The European Parliamentary (United Kingdom Representatives) Pensions (Amendment) Order 2010

EXPLANATORY NOTE

(This note is not part of the Order)

This Order amends the European Parliamentary (United Kingdom Representatives) Pensions (Consolidation and Amendment) Order 1994 (S.I. 1994/1662) (“the Principal Order”), which was made under section 4 of the European Parliament (Pay and Pensions) Act 1979 (“the 1979 Act”) and sets out a pension scheme (“the UK scheme”) for United Kingdom Representatives of the European Parliament (“Representatives”).

Article 1 provides for citation, commencement, interpretation and application. The Order comes into force on 1st May 2010, but the changes it makes to the Principal Order regarding contributions by Representatives, pension accrual rates and membership take effect from 14th July 2009. Section 4(3)(g) of the 1979 Act authorises the making of provisions taking effect from a date earlier than the date the Order is made.

Article 2 amends article 2 of the Principal Order by inserting new definitions of “Category 1 contributor”, “Category 2 contributor” and “Category 3 contributor” and by making a consequential amendment to the definition of “participant”.

Article 3 amends article 4 of the Principal Order pursuant to the Decision of the European Parliament of 28th September 2005 adopting the Statute for Members of the European Parliament 2005/684/EC, Euratom (OJ No L 262, 7.10.05, p1-10) (“the European Decision”). The European Decision introduced a common pension scheme for members of the European Parliament (“the European scheme”), which came into force on 14th July 2009. Members of the European Parliament may continue to avail themselves of their national pension schemes provided they were members before 14th July 2009 and were re-elected. Article 4 is therefore amended to provide that a Representative may only participate in the UK scheme if he has opted out of the European scheme and has made contributions to the UK scheme prior to 14th July 2009.

Articles 4 and 5(1), (3) and (4) amend articles 5 and 7 of the Principal Order and provide for the introduction of a new rate at which Representatives may contribute to the UK scheme and accrue pension under it. Currently, Representatives may pay contributions of 10% of salary to accrue pension at a rate of one-fortieth of final salary for each year of pensionable service, or they may pay contributions of 6% of salary to accrue pension at a rate of one-fiftieth of final salary. With effect from 14th July 2009, an option is introduced for Representatives to pay contributions of 5.9% of salary to accrue at a rate of one-sixtieth, the 10% contribution rate increases to 11.9% and the 6% contribution rate increases to 7.9%.

Articles 5(2) and 8(3) apply the UK scheme’s maximum pension limit of two-thirds of final salary to all scheme members, in relation to service accrued after 14th July 2009. This will affect Representatives who joined the scheme before 1st June 1989 and remain in service after reaching age 65.

Article 6 makes amendments to article 11 of the Principal Order, which sets out the circumstances in which an ill-health pension may be paid. The amendments only apply to a person who is serving as a Representative on or after the date this Order comes into force. They require an applicant for an ill-health pension to certify certain matters to the Managers in order to qualify for an ill-health pension and put in place a two-tier system for ill-health pensions. Article 6 also makes provision for the Managers to review an ill-health pension payable to a person aged under 65 and to terminate or reduce it where they consider that the pensioner no longer satisfies the conditions for payment.

Article 7 reduces the maximum number of Managers required in respect of the UK scheme from seven to six, changes the requirements that a person must meet in order to be eligible to act as a Manager and updates the Managers’ address for correspondence.

Article 8(1) and (2) amends Schedule 2 of the Principal Order to clarify the definitions of “Class B participant” and “Class C participant”.

Article 9 makes consequential amendments to paragraph 5 of Schedule 7, to reflect the amendments to article 11 of the Principal Order made by article 6 of this Order.

Article 10 provides for the pension scheme managers to collect additional contributions from Representatives whose contribution rate increases with effect from 14th July 2009 as a result of the changes made by article 4.

An impact assessment has not been provided for this instrument as no impact on the private or voluntary sectors is foreseen.