Clause 4: Obtaining information with respect to compliance with section 3
Subsections (1) and (2) give OPRA the power to require any person who has, or who is likely to have, information relevant to investigating compliance with the employer access requirement to produce any relevant documents.
Subsections (3) and (4) apply sections 100 to 103 of the Pensions Act 1995 in relation to OPRA's functions under clauses 4 and 5. Section 100 confers power on a justice of the peace to issue warrants to enable OPRA to search premises in certain circumstances. The extension of section 100 means that OPRA will be able to seek a warrant where they have problems in obtaining documents relating to compliance with the stakeholder pension conditions or the employer access requirements. Section 101 creates offences for obstructing OPRA's investigations. Section 102 provides that OPRA's powers do not enable them to require anyone to give information which would incriminate him or her or his or her spouse nor to require production of documents which would in court be subject to legal professional privilege. Section 102 also provides that liens on documents are unaffected by OPRA's powers to require production of documents. Section 103 enables OPRA to publish reports of its investigations.
Subsection (5) defines "document" for the purposes of this clause. The definition mirrors the definition in the corresponding provision of the 1995 Act.
Clause 5: Inspection of premises
Section 99 of the Pensions Act 1995 gives OPRA powers to inspect premises and documents and examine people for the purposes of investigating whether certain regulatory provisions of the 1995 Act are being complied with. This clause gives OPRA similar powers to investigate compliance with the employer access requirements (clause 3 refers).
Clause 6: Application of certain enactments
Subsections (1) and (2): sections 46, 58 and 102 of the Employment Rights Act 1996 protect the employment rights of trustees of their employer's occupational scheme. Trustees are protected from suffering any detriment in relation to their employment as a result of carrying out their duties as a trustee of that scheme; they have the right to take time off work to perform their functions; and dismissal arising from performing their trustee functions constitutes unfair dismissal. These subsections extend this protection to employees who are trustees of their employer's designated stakeholder scheme.
Subsection (3) brings into force Schedule 1 (see below). This extends certain provisions of the Pension Schemes Act 1993 and the Pensions Act 1995 to stakeholder pension schemes.
Clause 7: Reduced rates of contributions etc.; power to specify different percentages
Subsection (1): section 42B(2) of the Pension Schemes Act 1993 enables the Secretary of State to make an order determining the reduced rate of National Insurance contributions payable by members of contracted-out money purchase occupational pension schemes. The reduced rates reflect the cost of providing members with benefits of an equivalent value to the SERPS benefits they are giving up. This subsection allows different rates to be specified according to whether the money-purchase contracted-out scheme is registered as a stakeholder scheme or not. It could be used, for example, to allow the reduced rate of contributions to reflect any difference in costs between schemes that are stakeholder pension schemes and those that are not.
Subsection (2) provides a corresponding power to set different rates for members of appropriate personal pension schemes, depending on whether or not the scheme is registered as a stakeholder pension scheme. Subsection (2)(b) allows different rates to be specified depending on when the member first joined the scheme. This would, for example, enable a different rate of rebate to be set for those who have already entered into an arrangement with a pension scheme before a specified date than for those who enter into a new contracted-out arrangement after that date.
Clause 8: Interpretation of Part I
Subsections (2) to (5) apply the requirements of Part I to pension schemes managed by, or on behalf of, the Crown. Subsection (4) provides the Crown with immunity from prosecution in respect of any offence committed under this Part, but provides that such immunity does not extend to public servants. This provision matches the immunity provision in section 121 of the Pensions Act 1995 (and the one in the new section 111A(14) of the Pension Schemes Act 1993 inserted by clause 9 below).
Schedule 1: Application of the 1993 and 1995 Acts to stakeholder pension schemes
Sub-paragraph (1) enables certain provisions of the Pension Schemes Act 1993 and the Pensions Act 1995 to be applied to trust-based schemes which are registered as stakeholder pension schemes and which are not occupational pension schemes as defined by the 1993 Act. This puts broadly similar requirements on the trustees of stakeholder pension schemes as apply to trustees of occupational pension schemes, and allows OPRA to supervise the conduct of stakeholder scheme trustees in much the same way as they supervise occupational pension scheme trustees.
Sub-paragraph (2)(a). Subsections (4) to (9) of section 175 of the Pension Schemes Act 1993 make provision for the Pensions Compensation Board to impose a levy on occupational pension schemes in order to meet the Board's expenditure. Sub-paragraph (2)(a) extends this power to all stakeholder pension schemes.
Sub-paragraph (2)(b) lists the provisions of the Pensions Act 1995 that will apply. Some parts of the provisions are not relevant to stakeholder schemes which are not occupational schemes, because they will not operate on a salary-related basis and will not normally have a sponsoring employer.
The provisions from the 1995 Act that need to be applied are:
Section 3 allows OPRA to prohibit named individuals from acting as trustees of an occupational pension scheme.
Section 4 gives OPRA the power to suspend trustees in certain specified circumstances.
Section 5 requires OPRA to give notice of prohibition and suspension orders both to the person concerned and to the other trustees of a trust scheme.
Section 6 makes it an offence to act as trustee while suspended or removed, and sets out provisions for a person who continues to act as a trustee whilst suspended or prohibited.
Section 7 gives OPRA the power to appoint new trustees if an existing one has been prohibited or disqualified and in certain other specified circumstance.
Section 8 defines the scope of the powers of trustees appointed under section 7. Subsections (1) and (2) provide for payments made to trustees appointed by OPRA from scheme resources to be treated as a debt due from the employer; they are not relevant to stakeholder pension schemes as there will generally be no sponsoring employer.
Section 9 gives OPRA the same power as the High Court (Court of Session in Scotland) to vest property in or transfer property to trustees as a consequence of the appointment or removal of a trustee.
Section 10 gives OPRA the power to impose a civil penalty on any person who has committed a specified breach of duty.
Section 11 gives OPRA the power to direct or authorise the winding up of schemes in certain specified circumstances and on the application of certain specified persons. Subsection (3)(c) is not needed because it refers to applications to wind up schemes by employers and there will normally be no sponsoring employer in relation to a stakeholder pension schemes.
Section 13 enables OPRA to obtain injunctions (interdicts in Scotland) if the court is satisfied that it is reasonably likely that a person will misuse/misappropriate scheme assets.
Section 15 gives OPRA the power to make certain directions. Subsection (1) is not relevant because it covers failure to comply with section 49(5) of the Pensions Act 1995, which does not apply to stakeholder pension schemes.
Section 27 provides that a trustee may not act as scheme actuary or auditor.
Section 28 provides that a trustee of a trust scheme who also acts as a scheme actuary/auditor in breach of section 27 is guilty of an offence.
Section 29 gives OPRA the power to disqualify a person from being the trustee of any trust scheme in certain specified circumstances.
Section 30 contains a number of provisions covering persons who act as trustees while disqualified.
Section 31 provides that trustees who are fined for an offence or who receive a civil penalty cannot be reimbursed from the assets of a trust scheme.
Section 32 provides that decisions taken by the trustees of a trust scheme may be taken by a majority of the trustees unless the scheme provides otherwise. The references to sections 16 and 25 of the Pensions Act 1995 do not apply to stakeholder schemes because those sections themselves are not relevant.
Section 33 provides that trustees cannot restrict their liability for a breach of an obligation under any rule of law to take care or exercise skill in carrying out investment function whether or not that function has been delegated to another person.
Section 34 gives trustees the power to make any investment of any kind as if they were absolutely entitled to the assets of the scheme, and to delegate investment decisions to a fund manager. It also provides that trustees are not responsible for any act or default of the fund manager in the exercise of the discretion delegated to him if they have taken reasonable steps to ensure that the fund manager has the appropriate knowledge and experience to manage the investments, and that he is carrying out the work competently and in accordance with section 36 of the Pensions Act 1995.
Section 35 requires trustees to maintain a written statement of the principles governing their decisions. As section 56 of the 1995 Act will not apply to stakeholder schemes, the reference to that section in subsection (2) is not relevant. The obligation to consult the employer in subsection (5) is also not relevant because of the different role of employers in relation to stakeholder schemes.
Section 36 governs the exercise of discretion by the trustees and the fund manager.
Section 39. The general rule that trustees may not benefit where there is a conflict of interest between their personal interest in the scheme and trustee duties is relaxed in relation to member trustees to allow them to benefit in the same way as other members.
Section 41 places a duty on trustees to provide certain documents for scheme members and other specified persons.
Section 47 relates to the appointment of professional advisers. It imposes a duty on scheme trustees to appoint professional advisers and a duty on scheme professionals and employers to make information available to professional advisers and on scheme trustees to disclose information to professional advisers.
Section 48 provides for "whistle-blowing". Scheme professionals requirement to inform OPRA if they have reasonable cause to believe that trustees/manager, employer or professional adviser is not complying with duties in relation to the scheme.
Section 49 relates to the keeping of accounts etc. Section 49(5) is not relevant to stakeholder schemes. Section 49(8) imposes a duty on employers to remit deductions from earning to scheme trustees within a prescribed period. This section, as amended by clause 10, will apply to occupational pension schemes that are registered as stakeholder schemes. Clause 9 amends the Pension Schemes Act and introduces similar provisions for personal pension schemes. These will apply to stakeholder schemes that are not occupational schemes.
Section 50 imposes a duty upon scheme trustees to set up and operate procedures for resolving internal disputes.
Section 68 confers power on trustees to modify a scheme for certain purposes. Sub-paragraph (4) modifies this power in relation to stakeholder schemes.
Sections 81 to 86 relate to the Pensions Compensation Board and set out circumstances where compensation is payable. These will apply to stakeholder pensions schemes in the same way as they apply to money-purchase occupational schemes. However, the condition for the application of the compensation provisions in section 81(1)(b), that the employer must be insolvent, is not relevant because of the limited scope of employer involvement in stakeholder schemes.
Sections 91 to 94 relate to assignment, forfeiture, bankruptcy etc for occupational pension schemes.
Section 96 deals with OPRA's powers to review its determinations and for questions of law to be referred to court.
Section 108 deals with the scope of OPRA's powers to disclose certain information in relation to the discharge of its functions
Sections 110 deals with provision of information in relation to the Compensation Board.
Section 117 provides for particular requirements of the Pensions Act 1995 to override provisions of an occupational pension scheme. This will apply to stakeholder pension schemes to the extent that any provision of Part 1 which applies to stakeholder pension schemes conflicts with any scheme rule.
Section 124 and 125 provide interpretation of terms used in Part 1 of the Pensions Act 1995.
Sections 78 to 80, 97, 101 to 107, 109, 111 to 116, 120 and 123 of the 1995 Act are also relevant to stakeholder pension schemes but do not need to be expressly applied as they contain no specific reference to pension schemes.
Sub-paragraph (3) modifies the definition of employer in section 47(9) of the Pensions Act 1995 to reflect the different role of an employer in relation to stakeholder pension schemes. This section contains provisions that require sponsoring employers to carry out certain functions in relation to their occupational scheme: for example, they must disclose information to the scheme's trustees and professional advisers. For stakeholder pension schemes, the requirement will apply to any person who is or has been subject to the employer access requirement, as defined in clause 3.
Sub-paragraph (4). Section 68 of the Pensions Act 1995 gives scheme trustees the power to modify scheme rules for certain purposes. This sub-paragraph extends this power in relation to stakeholder pension schemes to enable their trustees to ensure that schemes meet the conditions set out in clause 1.
Sub-paragraph (5). Sub-paragraph (2) applies section 124 (definitions) of the Pensions Act 1995 to stakeholder pension schemes which are not occupational pension schemes. This sub-paragraph omits the definition of a "member" of an occupational pension scheme from the list of defined terms as it not appropriate to stakeholder schemes which are not occupational schemes.
Sub-paragraph (1): applies sections 98 to 100 of the 1995 Act to stakeholder pension schemes which are not occupational pension schemes, including those which may be set up other than on a trust basis:
Section 98 gives OPRA the power to demand the production of certain documents relating to their functions from trustees, professional advisers and employers. Section 98(3) defines what is meant by a "document" for the purposes of sections 98 and 99 to 101.
Sections 99 and 100: see sub-paragraphs (2) and (3) below.
Sub-paragraph (2): section 99 of the Pensions Act 1995 gives OPRA powers to inspect certain premises, require the production of documents and examine people for the purposes of investigating whether certain "regulatory provisions" of the 1995 Act are being complied with. This paragraph modifies the definition of regulatory provisions in relation to stakeholder schemes, so that the powers can be exercised by OPRA to investigate:
- whether the trustees or managers of a stakeholder pension scheme are complying with the applicable provisions of the 1995 Act;
- whether their scheme complies with the conditions set out in clause 1; and
- whether they have taken steps to ensure that those conditions are complied with.
OPRA is also given the power to investigate breaches of the corresponding legislation in Northern Ireland.
Sub-paragraph (3): section 100 of the 1995 Act enables a justice of the peace to issue a warrant for OPRA to search premises in certain circumstances. This sub-paragraph extends this provision so that it applies also where OPRA have reasonable grounds for believing that an offence has been committed under clause 2(5).
Sub-paragraph(4) ensures that OPRA can investigate possible breaches of the Northern Ireland legislation which corresponds with section 2(4) and (5) of this Bill, when this is made. OPRA is a UK-wide organisation and already has powers to investigate breaches of the Northern Ireland legislation corresponding to the 1993 and 1995 Acts.
Sub-paragraph (1) enables OPRA to use their powers under section 99 of the 1995 Act to investigate:
- whether a stakeholder pension scheme which is an occupational pension scheme complies or has complied with the conditions set out in clause 1; and
- whether the scheme trustees have taken steps to ensure that the scheme complies or has complied with those conditions.
Sub-paragraph (2) enables OPRA to seek a warrant under section 100 of that Act where it believes that an offence under clause 2(5), or a corresponding offence under Northern Irish legislation (see paragraph 2(4) of the Schedule), has been committed. (Paragraph 2 of the Schedule gives OPRA the same powers in respect of stakeholder schemes which are not occupational schemes - see note above.)
PART II: PENSIONS: GENERAL
This Part of the Bill comprises a number of measures intended to make the pensions regulatory framework work better; to provide additional protection for scheme members; and to simplify and clarify the rules which pension schemes must follow.
Clause 9: Monitoring of employers' payments to personal pension schemes
It is important that contributions to occupational and personal pensions should be paid on time. The Pensions Act 1995 introduced new safeguards for occupational pension schemes. That Act, and associated regulations, provide for payments to be made within set time limits and establish penalties for non-compliance. The rules apply both to contributions by employers and to contributions which derive from deductions from employees' earnings.
Employers can also make payments to their employees' personal pensions. Currently, however, there are no equivalent rules requiring timely payment.
This clause inserts two new sections into the Pension Schemes Act 1993, sections 111A and 111B. The clause provides a set of rules on the timely payment of contributions by employers into personal pension schemes. References below are to subsections of the newly inserted section 111A.
to (5) set out the new rules, which are consistent with rules introduced by the Pensions Act 1995 for occupational pension schemes. The regime will cover employee contributions deducted from employees' earnings and employers' contributions to pensions. The rules cover the time limits within which payments have to be made and to the sanctions that apply where payments are late or not made at all.
- Subsection (6) requires trustees and managers of personal pension schemes to monitor the timeliness of payments by employers. Where a payment is late, or not made at all, the trustees and managers will be required to report to the Occupational Pensions Regulatory Authority (OPRA). The time limits within which reports must be submitted and the circumstances in which such reports will not be required will be set out in regulations.
- Subsection (7) requires trustees and managers of schemes to provide information to employees on the amounts and dates of payments made to the scheme by employers.
- Subsections (8) and (11) to (13) relate to provision for civil or criminal sanctions against employers for late payment or non-payment of amounts payable to personal pension schemes. OPRA will have power to impose a civil penalty where there has been a breach of the requirement to make timely payment of contributions; however, if a person fraudulently evades an obligation to pay a contribution deducted from an employer's earnings, a criminal penalty will apply.
-- Subsections (9) and (10) provide that OPRA may impose civil penalties on trustees and managers if they fail to carry out their monitoring role.
-- In relation to stakeholder pension schemes (see commentary on Part I), subsection (11)(a) ensures that an employer who has already been penalised under clause 3(6) (for failing to comply with a request to deduct contributions to a stakeholder pension scheme from earnings) is not penalised again under these provisions.
- Subsection (14) provides the Crown with immunity from prosecution in respect of an offence committed under subsection (12), but provides that such immunity does not extend to public servants who commit an offence under that subsection. This provision (inserted into the Pensions Schemes Act1993, and relating to personal pension schemes) matches the immunity provision in section 121(3) of the Pensions Act 1995 for occupational schemes.
- As part of the provisions for stakeholder pension schemes in Part I of the Bill, clause 3(5) allows regulations to provide for cases where an employer would pay contributions to a person other than the trustees or managers of a scheme (for example, to a clearing house, if this was set up). Subsection (16) gives a power to modify the requirements of the new section 111A for such cases.
- Subsection (17) ensures that if an employee would have a right of action against his employer where contributions deriving from deductions from his earnings are not paid by the contractually agreed date, then that right will be unaffected (notwithstanding that such date may be later than the last day of the period prescribed in regulations within which such payment is required to be made).
The following references are to subsections in the new section 111B. They closely mirror the provisions already in place for occupational pension schemes under sections 98-103 of the Pensions Act 1995.
- Subsection (1) provides OPRA with the power to require documents from any person who holds information about:
-- whether section 111A has been complied with;
-- whether an employer has failed to meet the obligation to pay timely contributions under the direct payment arrangements; or
-- whether a person has fraudulently evaded their responsibilities to pay a contribution deducted from employees' earnings,
- Subsection (2) allows OPRA to specify the manner and time in which, and the place where, documents should be produced.
- Subsection (3) gives OPRA's inspectors powers to investigate any of the matters in subsection (1). It allows them to enter premises, to question anyone there and to demand documents for inspection.
- Subsection (4) provides that an inspector wishing to enter premises must, if asked to do so, produce a certificate of appointment.
- Subsection (5) specifies the premises that are liable to inspection. These are premises where:
-- the relevant employees work;
-- documents relevant to the administration of the employer's business, the direct payment arrangements or the relevant scheme are kept; or
-- the administration, or work connected with the administration, of the business, the direct payment arrangements or the scheme is carried out.
A private dwelling house is not included in this provision if it is not used by, or by permission of, the occupier for the purposes of trade or business.
- Subsection (6) provides that section 100 of the Pensions Act 1995 shall have effect in respect of OPRA's powers to require documents or to inspect premises in connection with compliance with section 111A. A justice of the peace will be able to issue a warrant where there are reasonable grounds for believing that:
-- there are documents which have been requested and not produced; or
-- such a request would result in documents being hidden, tampered with or destroyed; or
-- certain specified acts have or might be committed.
Such a warrant would allow an inspector to enter and search the premises, take possession, or copies, of documents or to require an explanation of their contents.
- Subsection (7) provides that sections 101-103 of the Pensions Act 1995 will have effect in respect of OPRA's powers to gather information under section 111B. This means that where a person, without reasonable excuse, fails to provide documents, deliberately obstructs an inspector or knowingly or recklessly provides false information he or she is guilty of a criminal offence. However, it provides that information does not have to be provided, or questions answered, if to do so would incriminate the person or their spouse. Nor need documents be provided in respect of which legal professional privilege could be claimed in any court proceedings. Finally, it provides that where OPRA completes an investigation, it may publish a report of the investigation and the result of it.
Clause 10: Late payments by employers to occupational pension schemes
Section 49(8) of the Pensions Act 1995 at present makes it a criminal offence for employers to deduct money from their employees' salaries as contributions towards an occupational pension scheme and not pay it to the scheme trustees within a prescribed period, if there is no reasonable excuse. Regulation 16 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 sets the prescribed period as 19 days from the end of the month in which the amount is deducted.
This clause gives the Occupational Pensions Regulatory Authority (OPRA) the power to impose a civil sanction for breaches of the requirement.
Subsection (1) replaces 49(8) of the Pensions Act 1995 with new subsections (8) to (13).
- The time limit for payment of employee contributions will continue to be set out in regulations, under the new section 49(8).
- The new section 49(9) gives the power to impose civil penalties for any breach of the requirement. It also imposes a new obligation on trustees and managers to report to the Occupational Pensions Regulatory Authority (OPRA) and to the employee where employee contributions have not been paid within the time limit prescribed under the new section 49(8).
- The new subsection (10) provides that OPRA may impose civil penalties on trustees or mangers if they fail to report promptly to OPRA when employee contributions have not been paid within the time limit.
- The new subsections (11) to (13) impose a criminal sanction in circumstances where there has been fraudulent evasion of the obligation to make payment of employee contributions within the prescribed time limit. In relation to stakeholder pension schemes, subsection (13)(a) ensures that an employer who has been required to pay a penalty under clause 3(6) for failing to comply with the provisions of that clause is not penalised again under section 10 of the 1995 Act.
- Subsection (2) makes it clear that section 88(3) of the Pensions Act 1995, which provides for a civil sanction on employers who do not pay contributions to money purchase schemes on time, only applies to employer contributions (so that section 49(8) deals with employee contributions and section 88(3) deals with employer contributions).