Explanatory Memorandum

Pensions Act (Northern Ireland) 2012

2012 CHAPTER 3

1 June 2012

Commentary on Sections

Part 4: Money Purchase Benefits

Section 27: Definition of money purchase benefits

Section 27 amends the Pension Schemes (NI) Act and the Pensions (No. 2) Act to amend the definition of money purchase benefits. The effect is to ensure that, in order for a benefit to qualify as a money purchase benefit, the amount or rate of the benefit must be calculated only by reference to assets which must necessarily suffice to provide the benefit. If any other factor such as a guaranteed investment return or other guarantee of the amount were used to calculate the benefit, it is not a money purchase benefit. The aim is to ensure that money purchase benefits cannot develop a funding deficit. In the case of a scheme pension in payment, the pension must be backed by an annuity contract or insurance policy to be a money purchase benefit.

Subsections (5) and (6) give retrospective effect to the amendments.

Section 28: Transitional

Section 28 provides a power, by regulations, to make transitional provision in relation to the coming into operation of the amendments in section 27. This includes power to disapply the amended definition of money purchase benefits, and power to modify the application of other legislation where the amended definition applies.

Section 29: Consequential and supplementary

Section 29 provides a power, by regulations, to make consequential or supplementary provision in relation to the amendments made by section 27. Subsection 2 amends Article 280 of the 2005 Order to allow provisions of that Order relating to scheme funding to be modified in relation to hybrid schemes, multi-employer schemes or partnerships. For example, this would allow provision to be made for hybrid schemes which provide both money purchase and defined benefits, so that regulatory requirements could be separately applied to different parts of the scheme.

Section 30: Power to make further provision

Section 30 provides a power to make further amendments to the definitions of money purchase benefits in the Pension Schemes (NI) Act and the Pensions (No. 2) Act.

Section 31: Regulations

Section 31 makes technical provision for regulations made under this Part, in particular it allows regulations to amend primary legislation and to have retrospective effect.