Part 3

Occupational Pension Schemes

Indexation and revaluation

Indexation requirements for cash balance benefits
21
1
Article 51 of the Pensions (Northern Ireland) Order 1995 (annual increase in rate of certain pensions) is amended as follows.
2
In paragraph (1) for “paragraph (6)” substitute “paragraphs (6) and (7)”.
3
After paragraph (6) add—
7
This Article does not apply to any pension (or part of a pension) under a relevant occupational pension scheme which—
a
is a cash balance benefit (see Article 51ZB), and
b
first comes into payment on or after the day on which section 21 of the Pensions Act (Northern Ireland) 2012 comes into operation.
8
An occupational pension scheme is a “relevant occupational pension scheme” if—
a
it has not, on or after the appointed day, been contracted-out by virtue of satisfying section 5(2) of the Pension Schemes Act, or
b
it has, on or after the appointed day, been so contracted-out, but no person is entitled to receive, or has accrued rights to, benefits under the scheme attributable to the period on or after that day when it was so contracted-out.
.
4
After Article 51ZA of the Pensions (Northern Ireland) Order 1995 insert—

Meaning of “cash balance benefit”
51ZB
1
For the purposes of Article 51(7)(a), a pension provided to or in respect of a member of an occupational pension scheme is a “cash balance benefit” if conditions 1 and 2 are met.
2
Condition 1 is that the rate of the pension is calculated by reference to a sum of money (“the available sum”) which is available under the scheme for the provision of benefits to or in respect of the member.
3
Condition 2 is that under the scheme—
a
there is a promise about the amount of the available sum, but
b
there is no promise about the rate or amount of the benefits to be provided.
4
The promise mentioned in paragraph (3)(a) includes in particular a promise about the change in the value of, or the return from, payments made under the scheme by the member or by any other person in respect of the member.
5
The promise mentioned in paragraph (3)(b) includes a promise that—
a
the amount of the available sum will be sufficient to provide benefits of a particular rate or amount;
b
the rate or amount of a benefit will represent a particular proportion of the available sum.
6
But a pension is not prevented from being a cash balance benefit merely because under the scheme there is a promise that—
a
the rate or amount of a benefit payable in respect of a deceased member will be a particular proportion of the rate or amount of a benefit which was (or would have been) payable to the member;
b
the amount of a lump sum payable to a member, or in respect of a deceased member, will represent a particular proportion of the available sum.
.