5 Occupational pension schemes: further provisions as to the calculation of cash equivalents and increases and reductions of cash equivalents
1 Where it is the established custom for additional benefits to be awarded from the scheme at the discretion of the trustees or managers or the employer, the cash equivalent shall, unless the trustees or managers have given a direction that cash equivalents shall not take account of such benefits, take account of any such additional benefits as will accrue to the transferor if the custom continues unaltered.
2 The trustees or managers shall not make a direction such as is mentioned in paragraph (1) unless, within 3 months before making the direction, they have consulted the actuary and have obtained the actuary’s written report on the implications for the state of funding of the scheme of making such a direction, including the actuary’s advice as to whether or not in the actuary’s opinion there would be any adverse implications for the funding of the scheme should the trustees or managers not make such a direction.
3 Subject to paragraph (6), in the case of a scheme to which section 56 of the 1995 Act applies, each respective part of the cash equivalent which relates to liabilities referred to in section 73(3)(a), (aa), (b), (c)(i) or (d) of the 1995 Act may be reduced by the percentage which is the difference between—
(a) 100 per cent; and
(b) the percentage of the liabilities mentioned in the relevant paragraph of section 73(3) which the actuarial valuation shows the scheme assets as being sufficient to satisfy
where the actuarial valuation is the latest actuarial valuation obtained in accordance with section 57 of the 1995 Act before the valuation day.
4 If, by virtue of Schedule 5 to the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996, section 56 of the 1995 Act applies to a section of a scheme as if that section were a separate scheme, paragraph (3) shall apply as if that section were a separate scheme, and as if the reference therein to a scheme were accordingly a reference to that section.
5 The reduction referred to in paragraph (3) shall not apply to a case where liability in respect of a pension credit is to be discharged in accordance with paragraph 1(2) of Schedule 5 to the 1999 Act (pension credits: mode of discharge—funded pension schemes).
6 Where a scheme has begun to be wound up, a cash equivalent may be reduced to the extent necessary for the scheme to comply with sections 73 and 74 of the 1995 Act (discharge of liabilities by insurance, etc.), and the Occupational Pension Schemes (Winding Up) Regulations 1996.
Section 74 is amended by paragraph 56 of Schedule 12 to the Welfare Reform and Pensions Act 1999.
S.I.1996/3126, amended by S.I.1997/786, and S.I.1999/3198.
7 If, by virtue of the Occupational Pension Schemes (Winding Up) Regulations 1996, section 73 of the 1995 Act applies to a section of a scheme as if that section were a separate scheme, paragraph (6) shall apply as if that section were a separate scheme and as if the references therein to a scheme were accordingly references to that section.
8 Where all or any of the benefits to which a cash equivalent relates have been surrendered, commuted or forfeited before the date on which the trustees or managers discharge their liability in respect of the pension credit in accordance with the provisions of Schedule 5 to the 1999 Act, the cash equivalent of the benefits so surrendered, commuted or forfeited shall be reduced to nil.
9 In a case where two or more of the paragraphs of this regulation fall to be applied to a calculation, they shall be applied in the order in which they occur in this regulation.