The Transfer of Employment (Pension Protection) Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations concern the obligations of an employer under section 258 of the Pensions Act 2004 (c. 35) towards a person in relation to whom section 257 of that Act applies.

Section 257 applies to a person (“the employee”) who becomes the employee of a new employer (“the transferee”) by virtue of a transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 (S.I. 1981/1794) apply, and who had actual or contingent rights in relation to an occupational pension scheme immediately before the transfer.

Under section 258, the transferee is required to secure that the employee is, or is eligible to become, an active member of an occupational pension scheme (as defined in section 1 of the Pension Schemes Act 1993 (c. 48) as substituted by section 239 of the 2004 Act) in relation to which the transferee is the employer and, if it is a money purchase scheme, to make “relevant contributions” to it. Alternatively, the transferee must make such contributions to a stakeholder pension scheme of which the employee is a member (or offer to contribute to a stakeholder scheme of which he is eligible to be a member).

Section 258(2)(c) provides that a scheme in relation to which the transferee is the employer, if it is not a money purchase scheme, must satisfy a standard provided for in the Pension Schemes Act 1993, or, if regulations so provide, comply with prescribed requirements. For the purposes of this provision, regulation 2 requires that either the value of the benefits provided for by the transferee's scheme must be at least 6% of pensionable pay for each year of employment in addition to any contributions made by him or that the scheme must provide for the employer to make relevant contributions on behalf of his employees.

Section 258(7) provides for “relevant contributions” to be defined in regulations. Regulation 3 provides that such contributions must be made in respect of each period for which the employee contributes to the pension scheme, and that the amount contributed must equal the employee's contribution subject to an upper limit of 6% of basic pay.

As these Regulations are made before the expiry of the period of six months beginning with the coming into force of the provisions of the Pensions Act 2004 by virtue of which they are made, the requirement for the Secretary of State to consult such persons as he considers appropriate does not apply.

An assessment of the impact on business, charities and the voluntary sector of the provisions in these Regulations is included in the Regulatory Impact Assessment that accompanied the Pensions Act 2004. A copy of that assessment has been placed in the libraries of both Houses of Parliament. Copies may be obtained from the Department for Work and Pensions, Regulatory Impact Unit, Adelphi, 1-11 John Adam Street, London WC2N 6HT.