The Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1996

Explanatory Note

(This note is not part of the Regulations.)

These Regulations are made in consequence of the revised procedures for contracting out contained in Part IV of the Pensions (Northern Ireland) Order 1995 (“the Order”). Provisions of Part IV of the Order, for the purposes of authorising the making of regulations, and Article 166 of the Order, in so far as it was not already in operation, came into operation on 6th April 1996 by virtue of the Pensions (1995 Order) (Commencement No. 2) Order (Northern Ireland) 1996 (S.R. 1996 No. 91 (C. 4)).

The Regulations replace the Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1985 (“the 1985 Regulations”) and other related regulations which are now revoked. They supplement the changes to Part III of the Pension Schemes (Northern Ireland) Act 1993 (“the Act”) introduced by the Order and consolidate and amend those provisions of the 1985 Regulations which remain relevant.

In addition to minor and drafting amendments, the Regulations make the following changes of substance—

• revised procedures for contracting out,

• requirements to disclose information to employees about an employer’s election to contract out (regulation 6),

• special provision for holders of pensionable judicial office (regulation 14),

• a requirement to ensure that the resources of a scheme are sufficient (regulation 18),

• requirements to ensure that the scheme provides pensions broadly equivalent to those under a reference scheme (regulation 23),

• requirements relating to money purchase schemes to secure compliance with restrictions on employer-related investments (regulation 30),

• special provision for overseas schemes (regulation 48).

Part II provides for the procedure for employers to make elections to contract out employments, for notice and consultation requirements and the issue of contracting-out certificates by the Department of Health and Social Services (“the Department”).

Part III concerns requirements applying to salary related contracted-out schemes from 6th April 1997. Provision is made as to the level of resources required (regulation 18), payment of lump sums and commutation of benefits (regulations 19 and 20), the age at which benefits can be paid (regulation 21) and complying with the statutory standard in accordance with section 5(2B)(a) of the Act (regulations 22 to 27).

Part IV concerns money purchase contracted-out schemes. Provision is made for further requirements applying to such schemes (regulation 30); the deduction, payment and calculation of minimum payments (regulations 31, 32 and 33); the manner of calculating or estimating earnings (regulation 34); the manner and adjustment of age-related payments and the circumstances in which such payments are not to be made (regulations 35, 37 and 38); verification of age (regulation 36); the circumstances in which a money purchase scheme can change the mode of contracting out (regulation 39) and schemes which may not be contracted out (regulation 40).

Part V provides for additional requirements applying to all schemes and special requirements applying to overseas schemes. Provision is made for requirements concerning information about resources (regulation 41); alteration of scheme rules (regulation 42); termination of contracted-out employment (regulation 43); notifications to the Department (regulation 44); approval of arrangements for, and supervision of, schemes which cease contracting out (regulations 45 and 46); variation and cancellation of certificates (regulation 47); and overseas schemes (regulation 48).

Part VI concerns the restoration of rights in the State scheme. It provides for cases where a scheme is insolvent (regulations 49 and 50) and carries forward some existing provisions relating to contributions equivalent premiums (regulations 51 to 54).

Part VII provides for requirements applying to guaranteed minimum pensions which have accrued up until 6th April 1997. It carries forward the existing requirements applying to guaranteed minimum pensions which were previously contained in the 1985 Regulations.

Part VIII concerns transitional arrangements and savings. Provision is made in relation to the transitional arrangements for certification of schemes (regulation 70); the renewal of certificates by salary related schemes during a transitional period (regulation 71); the transitional requirements as to resources for salary related schemes (regulation 72); transitional arrangements and savings for salary related schemes which have commenced winding-up before 6th April 1997 (regulation 73); transitional arrangements concerning approval of schemes ceasing to be contracted out before 6th April 1997 (regulation 74); transitional modifications relating to issue and cancellation of further certificates (regulation 75); the prevention of the recovery of Class 1 contributions in certain circumstances (regulation 76) and transitional arrangements for schemes contracted out under section 5(2) of the Act before 6th April 1997 to become contracted out under section 5(3) of that Act from that date (regulation 77). Savings are made in respect of transitional arrangements for state scheme premiums (regulation 78).

Revocations are made in regulation 79 and Schedule 2.