Welfare Reform and Pensions Bill

Welfare Reform and Pensions Bill - continued	House of Commons

back to previous text

PART II

PENSIONS: GENERAL

Monitoring of employers' payments to personal pension schemes.

8. In Part VI of the Pension Schemes Act 1993 (further requirements for protection of scheme members), after section 111 there shall be inserted-

"Monitoring of employers' payments to personal pension schemes.	111A. - (1) This section applies where-
	(a) an employee is a member of a personal pension scheme; and
	(b) direct payment arrangements exist between the employee and his employer.
	(2) In this section "direct payment arrangements" means arrangements under which contributions fall to be paid by or on behalf of the employer towards the scheme-
	(a) on the employer's own account (but in respect of the employee); or
	(b) on behalf of the employee out of deductions from the employee's earnings.
	(3) The employer must secure that there is prepared, maintained and from time to time revised a record of the direct payment arrangements which complies with subsection (4).
	(4) The record must-
	(a) show the rates and due dates of contributions payable under the direct payment arrangements, and
	(b) satisfy prescribed requirements.
	(5) The employer must, within the prescribed period after the preparation or any revision of the record, send a copy of the record or (as the case may be) of the revised record to the trustees or managers of the scheme.
	(6) Except in prescribed circumstances, the trustees or managers of the scheme must, where any contribution shown by the record to be payable under the direct payment arrangements has not been paid on or before its due date, give notice of that fact, within the prescribed period, to the Regulatory Authority and the employee.
	(7) The trustees or managers of the scheme must before the end of prescribed intervals send the employee a statement setting out the amounts and dates of the payments made under the direct payment arrangements during a prescribed period.
	(8) If-
	(a) the employer fails to take all such steps as are reasonable to secure compliance with subsection (3) or (5), or
	(b) a contribution payable under the direct payment arrangements is not paid to the trustees or managers of the scheme on or before its due date,
	section 10 of the Pensions Act 1995 (power of the Regulatory Authority to impose civil penalties) applies to the employer.
	(9) If subsection (6) or (7) is not complied with, section 10 of the Pensions Act 1995 applies to any trustee or manager of the scheme who has failed to take all such steps as are reasonable to secure compliance.
	(10) A person shall not be required by virtue of subsection (8)(b) above to pay a penalty under section 10 of the Pensions Act 1995 in respect of a failure if in respect of that failure he has been-
	(a) required to pay a penalty under that section by virtue of section 3(6) of the Welfare Reform and Pensions Act 1999 (failures in respect of stakeholder pensions), or
	(b) convicted of an offence under subsection (11) below.
	(11) A person is guilty of an offence if he is knowingly concerned in the fraudulent evasion of the direct payment arrangements so far as they are arrangements for the payment by him or any other person of any such contribution towards the scheme as is mentioned in subsection (2)(b).
	(12) A person guilty of an offence under subsection (11) is liable-
	(a) on summary conviction, to a fine not exceeding the statutory maximum; and
	(b) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine or both.
	(13) No prosecution shall be brought against the Crown for an offence under subsection (11), but that subsection applies to persons in the public service of the Crown as to other persons.
	(14) In this section "due date", in relation to a contribution payable under the direct payment arrangements, means-
	(a) if the contribution falls to be paid on the employer's own account, the latest day under the arrangements for paying it;
	(b) if the contribution falls to be paid on behalf of the employee, the last day of a prescribed period.
	(15) Regulations may provide for this section to apply with such modifications as may be prescribed in a case where-
	(a) the direct payment arrangements give effect to a requirement arising under subsection (5) of section 3 of the Welfare Reform and Pensions Act 1999 (deduction and payment of employee's contributions to stakeholder scheme), and
	(b) in accordance with regulations under that subsection, that requirement is for the employer to pay contributions to a person prescribed by such regulations (instead of to the trustees or managers of the scheme).
	(16) Nothing in this section shall be taken as varying the provisions of the direct payment arrangements or as affecting their enforceability."

Late payments by employers to occupational pension schemes.

9. - (1) For section 49(8) of the Pensions Act 1995 (offence where deduction from earnings not paid in timely fashion to occupational pension scheme) there shall be substituted-

	"(8) Where on making a payment of any earnings in respect of any employment there is deducted any amount corresponding to any contribution payable on behalf of an active member of an occupational pension scheme, the amount deducted is to be paid, within a prescribed period, to the trustees or managers of the scheme.
	(9) If in any case there is a failure to comply with subsection (8)-
	(a) section 10 applies to the employer; and
	(b) except in prescribed circumstances, the trustees or managers must give notice of the failure, within the prescribed period, to the Authority and the member.
	(10) If any person is knowingly concerned in the fraudulent evasion of the obligation imposed by subsection (8) in any case, he is guilty of an offence.
	(11) A person guilty of an offence under subsection (10) is liable-
	(a) on summary conviction, to a fine not exceeding the statutory maximum; and
	(b) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine or both.
	(12) A person shall not be required by virtue of subsection (9)(a) above to pay a penalty under section 10 in respect of a failure if in respect of that failure he has been-
	(a) required to pay a penalty under that section by virtue of section 3(6) of the Welfare Reform and Pensions Act 1999 (failures in respect of stakeholder pensions), or
	(b) convicted of an offence under subsection (10) above."

(2) In section 88(3) of that Act (civil penalty where contributions by or on behalf of employer to occupational pension scheme not paid by due date), after "by or on behalf of the employer" there shall be inserted "on the employer's own account".

Effect of person's insolvency on his pension rights.

10. - (1) Where a bankruptcy order is made against a person on a petition presented after the coming into force of this section, any rights of his under an approved pension arrangement are excluded from his estate.

(2) In this section "approved pension arrangement" means-

(a) an exempt approved scheme;

(b) a relevant statutory scheme;

(c) a retirement benefits scheme set up by a government outside the United Kingdom for the benefit, or primarily for the benefit, of its employees;

(d) a retirement benefits scheme which is being considered for approval under Chapter I of Part XIV of the Taxes Act;

(e) a contract or scheme which is approved under Chapter III of that Part (retirement annuities);

(f) a personal pension scheme which is approved under Chapter IV of that Part;

(g) a personal pension scheme which is being considered for approval under that Chapter IV;

(h) an annuity purchased for the purpose of giving effect to rights under a scheme falling within any of paragraphs (a) to (c) and (f);

(j) any pension arrangements of any description which may be prescribed by regulations made by the Secretary of State.

(3) The reference in subsection (1) to rights under an approved pension arrangement does not include rights under a personal pension scheme approved under Chapter IV of Part XIV of the Taxes Act unless those rights arise by virtue of approved personal pension arrangements.

(4) Subsection (5) applies if-

(a) at the time when a bankruptcy order is made against a person-

(i) a retirement benefits scheme is being considered for approval under Chapter I of Part XIV of the Taxes Act, or

(ii) a personal pension scheme is being considered for approval under Chapter IV of that Part, and

(b) the decision of the Commissioners of Inland Revenue is that approval is not to be given to the scheme.

(5) Any rights of that person under the scheme shall (without any conveyance, assignment or transfer) vest in his trustee in bankruptcy, as part of his estate, immediately on-

(a) the Commissioners' decision being made, or

(b) (if later) the trustee's appointment taking effect or, in the case of the official receiver, his becoming trustee.

(6) Subsection (7) applies if, at any time after a bankruptcy order is made against a person, the Commissioners of Inland Revenue give notice-

(a) withdrawing their approval under Chapter I of Part XIV of the Taxes Act from a retirement benefits scheme, or

(b) withdrawing their approval under Chapter IV of that Part from a personal pension scheme or from any approved personal pension arrangements,

and the date specified as being that from which the approval is withdrawn ("the withdrawal date") is a date not later than that on which the bankruptcy order is made.

(7) Any rights of that person under the scheme or arising by virtue of the arrangements, and any rights of his under any related annuity, shall (without any conveyance, assignment or transfer) vest in his trustee in bankruptcy, as part of his esate, immediately on-

(a) the giving of the notice, or

(b) (if later) the trustee's appointment taking effect or, in the case of the official receiver, his becoming trustee.

(8) In subsection (7) "related annuity" means an annuity purchased on or after the withdrawal date for the purpose of giving effect to rights under the scheme or (as the case may be) to rights arising by virtue of the arrangements.

(9) Where under subsection (5) or (7) any rights vest in a person's trustee in bankruptcy, the trustee's title to them has relation back to the commencement of the person's bankruptcy; but where any transaction is entered into in good faith by the trustees or managers of the scheme in question before the making of the decision mentioned in subsection (4)(b) or (as the case may be) the giving of the notice mentioned in subsection (6), the trustee in bankruptcy is not in respect of that transaction entitled by virtue of this subsection to any remedy against them or any person whose title to any property derives from them.

(10) Without prejudice to section 68, regulations under subsection (2)(j) may, in the case of any description of arrangements prescribed by the regulations, make provision corresponding to any provision made by subsections (4) to (9).

(11) In this section-

(a) "exempt approved scheme", "relevant statutory scheme" and "retirement benefits scheme" have the same meaning as in Chapter I of Part XIV of the Taxes Act;

(b) "approved personal pension arrangements" and "personal pension scheme" have the same meaning as in Chapter IV of that Part;

(c) "estate", in relation to a person against whom a bankruptcy order is made, means his estate for the purposes of Parts VIII to XI of the Insolvency Act 1986;

(d) "the Taxes Act" means the Income and Corporation Taxes Act 1988.

Effect of insolvency on unapproved pension rights.

11. - (1) The Secretary of State may by regulations make provision for rights of a person under unapproved pension arrangements to be excluded, in the event of a bankruptcy order being made against that person, from his estate for the purposes of Parts VIII to XI of the Insolvency Act 1986.

(2) Regulations under subsection (1) may, in particular, provide for rights under an unapproved pension arrangement to be excluded from a person's estate by reference to-

(a) future likely needs of him and his family, and

(b) the extent to which any pension and other benefits likely to be received by virtue of rights of his under other pension arrangements appear likely to be adequate for meeting any such needs.

(3) In this section "unapproved pension arrangement" means a pension arrangement which-

(a) is not an approved pension arrangement within the meaning of section 10, and

(b) is of a description prescribed by regulations made by the Secretary of State.

Forfeiture of rights under pension arrangements.

12. - (1) In the Pension Schemes Act 1993, after section 159 there shall be inserted-

"No forfeiture on bankruptcy of rights under personal pension schemes.	159A. - (1) A person's rights under a personal pension scheme cannot be forfeited by reference to his bankruptcy.
	(2) For the purposes of this section forfeiture shall be taken to include any manner of deprivation or suspension."

(2) In section 92(2) of the Pensions Act 1995 (exceptions to the rule preventing forfeiture of rights under occupational pension schemes), paragraph (b) (which allows forfeiture of such rights by reference to a scheme member's bankruptcy) shall cease to have effect.

Compensating occupational pension schemes.

13. - (1) In subsection (1)(d) of section 81 of the Pensions Act 1995 (compensation not payable by the Pensions Compensation Board unless assets of salary-related trust scheme worth less than 90 per cent. of its liabilities), for "90 per cent. of the amount of the liabilities of the scheme" there shall be substituted "the protection level".

(2) After subsection (2) of that section there shall be inserted-

	"(2A) In subsection (1)(d) "the protection level" means the aggregate of-
	(a) the amount of the liabilities of the scheme to, or in respect of, its pensioner members and such other of its members as fall within a prescribed class or description,
	(b) 90 per cent. of the amount of the liabilities of the scheme to, or in respect of, any other members of the scheme, and
	(c) the amount of the liabilities of the scheme which are not liabilities to, or in respect of, its members;
	and references in this subsection to liabilities to, or in respect of, members of the scheme are references to liabilities in respect of pensions or other benefits."

(3) Section 83 of that Act (amount of compensation) shall be amended as follows.

(4) In subsection (3)(a) (compensation not to exceed 90 per cent. of shortfall), the words "90 per cent. of" shall be omitted.

(5) In subsection (3)(b) (compensation not to cause value of salary-related trust scheme's assets to exceed 90 per cent. of amount of its liabilities), for the words from "90 per cent." onwards there shall be substituted "the aggregate of the protected liabilities."

(6) After subsection (3) there shall be added-

	"(4) In subsection (3) "the protected liabilities" means-
	(a) the amount on the settlement date of the liabilities of the scheme to, or in respect of, its pensioner members and such other of its members as fall within a prescribed class or description,
	(b) 90 per cent. of the amount on that date of the liabilities of the scheme to, or in respect of, any other members of the scheme, and
	(c) the amount on that date of the liabilities of the scheme which are not liabilities to, or in respect of, its members;
	and references in this subsection to liabilities to, or in respect of, members of the scheme are to liabilities in respect of pensions or other benefits."

Miscellaneous amendments.

14. Schedule 2 (which contains amendments of the law relating to pensions) shall have effect.

Prepared 10 February 1999