.12.2005) by The Civil Partnership (Contracted-out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005 (S.I. 2005/2050), art. 1(3), Sch. 2 para. 41(a)

F20 Words in reg. 6(5) substituted (5.12.2005) by The Civil Partnership (Contracted-out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005 (S.I. 2005/2050), art. 1(3), Sch. 2 para. 41(b)

F21 Words in reg. 6(5)(b)(ii) substituted (6.4.2014) by The Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (S.I. 2013/2734), reg. 1(1), Sch. 9 para. 6

Marginal Citations

M5 S.I. 1991/167; relevant amending instruments are 1994/1062, 1995/3067 and 1996/2131.

Form of consent

7.  For the purpose of section 19(5)(a)(ii) of the 1993 Act (form of consent to arrangements for securing benefits) the prescribed form is the form set out in Schedule 1 to these Regulations.