Section 23: Test scheme
Section 21 provides that the quality requirement for defined benefits schemes depends on whether or not the jobholder is in contracted-out employment, as defined under the Pension Schemes (Northern Ireland) Act 1993.
If a jobholder is in contracted-out employment, evidenced by a certificate issued under section 3(1) of the Pension Schemes (Northern Ireland) Act 1993, the scheme satisfies the quality requirement in relation to that jobholder. Subsection (3) enables the Department to change, by order, the quality requirement so that a scheme does not qualify on the evidence of contracting out alone, but is required to meet a modified version of the test scheme standard (see sections 22 and 23) with an accrual rate of no more than 1/80th rather than 1/120th as set out in section 23(4)(a).
For jobholders who are members of a defined benefits scheme and are not in contracted-out employment, the scheme must meet the test scheme standard (seesection 22).
Section 22 provides that a scheme satisfies the test scheme standard if it provides benefits for the relevant members of the scheme that are broadly equivalent to, or better than, the benefits provided by a model test scheme – set out in section 23. Relevant members are (subsection (2)):
for a jobholder who is not in contracted-out employment, the jobholder and all active members who are not in contracted-out employment and are jobholders of the same employer;
for a jobholder who is in contracted-out employment, the jobholder and all active members who are in contracted-out employment and are jobholders of the same employer.
In making a comparison when applying this section, the pensions of relevant members must be considered as a whole (subsection (3)). A regulation-making power enables the Department to set out detail on how comparison with the model test scheme will be done (subsection (4)). Regulations undersubsection (4) may provide for the determination to be made in accordance with guidance issued by the Department (subsection (5)).
Under subsection (6), the Department may provide, by regulations, that an actuary will be required to confirm that a scheme meets the test.
The model test scheme on which the comparison is made is set out at section 23. It provides a pension for life based on a maximum of 40 years of accruals at an annual rate of 1/120th.
