The Occupational Pension Schemes (Winding Up) (Modification for Multi-employer Schemes and Miscellaneous Amendments) Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations modify the position under the Pensions Act 1995 (c. 26) (“the 1995 Act”) where an occupational pension scheme that has more than one employer or has had more than one employer at any time since 6th April 2005 and whose rules do not provide for the partial winding up of the scheme if it is being wound up. They also amend the Occupational Pension Schemes (Winding up etc.) Regulations 2005 (S.I. 2005/706) (“the 2005 Regulations”) and the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996 (S.I. 1996/1536) (“the MFR Regulations”).

Regulation 2 provides for cases where an insolvency event has occurred in relation to one of the persons who is an employer in relation to an occupational pension scheme since 6th April 2005 and the trustees or managers of the scheme have determined in the last 3 months that it is probable that the scheme will enter an assessment period in the next 12 months (that is, a period when the Board of the Pension Protection Fund (“the Board”) determine whether to assume responsibility for the scheme for the purposes of pension protection). In such cases the normal obligation of the trustees or managers under section 73A of the 1995 Act to reduce the benefits that they pay out in respect of a member during the winding up period so that members do not receive more than they should according to the priority rules in section 73 of the 1995 Act is modified. The modification enables the trustees, if they wish, to pay in full the level of benefits that would be payable if the Board were to assume responsibility for the scheme. Regulation 2 also modifies section 73A of the 1995 Act so that if the trustees cease to expect the scheme to enter an assessment period in the next 12 months, they may recover any overpayments made as a result of exercising the power to pay greater amounts. Where sections 73 to 74 of the 1995 Act apply as if a part of a scheme were a scheme, regulation 2 applies in the same way.

Regulation 3 revokes regulation 4(5) of the 2005 Regulations with the result that the order of priority to be given to scheme liabilities being paid out during the winding up period of an occupational pension scheme under section 73(4) of the 1995 Act is the same whether or not during the winding up period there is an assessment period. (Regulation 4(5) modified section 73(4) where there was no assessment period.) Regulation 3 also makes it clear that the new regulation 4 substituted by regulation 9 of the 2005 Regulations supersedes regulations 4A to 4C of the Occupational Pension Schemes (Winding Up) Regulations 1996 (S.I. 1996/3126).

Regulation 4 amends regulation 6(1) of the MFR Regulations so that assets representing the value of any rights in respect of money purchase benefits under an occupational pension scheme are excluded from minimum funding valuations for the purposes of section 56 of the 1995 Act. This is consequential on the exclusion by section 73(10) of the 1995 Act of a scheme’s money purchase liabilities from the liabilities mentioned in section 73(4) of that Act, because it is those liabilities that are valued for the purposes of those valuations and the valuation would be misleading if the corresponding assets were not also excluded.

As these Regulations are made before the expiry of the period of six months beginning with the coming into force of section 270 of the Pensions Act 2004 (c. 35) on which they are consequential, the requirement for the Secretary of State to consult such persons as he considers appropriate does not apply.

A full regulatory impact assessment has not been produced for this instrument as it has no impact on the costs of business.