Pensions Bill

House of Lords

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Pensions Bill

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
5

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Jobholder’s right to opt in
(1)
This section applies to a jobholder who is not an active member of a qualifying
scheme.
(2)
But it does not apply at a time when—
(a)
arrangements are required to be made under section 3 or 5 in respect of
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the jobholder, or
(b)
the jobholder’s automatic enrolment date is postponed under section 4.
(3)
The jobholder may by notice require the employer to arrange for the jobholder
to become an active member of an automatic enrolment scheme.
(4)
The Secretary of State may by regulations make provision—
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(a)
about the form and content of the notice;
(b)
about the arrangements that the employer is required to make;
(c)
for determining the date with effect from which the jobholder is to
become an active member under the arrangements.
(5)
For the purposes of arrangements under subsection (3) regulations may
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require information to be provided to any person by the employer or—
(a)
where the arrangements relate to an occupational pension scheme, the
trustees or managers of the scheme;
(b)
where the arrangements relate to a personal pension scheme, the
provider of the scheme.
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(6)
For the purposes of arrangements made under subsection (3) in relation to a
personal pension scheme, regulations may deem an agreement to exist (subject
to section 8) between the jobholder and the provider of the scheme for the
jobholder to be an active member of the scheme on terms and conditions
determined in accordance with the regulations.
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(7)
Subsections (8) and (9) apply where a jobholder becomes an active member of
an automatic enrolment scheme in pursuance of a notice under this section
and, within the period of 12 months beginning with the day on which that
notice was given—
(a)
ceases to be an active member of that scheme, and
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(b)
gives the employer a further notice under this section.
(8)
The further notice does not have effect to require the employer to arrange for
the jobholder to become an active member of an automatic enrolment scheme.
(9)
But any arrangements the employer makes for the jobholder to become, within
that period, an active member of such a scheme must be made in accordance
35
with regulations under this section.
8
Jobholder’s right to opt out
(1)
This section applies on any occasion when arrangements under section 3(2),
5(2) or 7(3) apply to a jobholder (arrangements for the jobholder to become an
active member of an automatic enrolment scheme).
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(2)
If the jobholder gives notice under this section—
(a)
the jobholder is to be treated for all purposes as not having become an
active member of the scheme on that occasion;

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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(b)
any contributions paid by the jobholder, or by the employer on behalf
of the jobholder, on the basis that the jobholder has become an active
member of the scheme on that occasion must be refunded in accordance
with prescribed requirements.
(3)
Regulations under subsection (2)(b) may, in particular, make provision
5
about—
(a)
the time within which contributions must be refunded;
(b)
how the amount to be refunded is calculated;
(c)
the procedure for refunding contributions.
(4)
The Secretary of State may by regulations make further provision in relation to
10
notices under this section.
(5)
The regulations may in particular make provision—
(a)
as to the form and content of a notice;
(b)
as to the period within which a notice must be given;
(c)
as to the person to whom a notice must be given;
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(d)
requiring any person to make prescribed arrangements for enabling
notices to be given;
(e)
requiring any person to take prescribed action in consequence of a
notice (in addition to any action prescribed under subsection (2)(b)).
(6)
The regulations must provide for the notice—
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(a)
to include information about the effect in relation to jobholders of
giving notice under this section, and
(b)
to be signed or otherwise authorised by the jobholder.
Duty in relation to workers without qualifying earnings
9
Workers without qualifying earnings
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(1)
This section applies to a worker—
(a)
to whom paragraphs (a) and (b) of section 1(1) apply (working in Great
Britain and aged between 16 and 75),
(b)
to whom paragraph (c) of section 1(1) does not apply (qualifying
earnings), and
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(c)
who is not an active member of a pension scheme that satisfies the
requirements of this section.
(2)
The worker may by notice require the employer to arrange for the worker to
become an active member of a pension scheme that satisfies the requirements
of this section.
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(3)
The Secretary of State may by regulations make provision—
(a)
about the form and content of the notice;
(b)
about the arrangements that the employer is required to make;
(c)
for determining the date with effect from which the worker is (subject
to compliance with any requirements of the scheme) to become an
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active member under the arrangements.
(4)
Subsections (5) and (6) apply where a worker becomes an active member of a
pension scheme in pursuance of a notice under this section and, within the
period of 12 months beginning with the day on which that notice was given—

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
7

(a)
ceases to be an active member of that scheme because of any action or
omission by the worker, and
(b)
gives the employer a further notice under this section.
(5)
The further notice does not have effect to require the employer to arrange for
the worker to become an active member of a pension scheme.
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(6)
But any arrangements the employer makes for the worker to become, within
that period, an active member of a pension scheme that satisfies the
requirements of this section must be made in accordance with regulations
under this section.
(7)
A pension scheme satisfies the requirements of this section if—
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(a)
it is registered under Chapter 2 of Part 4 of the Finance Act 2004 (c. 12),
and
(b)
in the case of a personal pension scheme, there are, in relation to the
worker concerned, direct payment arrangements (within the meaning
of section 111A of the Pension Schemes Act 1993 (c. 48)) between the
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worker and the employer.
Supplementary provision about the duties
10
Information to be given to workers
(1)
The Secretary of State must make provision by regulations—
(a)
for all jobholders to be given information about the effect of sections 2
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to 8 in relation to them;
(b)
for all workers to whom section 9 applies to be given information about
the effect of that section in relation to them;
(c)
for a prescribed person to be required to provide the information.
(2)
Regulations under this section must state—
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(a)
what information must be given;
(b)
in what circumstances it must be given;
(c)
how and when it must be given.
11
Information to be given to the Pensions Regulator
(1)
The Secretary of State may make regulations requiring employers to provide
30
the Pensions Regulator with information about action they have taken or
intend to take for the purposes of any provision of, or of regulations under,
sections 2 to 10.
(2)
The regulations may in particular—
(a)
require an employer to provide information about pension schemes to
35
which any action relates;
(b)
require an employer to identify which of any prescribed descriptions a
scheme falls within;
(c)
require an employer to provide information that appears to the
Secretary of State to be required for the performance by the Pensions
40
Regulator of its functions under Chapter 2 of this Part;
(d)
make provision about how and in what form any information is to be
provided.

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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Introduction of employers’ duties
The Secretary of State may by regulations provide that sections 2 to 9 do not
apply in the case of an employer of any description until such date after the
commencement of those sections as is prescribed in relation to employers of
that description.
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Qualifying earnings
13
Qualifying earnings
(1)
A person’s qualifying earnings in a pay reference period of 12 months are the
part (if any) of the gross earnings payable to that person in that period that is—
(a)
more than £5,035, and
10
(b)
not more than £33,540.
(2)
In the case of a pay reference period of less or more than 12 months, subsection
(1) applies as if the amounts in paragraphs (a) and (b) were proportionately less
or more.
(3)
In this section, “earnings”, in relation to a person, means sums of any of the
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following descriptions that are payable to the person in connection with the
person’s employment—
(a)
salary, wages, commission, bonuses and overtime;
(b)
statutory sick pay under Part 11 of the Social Security Contributions
and Benefits Act 1992 (c. 4);
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(c)
statutory maternity pay under Part 12 of that Act;
(d)
ordinary statutory paternity pay or additional statutory paternity pay
under Part 12ZA of that Act;
(e)
statutory adoption pay under Part 12ZB of that Act;
(f)
sums prescribed for the purposes of this section.
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14
Review of qualifying earnings band
(1)
The Secretary of State must in each tax year determine whether the amounts in
section 13(1)(a) and (b) have maintained their value.
(2)
The Secretary of State must in particular make a determination under
subsection (1) by reference to a review under section 148 of the Social Security
30
Administration Act 1992 (review of general level of earnings for revaluation of
earnings factors).
(3)
If the Secretary of State determines under this section that the amounts in
section 13(1)(a) and (b) have not maintained their value, the Secretary of State
must make an order substituting in those provisions the amounts that the
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Secretary of State considers appropriate for maintaining their value.
15
Pay reference period
(1)
In relation to any person a pay reference period is the period prescribed.
(2)
The Secretary of State may by regulations—
(a)
make provision for determining a person’s earnings in any pay
40
reference period;

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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(b)
make provision for determining the first date of each pay reference
period in relation to a person.
(3)
A reference in any provision to the relevant pay reference period is a reference
to the period determined in accordance with regulations under this section, as
they apply for the purposes of that provision in the case concerned.
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Qualifying schemes and automatic enrolment schemes
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Qualifying schemes
(1)
A pension scheme is a qualifying scheme in relation to a jobholder (J) if—
(a)
the scheme is an occupational pension scheme or a personal pension
scheme,
10
(b)
the scheme is registered under Chapter 2 of Part 4 of the Finance Act
2004 (c. 12), and
(c)
while J is an active member, the scheme satisfies the quality
requirement in relation to J.
(2)
The Secretary of State may by regulations provide that subsection (1)(b) does
15
not apply in relation to a scheme to which section 25 or 27 applies, if prescribed
requirements are satisfied.
(3)
The Secretary of State may by regulations provide that a scheme is not a
qualifying scheme in relation to J if—
(a)
while J is an active member, the payments that must be made to the
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scheme by, or on behalf or in respect of, J for purposes other than the
provision of benefits exceed a prescribed amount,
(b)
while J is an active member, the contributions that must be paid to the
scheme by, or on behalf or in respect of, J exceed a prescribed amount,
or
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(c)
the scheme provides for average salary benefits to be provided to or in
respect of J and contains prescribed features.
17
Automatic enrolment schemes
(1)
A pension scheme is an automatic enrolment scheme in relation to a jobholder
(J) if—
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(a)
it is a qualifying scheme in relation to J,
(b)
it satisfies the conditions in subsection (2), and
(c)
it satisfies any further conditions prescribed.
(2)
The conditions mentioned in subsection (1)(b) are that—
(a)
no provision of the scheme prevents the employer from making
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arrangements prescribed by regulations under section 3(2), 5(2) or 7(4)
for J to become an active member of the scheme;
(b)
no provision of the scheme requires J to express a choice in relation to
any matter, or to provide any information, in order to remain an active
member.
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18
Occupational pension schemes
For the purposes of this Part, each of these is an occupational pension
scheme—

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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(a)
an occupational pension scheme within the meaning of section 1(1) of
the Pension Schemes Act 1993 (c. 48) that has its main administration in
the United Kingdom;
(b)
an institution for occupational retirement provision within the
meaning of Article 6(a) of the IORP Directive, that has its main
5
administration in an EEA State other than the United Kingdom;
(c)
a pension scheme that is prescribed or is of a prescribed description and
that has its main administration elsewhere than in an EEA State.
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Personal pension schemes
For the purposes of this Part, a personal pension scheme is a pension scheme
10
that is not an occupational pension scheme.
Quality requirements
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Quality requirement: UK money purchase schemes
(1)
A money purchase scheme that has its main administration in the United
Kingdom satisfies the quality requirement in relation to a jobholder if under
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the scheme—
(a)
the jobholder’s employer must pay contributions in respect of the
jobholder;
(b)
the employer’s contribution, however calculated, must be equal to or
more than 3% of the amount of the jobholder’s qualifying earnings in
20
the relevant pay reference period;
(c)
the total amount of contributions paid by the jobholder and the
employer, however calculated, must be equal to or more than 8% of the
amount of the jobholder’s qualifying earnings in the relevant pay
reference period.
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(2)
The Secretary of State may by regulations provide that, where a certificate has
been issued under section 7(1) of the Pension Schemes Act 1993 stating that the
employment of the jobholder is contracted-out employment by reference to the
scheme, paragraphs (b) and (c) of subsection (1) have effect with prescribed
modifications.
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(3)
A scheme does not fail to satisfy the quality requirement under this section
merely because the trustees or managers of the scheme may on any occasion
refuse to accept a contribution below an amount prescribed for the purposes of
this section on the grounds that it is below that amount.
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Quality requirement: UK defined benefits schemes
35
(1)
Subject to subsection (3), a defined benefits scheme that has its main
administration in the United Kingdom satisfies the quality requirement in
relation to a jobholder if the jobholder is in contracted-out employment.
(2)
A defined benefits scheme that has its main administration in the United
Kingdom satisfies the quality requirement in relation to a jobholder who is not
40
in contracted-out employment if it satisfies the test scheme standard in relation
to that jobholder.
(3)
The Secretary of State may by order provide that a scheme does not satisfy the
quality requirement in relation to a jobholder who is in contracted-out

Pensions Bill
Part 1 — Pension scheme membership for jobholders
Chapter 1 — Employers’ duties
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employment unless it satisfies the test scheme standard in relation to that
jobholder, with the substitution of a higher fraction, not exceeding 1/80th, for
the fraction of 1/120th in section 23(4)(a).
(4)
In relation to any scheme, a jobholder is in contracted-out employment for the
purposes of this section and section 22 if a certificate has been issued in respect
5
of the jobholder under section 7(1) of the Pension Schemes Act 1993 (c. 48)
stating that the employment of the jobholder is contracted-out employment by
reference to the scheme.
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Test scheme standard
(1)
A scheme satisfies the test scheme standard in relation to a jobholder (J) if the
10
pensions to be provided for the relevant members of the scheme are broadly
equivalent to, or better than, the pensions which would be provided for such
persons under a test scheme.
(2)
Subject to subsection (3), the relevant members are—
(a)
if J is not in contracted-out employment, all active members who are
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not in contracted-out employment and are jobholders of the same
employer as J;
(b)
if J is in contracted-out employment, all active members who are in
contracted-out employment and are jobholders of the same employer
as J.
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(3)
In applying this section the pensions to be provided for relevant members must
be considered as a whole.
(4)
The Secretary of State may by regulations make provision for the manner of,
and criteria for, determining whether the pensions to be provided for the
relevant members under a scheme are broadly equivalent to, or better than, the
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pensions which would be provided for them under a test scheme.
(5)
Regulations under subsection (4) may provide for the determination to be
made in accordance with guidance issued from time to time by the Secretary of
State.
(6)
The Secretary of State may by regulations provide that a scheme only satisfies
30
the test scheme standard if the scheme actuary certifies that it does.
(7)
Except in prescribed circumstances, the scheme actuary is the actuary
appointed under section 47(1)(b) of the Pensions Act 1995 (c. 26) (professional
advisers) in relation to the scheme.
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Test scheme
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(1)
A test scheme is an occupational pension scheme which satisfies—
(a)
the requirements of subsections (2) and (4), and
(b)
any prescribed requirements.
(2)
The scheme must provide for a member to be entitled to a pension
commencing at the appropriate age and continuing for life.
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(3)
The appropriate age is 65 or any higher age prescribed.
(4)
The annual rate of the pension at that age must be—