Occupational Pension Schemes (Preservation of Benefit) Regulations 1991
1991 No. 167
PENSIONS
The Occupational Pension Schemes (Preservation of Benefit) Regulations 1991
Made 1st February 1991
Laid before Parliament 7th February 1991
Coming into force 28th February 1991
The Secretary of State for Social Security, in exercise of the powers conferred by sections 51(5) and (10), 64(1A), 96(1) and (2) and 99(1) and (3) of, and paragraphs 5(1), 6(5), 9(1), (2) and (3), 12(2), 13(5), 15(4) and 20 to 26 of Schedule 16 to, the Social Security Act 19731, section 6(4) of the National Insurance Act 19742, sections 166(1) to (3A) and 168(1) of, and Schedule 20 to, the Social Security Act 19753and sections 52C(5), 56P, 62(4) and 66(2) and (3) of, and paragraphs 14(3) and 20 of Schedule 1A to, the Social Security Pensions Act 19754, and of all other powers enabling him in that behalf, after considering the report of the Occupational Pensions Board on the proposals submitted to them5, hereby makes the following Regulations:
Citation, commencement and interpretation
1.—(1) These Regulations may be cited as the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991.
(2) These Regulations come into force on 28th February 1991.
(3) In these Regulations, “Schedule 16” means Schedule 16 to the Social Security Act 1973 (requirements as to preservation of benefit under occupational pension schemes).
Meaning of “employer”
2.—(1) This regulation applies for the purposes of Part II of the Social Security Act 1973 (occupational pension schemes).
(2) In relation to an employed earner, “employer” means the secondary contributor in relation to any payment of earnings in respect of the employment concerned.
(3) In relation to a self-employed earner, “employer” means any other person, government department, public authority or body of persons who has made, or is to make, payments to the scheme in respect of the earner.
(4) In this regulation, “employed earner” and “self-employed earner” mean the same as in section 2 of the Social Security Act 1975 (categories of earners) and “secondary contributor” means the same as in section 4 of that Act (Class 1 contributions-incidence).
Meaning of “member” and “prospective member”
3.—(1) This regulation applies for all the purposes of Part II of the Social Security Act 1973.
(2) Any earners who are, or have been, in pensionable service under an occupational pension scheme are to be regarded as members of the scheme.
(3) There are to be regarded as prospective members of an occupational pension scheme—
(a)
(a) any earners who are able, at their own option, to become members of the scheme, and
(b)
(b) any earners who will become so able, if they continue in the same employment for a sufficiently long time and their contracts of service and the scheme rules remain unaltered during that time.
Benefits included in supplementary credits
4.—(1) For the purposes of paragraph 5(1)(c) of Schedule 16, in the circumstances set out in paragraph (2) below, “supplementary credits” include any increase of benefit or additional benefit that is of an amount, or at a rate, unrelated to length of pensionable service or to the number or amount of contributions paid by or for the member.
(2) The circumstances referred to in paragraph (1) are that the member becomes entitled to the increase of benefit or additional benefit in consequence of a provision made by or under the scheme after he becomes a member of it and before his pensionable service terminates.
Short service benefit in lump sum form
5.—(1) For the purposes of paragraph 6(5) of Schedule 16, a scheme may provide for payment of short service benefit in the form of a lump sum before normal pension age in the circumstances described in any of paragraphs (2) to (4) of this regulation or any other circumstances where the Occupational Pensions Board consider it reasonable.
(2) The circumstances described in this paragraph are that the member’s earning capacity is destroyed or seriously impaired by physical or mental infirmity.
(3) The circumstances described in this paragraph are that the member has become incapable of following his normal employment because of physical or mental infirmity.
(4) The circumstances described in this paragraph are that the member has attained age 50 or is within 10 years of normal pension age.
Means of assuring short service benefit
6.—(1) For the purposes of paragraph 9(1) of Schedule 16, short service benefit that is not payable directly out of the resources of the scheme may be assured to the member by means of a transaction to which section 52C of the Social Security Pensions Act 19756(extinguishment of liability of scheme for pensions secured by insurance policies or annuity contracts) applies, and which satisfies the requirements of paragraph (2) of this regulation.
(2) A transaction satisfies the requirements of this paragraph if—
(a)
(a) it results in the member’s short service benefit being secured by one or more policies of insurance or annuity contracts that are appropriate for the purposes of section 52C of the Social Security Pensions Act 1975; and
(b)
(b) the member will be able to assign or surrender the insurance policies or annuity contracts on the conditions set out in regulation 2 of the Occupational Pension Schemes (Discharge of Liability) Regulations 19857(conditions on which policies of insurance and annuity contracts may be assigned or surrendered).
(3) For the purposes of paragraph (2) of this regulation, a policy of insurance or annuity contract which is taken out or entered into with an authorised friendly society, but which otherwise satisfies the conditions for being “appropriate” for the purposes of section 52C of the Social Security Pensions Act 1975, is to be treated as if it were appropriate for the purposes of that section.
(4) In this regulation—
“friendly society” means a friendly society registered under—
(a)
(a) section 7(1)(a) of the Friendly Societies Act 19748(societies which may be registered); or
(b)
(b) section 1(1)(a) of the Friendly Societies Act (Northern Ireland) 19709(societies which may be registered); and
“authorised friendly society” means a friendly society—
(a)
(a) which is an authorised person, as defined in section 207(1) of the Financial Services Act 198610(interpretation), and
(b)
(b) which is authorised under either regulation 5 or regulation 6 of the Friendly Societies (Long Term Insurance Business) Regulations 198711(authorisation of existing and new societies) to carry on long term business as defined in those Regulations.
Alternatives to short service benefit
7.—(1) For the purposes of paragraph 9(2) of Schedule 16, a scheme may, instead of providing short service benefit, provide any of the alternatives to short service benefit described in regulations 8 to 10 below.
(2) The alternatives described in regulations 8 to 10 may be provided by way of complete or partial substitute for short service benefit, but (except in the cases specifically referred to) only with the member’s consent.
(3) In addition to the alternatives to short service benefit described in regulations 8 to 10, the scheme may provide any other alternative to short service benefit that is consistent with paragraph 9(4) of Schedule 16 and is, in the Occupational Pensions Board’s opinion, a suitable means of maintaining the provision of benefits in relation to a particular scheme or category of schemes.
(4) Any alternative provided by virtue of paragraph (3) may be provided by way of complete or partial substitute for short service benefit, but (except in any case where the Occupational Pensions Board consider it reasonable) only with the member’s consent.
Early retirement or deferred retirement
8.—(1) The scheme may provide benefits that are different from those required to constitute short service benefit as regards amount, recipient and the time at which they are payable. The benefits must, however, include a benefit that is payable to the member.
(2) The member’s benefit must not be payable before normal pension age except in the circumstances referred to in regulation 5.
(3) Benefits consisting of, or including, a benefit that becomes payable to the member before normal pension age may be provided without the member’s consent where—
(a)
(a) the member’s earning capacity is destroyed or seriously impaired by physical or mental infirmity, and
(b)
(b) in the opinion of the trustees or managers of the scheme, the member is incapable of deciding whether it is in his interests to consent.
(4) Any scheme rule that allows the alternative described in this regulation must require the trustees or managers of the scheme to be reasonably satisfied that, when the member’s benefit becomes payable, the total value of the benefits to be provided under this regulation is at least equal to the amount described in regulation 11.
Bought out benefits
9.—(1) The scheme may provide for benefits different from those required to constitute short service benefit to be appropriately secured by a transaction to which section 52C of the Social Security Pensions Act 1975 applies (extinguishment of liability of scheme for pensions secured by insurance policies or annuity contracts).
(2) Any scheme rule that allows the alternative described in this regulation must require the trustees or managers of the scheme to be reasonably satisfied that, except where paragraph (3) below applies, the payment made to the insurance company is at least equal to the amount described in regulation 11.
(3) The exception to paragraph (2) is where the member is requiring the trustees or managers to provide...
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