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The Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1996

Type Ni-Statutory-Rule

Publication 1996-10-16

State In force

Jurisdiction Northern Ireland

Department Government Printer for Northern Ireland

Source legislation.gov.uk

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Made: 16th October 1996

Coming into operation: 6th April 1997

The Department of Health and Social Services for Northern Ireland, in exercise of the powers conferred on it by the provisions set out in Schedule 1 and of all other powers enabling it in that behalf, hereby makes the following Regulations:

Part I — Preliminary

Citation, commencement and interpretation

1

(1) These Regulations may be cited as the Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1996 and shall come into operation on 6th April 1997.

(2) In these Regulations—

“the Act” means the Pension Schemes (Northern Ireland) Act 1993[^f00001];

“the actuary” means the actuary appointed for the scheme in pursuance of Article 47(1) of the Order or the actuary otherwise authorised by virtue of these Regulations to provide certification in accordance with section 8A(6) of the Act[^f00002];

“the Administration Act” means the Social Security Administration (Northern Ireland) Act 1992[^f00003];

“administrator”, in relation to an occupational pension scheme, means the person resident in the United Kingdom having responsibility for the management of the scheme or, in the case of an overseas scheme, means the person resident in the United Kingdom appointed in accordance with section 590(2)(c) of the Taxes Act;

“age-related payment” means a payment made by the Department in accordance with section 38A(3) of the Act[^f00004];

“the Contributions and Benefits Act” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992[^f00005];

“earnings period” has the same meaning as in the Social Security (Contributions) Regulations (Northern Ireland) 1979[^f00006];

“emoluments” means so much of a person’s remuneration or profit derived from employed earner’s employment as constitutes earnings for the purposes of the Contributions and Benefits Act;

“employer” includes a person who, under paragraphs (3) or (4) or regulations 12 to 14, is treated as an employer;

“income tax month” means a period beginning on the 6th day of any calendar month and ending on the 5th day of the following calendar month;

“independent trade union” means an independent trade union recognised to any extent for the purpose of collective bargaining;

“insured scheme” means a scheme in which the benefits are secured by one or more policies of insurance or annuity contracts and which is managed by an insurance company which issued the policy or contract;

“minimum funding requirement” shall be construed in accordance with Article 56 of the Order;

“the Occupational Pensions Board” means the Occupational Pensions Board established under section 66 of the Social Security Act 1973[^f00007] and dissolved under section 150 of the Pensions Act 1995[^f00008];

“the Order” means the Pensions (Northern Ireland) Order 1995;

“overseas scheme” means an occupational pension scheme which is— established under irrevocable trust or by such other means as the Department may approve, and administered wholly or primarily, outside the United Kingdom;

“principal appointed day” has the same meaning as in section 3(2B) of the Act[^f00009];

“scheme” means an occupational pension scheme;

“section 5(2B) rights” are rights (other than rights attributable to voluntary contributions within the meaning of section 107 of the Act) which are attributable to an earner’s service on or after the principal appointed day in employment which is contracted out in accordance with section 5(2B) of the Act[^f00010];

“the Taxes Act” means the Income and Corporation Taxes Act 1988[^f00011];

“trustees”, in relation to a scheme which is not set up or established under a trust, means the managers or administrators of the scheme.

(3) For the purposes of these Regulations, any person, government department or public authority who, under Part I of the Contributions and Benefits Act or regulations made thereunder, is, or is to be treated as, the secondary Class 1 contributor shall be treated as the employer of the earner in respect of whom the Class 1 contributions are payable.

(4) For the purposes of the Regulations and without prejudice to paragraph (3), there shall be treated as the employer of a self-employed earner to whom a scheme applies any person (other than that self-employed earner), government department or public authority who makes or is liable to make payments towards the resources of the scheme in respect of that self-employed earner (either under actual or contingent legal obligation or in the exercise of power conferred, or duty imposed, on a Minister of the Crown, government department or any other person, being a power or duty which extends to the disbursement or allocation of public money).

(5) For the purposes of these Regulations, a person is to be regarded as a member of a scheme during a period when his service in relevant employment is such that at the time when it is given it either—

(a) qualifies him for benefits (in the form of a pension or otherwise, payable on the termination of his service or on his retirement or his death) under the scheme which in the opinion of the Department are referable to that period, or

(b) is certain so to qualify him subsequently if it continues for a sufficiently long time and the rules of the scheme and the terms of his contract of service remain unaltered during that time.

(6) Any document required or authorised to be sent to any person shall be deemed to have been sent if it was sent by post to that person’s usual or last known address or (in the case only of a document required or authorised to be sent to an employer) to the address of the principal place at which any employment to which the document relates is last known to have been carried on.

(7) Subject to paragraph (8), the Interpretation Act (Northern Ireland) 1954[^f00012] shall apply to these Regulations as it applies to a Measure of the Assembly.

(8) For the purposes of these Regulations and notwithstanding section 39(2) of the Interpretation Act (Northern Ireland) 1954, where a period of time is expressed to begin on, or to be reckoned from, a particular day, that day shall be included in the period.

Part II — Certification of Employments

Making of elections for the issue of contracting-out certificates

2

(1) Subject to regulation 10, an election with a view to the issue of a contracting-out certificate—

(a) may only be made—

(i) after notices to make such an election have been given by the employer in accordance with regulation 3, and

(ii) within the period after the expiry of those notices which is specified in regulation 5, and

(b) shall be made in writing to the Department and shall include the particulars specified in regulation 6.

(2) An employer may elect that an employment of earners in an employment shall be contracted out by reference to a scheme in relation to all earners in that employment with the exception of those mentioned in either or both of sub-paragraphs (a) and (b)—

(a) where an earner in an employment to which the scheme relates opts in writing not to join or, as the case may be, not to remain as a member of any contracted-out employment to which the scheme relates, any earner who so opts, and

(b) in a case where it is possible for one or more earners to be unable to complete 5 years' service in that employment as members of that scheme before reaching the normal pension age of that scheme, the earner or earners whose length of service (consisting of service in that employment as a member of that scheme, or linked qualifying service in relation to such service, or both) falls short of a minimum length of service (not exceeding 5 years) specified in the rules of the scheme and who cannot (so far as is known when the contracting-out certificate is issued, or if later in the case of a particular earner, when he enters the employment) complete such a minimum length of service before reaching the normal pension age of the scheme.

Notices by employers of intended election

3

(1) A notice of intention to make an election with a view to the issue of a contracting-out certificate shall be given by the employer, in the manner specified in paragraph (3), to—

(a) the earners in respect of whose employment the election is proposed to be made, and those (if any) in that employment in relation to whom the employer is not electing that the employment shall be treated as contracted out;

(b) the trustees and administrator of the scheme to which the election is to relate;

(c) where there is a policy of insurance or annuity contract as a means of securing the protected rights, guaranteed minimum pensions or any benefits arising in respect of section 5(2B) rights to be payable under the scheme, the insurance company or friendly society concerned, and

(d) all independent trade unions recognised in relation to the earners concerned.

(2) Notices given under this regulation shall be in writing and shall—

(a) specify the scheme and the employments concerned and, if the election is not intended to be in relation to all earners in those employments, the categories or descriptions of the earners to be so affected;

(b) specify the date from which it is intended that the contracting-out certificate shall have effect;

(c) describe (whether or not by reference to another document) the benefits payable under the scheme to, and the contributions (if any) payable to the scheme by, the earners to be covered by the election, and the changes (if any) which would be made to those benefits and contributions if the employment were contracted out;

(d) specify the date of expiry of the notice in accordance with paragraphs (4) and (5);

(e) specify the name and business address of the person to whom representations may be made with respect to the matters included in the notice;

(f) contain a statement that—

(i) such representations may also be made to the Department;

(ii) the Department may defer its determination to enable the election to be further considered in the light of representations made by or on behalf of the persons to whom the notice is given;

(iii) the Department has power to refuse to give effect to the election if it is not satisfied that the employer has undertaken consultations about the matters covered by the notice with all independent trade unions recognised in relation to the earners concerned, and

(g) explain (whether or not by reference to another document)—

(i) whether the employment would be contracted out by reference to a salary related or money purchase contracted-out scheme and how benefits would accrue to a member under the scheme if the employment were contracted out;

(ii) how, if the employment were contracted out, the additional pensions of state retirement pensions and widows' and widowers' benefits payable to or in respect of the earners in that employment under the Contributions and Benefits Act, and the rates at which contributions payable by those earners under Part I of that Act, would be affected;

(iii) where further information about the scheme, state retirement pensions and the benefits mentioned in head (ii) can be obtained.

(3) A notice under this regulation shall be given—

(a) to any earner concerned by—

(i) sending or delivering it to him, or

(ii) exhibiting it conspicuously at the place of work or employment so that it may be read conveniently by him and by drawing his attention to it in writing;

(b) to any other person, by sending or delivering it to that person.

(4) Subject to paragraph (5), a notice may specify a date of expiry which is not earlier than the date one month after that on which the notice is given.

(5) If any independent trade union recognised in relation to the earners concerned does not assent to the period of notice specified in accordance with paragraph (4), a notice must specify a date of expiry which is not earlier than the date 3 months after that on which the notice is given.

Consultation with trade unions

4

(1) An employer who has given a notice under regulation 3 shall undertake consultations, if he has not already done so, about the matters covered by the notice with all independent trade unions recognised in relation to the earners concerned.

(2) Any question whether an organisation is an independent trade union recognised in relation to earners may be referred by the employer of those earners, or by the organisation, to an industrial tribunal.

(3) Any question whether an employer has complied with the requirements as to consultations specified in paragraph (1) may be referred by the employer, or by an independent trade union recognised in relation to the earners concerned, to an industrial tribunal.

Time for making an election

5

An election may be made only after the date of expiry of the notice given under regulation 3 and within 3 months of that date (or such longer period as the Department may in its discretion allow), but nothing in this regulation shall prevent an election from being made after the giving of further notices which comply with the requirements of that regulation.

Information to be included in an election

6

(1) An election shall include the following particulars—

(a) the name and address of the employer;

(b) the name by which the scheme to which the election relates is known;

(c) a description of the employments to which the contracting-out certificate is intended to relate and, if the certificate is not intended to be in relation to all earners in those employments, the categories or descriptions of the earners intended to be included in the certificate;

(d) the date from which it is desired that the certificate shall have effect;

(e) the names and addresses of the trustees and administrator of the scheme to which the election relates, and

(f) the person to whom notices were given under regulation 3(1)(b), (c) and (d).

(2) The employer shall also confirm in writing—

(a) that he has, in accordance with regulation 3(1), given the earners mentioned in regulation 3(1)(a) notice of the intention to make the election, and

(b) how that notice was given and its date of expiry;

(d) unless the scheme is one to which regulation 27 applies (modification applying to public service pension schemes), that the restrictions imposed under Article 40 of the Order (restrictions on employer-related investments) apply to the scheme and the scheme complies with those restrictions;

(e) in the case of a scheme to which Article 47 of the Order (professional advisers) applies, that the scheme complies with the requirement, under paragraph (1)(b) of that Article, to have an actuary;

(f) in the case of a trust scheme—

(i) that any fund manager to whom any discretion to make any decisions about investments has been delegated in accordance with Article 34 of the Order (power of investment and delegation) is capable of giving proper advice within the meaning of Article 36(6) of the Order;

(ii) that the requirements of Article 49 of the Order (other responsibilities of trustees, employers, etc.) and any regulations made under that provision to keep any money received by the trustees in a separate account and to keep proper books and records are complied with;

(g) in the case of a scheme to which Article 56 of the Order (minimum funding requirement) applies, that the requirements of Article 57(1) and (2) and 58 of the Order and any regulations made under those provisions to obtain actuarial valuations and certificates are complied with.

(3) In the case of a scheme which is electing to contract out under section 5(2) of the Act[^f00013] (salary related contracted-out scheme) the employer shall also provide—

(a) unless the scheme is one to which regulation 18(2) applies (public service pension scheme), written confirmation or evidence that the actuary is satisfied that the resources of the scheme are sufficient to meet the requirement prescribed in regulation 18 (requirement as to resources of the scheme) or, as the case may be, the transitional requirements as to resources prescribed in regulations 72 and 73, and

(b) a certificate signed by the actuary that the scheme satisfies the statutory standard in relation to any earner’s service after the principal appointed day in accordance with section 8A of the Act.

(4) In the case of a scheme which is electing to contract out under section 5(3) of the Act[^f00014] (money purchase contracted-out scheme) the employer shall also provide confirmation in writing—

(a) that he will comply with obligations concerning minimum payments in accordance with section 4(1)(a)(ii) of the Act[^f00015] and regulations made under sections 4(3) and 5(3) of the Act, and

(b) that the requirements of regulation 30(1)(b) and (c) are satisfied.

Amendment of an election

7

An employer may amend his election at any time before the issue of a contracting-out certificate if the amendment does not alter the categories or descriptions of the earners to which the election relates.

Issue of contracting-out certificates

8

(1) Subject to paragraph (2) when the Department has determined that an employment should be treated, either in relation to all earners in it or in relation to any specified category or description of earners, as contracted-out employment, it shall issue and send to the employer concerned a contracting-out certificate.

(2) The contracting-out certificate shall specify—

(a) the name and address of the employer;

(b) the name of the scheme by reference to which that employment is to be so treated;

(c) the employments to which the certificate relates or, if the contracting-out certificate does not relate to all earners in those employments, the categories or descriptions of the earners to whom it relates, and

(d) the date from which the certificate is to have effect, which may, where the Department considers it appropriate, be earlier than the date on which the certificate is issued, provided that the scheme satisfied any contracting-out conditions or requirements which apply to the scheme from the date from which the certificate is to have effect.

Making of elections by employers for the variation or surrender of contracting-out certificates

9

(1) Subject to the provisions of paragraphs (2) and (3) and regulation 10, an election with a view to the variation or surrender of a contracting-out certificate may only be made—

(a) after notices of intention to make such an election have been given by the employer in accordance with paragraphs (4) and (5), and

(b) within the period after the expiry of those notices which is specified in paragraph (7),

and shall be made in writing to the Department.

(2) Where a proposed variation is a change—

(a) in the name of the employer;

(b) in the address of the employer, or

an election with a view to the variation of a certificate shall be made in writing to the Department within 3 months of the event to which the election relates or such longer period as the Department may in its discretion allow and may be made without compliance with paragraphs (1) and (4) to (7).

(3) In addition to the cases described in paragraph (2), in such cases as the Department may approve, where a proposed variation would not alter—

(a) the categories or descriptions of the earners affected by the certificate;

(b) in the case of a money purchase contracted-out scheme, the protected rights under, or in the case of any other scheme, the benefits provided by the scheme, or

(4) Notices of intention to make an election with a view to the variation or surrender of a contracting-out certificate shall be given within 3 months of the event to which the election relates, or such longer period as the Department may in its discretion allow, to the persons referred to in regulation 3(1)(a) to (d) in the manner mentioned in regulation 3(3).

(5) Notices given under this regulation shall be given in writing and shall—

(a) specify the scheme and the employments concerned and, if the election is not intended to be in relation to all earners in those employments, the categories or descriptions of the earners to be so affected;

(b) specify the date from which it is intended that the variation or surrender is to have effect;

(d) specify the name and business address of a person to whom representations may be made with respect to the matters included in the notice;

(e) contain a statement that—

(i) such representations may also be made to the Department;

(ii) the Department may defer its determination to enable the election to be further considered in the light of representations made by or on behalf of persons to whom the notice is given, and

(iii) the Department has power to refuse to give effect to the election if it is not satisfied that the employer has undertaken consultations about the matters covered by the notice with all independent trade unions recognised in relation to the earners concerned;

(f) explain (whether or not by reference to another document) how, if the proposed variation or surrender took place, the additional pensions of state retirement pensions and widows' benefits payable to or in respect of the earners concerned under the Contributions and Benefits Act, and the rates at which contributions payable by those earners under Part I of that Act, would be affected, and

(g) describe (whether or not by reference to another document) any changes which would be made to the benefits provided under, and the contributions (if any) payable by earners concerned to, the scheme if the proposed variation or surrender took place.

(6) An employer who has given such a notice as is mentioned in this regulation shall undertake consultations, if he has not already done so, about the matters covered by the notice with all independent trade unions recognised in relation to the earners concerned and any question whether an employer has complied with this requirement may be referred to an industrial tribunal.

(7) An election under this regulation may only be made after the date of the expiry of the notice given in accordance with paragraphs (4) and (5) and within 3 months of that date (or such longer period as the Department may in its discretion allow), so however that nothing in this paragraph shall prevent an election from being made after the giving of further notices which comply with the requirements of this regulation.

(8) An employer may amend his election under this regulation at any time before the variation or surrender of the certificate if the amendment does not alter the categories or descriptions of the earners affected by the certificate.

Special provision with regard to elections for the issue, variation or surrender of certificates where the employment remains contracted out

10

(1) Subject to regulation 71 (elections for replacement certificates by salary related schemes during transitional period) and to paragraphs (2) and (3), where in the case of an election with a view to the issue, variation or as the case may be, surrender of a contracting-out certificate the Department is satisfied, that—

(a) any earner in respect of whose employment the election relates will continue to qualify for pensions which satisfy section 5(2) of the Act, or for protected rights, as the case may be, under the scheme when the election takes effect;

(b) the accrued rights to pensions which satisfy section 5(2) of the Act, or to protected rights, as the case may be, of that earner under that scheme, will be unaffected, and

then that election shall be made in writing to the Department and may be made without compliance with regulations 2(1), 4, 5 and 9(1) and (4) to (7).

(2) Where, in accordance with paragraph (1), an election is made without compliance with the said provisions, the employer must give notice in the manner mentioned in regulation 3(3) to—

(a) the earners to whose employment the election relates, and

(b) the persons referred to in regulation 3(1)(b) to (d).

(3) Notices given under paragraph (2) shall specify—

(a) the name of the scheme;

(b) the reason for the election;

(d) the reasons why the election is being made without compliance with regulations 2(1), 4, 5 and 9(1) and (4) to (7).

Special circumstances in which the Department may determine earners to have been in contracted-out employment

11

Where an earner has been employed in an employment during a period in which employment of that description was contracted-out but such employment was not (apart from this regulation) contracted out in relation to him, and the Department is satisfied—

(a) that it was not contracted out in relation to him solely because he was not during that period a member of the relevant scheme, and

(b) that he was not during that period a member of that scheme solely because of inadvertence,

it may determine that that earner was in contracted-out employment by reference to that scheme during that period.

Special provision for holding companies and subsidiaries

12

(1) This regulation applies to cases where—

(a) earners employed in employment under different employers qualify by virtue of their respective service in those employments for the benefits of the same scheme, and

(b) each of the employers in the scheme is either—

(i) one of a group of companies consisting of a holding company and one or more subsidiaries;

(ii) one of a group of employers who are associated employers within the meaning of section 590A(3) and (4) of the Taxes Act[^f00016], or

(iii) one of a group of employers who are associated by a common interest.

(2) In this regulation—

(a) “associated by a common interest” means employers who share either management, shareholders, employees or business operations in common;

(b) “holding company” means a body corporate which is either—

(i) a holding company within the meaning of Article 4 of the Companies (Northern Ireland) Order 1986[^f00017];

(ii) an employer who controls an associated employer within the meaning of section 590A(3) and (4) of the Taxes Act, or

(iii) an employer who is the principal employer for the purposes of the scheme in accordance with the scheme rules or the employer who has power to act on behalf of all employers in the scheme in relation to the scheme rules;

(i) a subsidiary within the meaning of Article 4 of the Companies (Northern Ireland) Order 1986;

(ii) an employer controlled by an associated employer within the meaning of section 590A(3) and (4) of the Taxes Act, or

(iii) an employer subject to the rules of the scheme.

(3) In a case to which this regulation applies, any notice which is required or authorised to be given under these Regulations shall, subject to paragraph (4), be treated as properly given if given by the holding company on behalf of any of its subsidiaries, and where this is done the holding company shall, subject to paragraphs (4) and (5), be treated as the employer of the earners for the purposes of sections 3(1)(a), (2) and (7), 7 and 30(1)(a), (2) and (8) of the Act[^f00018] and of any regulations made thereunder.

(4) The duty of an employer to undertake the consultations mentioned in regulations 3(2)(f)(iii), 4, 9(5)(e)(iii) and (6) shall be carried out by each subsidiary in respect of the earners employed by it, unless all the independent trade unions recognised in relation to those earners have signified in writing to the holding company that they agree that those consultations may be conducted on the subsidiary’s behalf by the holding company.

(5) The Department may refuse to give effect to an election made by a holding company if it is not satisfied either that each subsidiary has undertaken those consultations in respect of the earners employed by the holding company, or that the holding company has undertaken them with the agreement of those trade unions.

Special provision for public service pension schemes

13

(1) This regulation applies to cases where earners in employments under different employers qualify by virtue of their respective service in those employments for the benefits of the same public service pension scheme.

(2) In a case to which this regulation applies, any notice which is required or authorised to be given under these Regulations shall be treated as properly given if given either by a government department or by the Minister of the Crown having responsibility for the scheme and where this is done the government department or that Minister, as the case may be, shall be treated as the employer of the earners for the purposes of sections 3(1)(a), (2) and (7), 7 and 30(1)(a), (2) and (8) of the Act and of any regulations made thereunder.

Special provision for holders of pensionable judicial office

14

In respect of earners who are holders of pensionable judicial office, any notice which is required or authorised to be given under these Regulations shall be treated as properly given if given either by the Lord Chancellor or by a government department and where this is done the Lord Chancellor or that government department, as the case may be, shall be treated as the employer of the earners for the purposes of sections 3(1)(a), (2) and (7), 7 and 30(1)(a), (2) and (8) of the Act and of any regulations made thereunder.

Further information and change of circumstances

15

An employer who makes an election with a view to the issue of a contracting-out certificate or an employer whom such a certificate has been issued, shall furnish to the Department such reports, accounts and other documents and information relating to the scheme as the Department requires, and, in particular, shall notify the Department of any such change of circumstances affecting the scheme as it may have required the employer to notify as soon as practicable after its occurrence.

Requirement to confirm relevant requirements are satisfied

16

(1) An employer to whom a contracting-out certificate has been issued (including any certificate which has been surrendered or cancelled) shall, on such occasions and at such times as the Department may require, provide written confirmation and such other evidence as the Department may require—

(a) in the case of a scheme contracted out under section 5(2) of the Act (salary related contracted-out scheme)—

(i) that the scheme is not one which is excluded from contracting-out under these Regulations, and

(ii) that section 5(2) of the Act and any regulations which apply to the scheme by reason of its being a scheme to which that provision relates are satisfied;

(b) in the case of a scheme contracted out under section 5(3) of the Act (money purchase contracted-out scheme)—

(i) that the scheme is not one which is excluded from contracting-out under these Regulations, and

(ii) that sections 4(1)(a)(ii) and 5(3) of the Act, and any regulations which apply to the scheme by reason of its being a scheme to which those provisions relate, are satisfied;

(c) in the case of a scheme which has ceased to be contracted out under section 5(2) of the Act (salary related contracted-out scheme) and which preserves any of the rights specified in section 46(1)(a) of the Act[^f00019] within the scheme, that the requirements specified in regulation 45(3)(a) (approval of arrangements for salary related schemes ceasing to be contracted out) are satisfied;

(d) in the case of a scheme which has ceased to be contracted out under section 5(3) of the Act (money purchase contracted-out scheme) and which preserves any protected rights within the scheme, that the requirements specified in regulation 45(3)(b) (approval of arrangements for money purchase schemes ceasing to be contracted out) are satisfied.

(2) In the case of a scheme which is contracted out under section 5(2) of the Act (salary related contracted-out scheme) the evidence to be provided to the Department referred to in paragraph (1) shall include a certificate signed by the actuary that the scheme continues to satisfy the statutory standard in accordance with section 8A of the Act[^f00020].

17

A scheme may be contracted out in relation to the employment of an earner under section 5(2) of the Act (requirements for certification of a salary related contracted-out scheme) only if, in relation to an earner’s service on or after the principal appointed day, in addition to satisfying the conditions required by section 5(2B)(a) and (b) of the Act[^f00021], it also satisfies the requirements of regulations 18 to 22.

Requirement as to resources of the scheme

18

(1) Subject to paragraph (2) and regulations 72 and 73 (transitional arrangements concerning requirements as to resources) for the purposes of section 5(2B)(c)(i) of the Act (requirements as to amount of the resources of the scheme), the amount of the resources of the scheme must be sufficient either to enable the scheme to meet the minimum funding requirement provided for in Article 56(1) of the Order, or the actuary to the scheme must have certified under Article 58(6)(b) of the Order that in his opinion the rates of contributions are adequate for the purpose of securing that the minimum funding requirement will be met by the end of the period prescribed in relation to that Article.

(2) Paragraph (1) does not apply to a public service pension scheme to which Article 56 of the Order does not apply.

19

A salary related contracted-out scheme may not provide for the payment of a lump sum instead of a pension except in accordance with regulation 20 (trivial commutation of section 5(2B) rights) and, as the case may be, regulation 60 (trivial commutation of guaranteed minimum pensions) or—

(a) in the case of a scheme which is exempt approved within the meaning of section 592(1) of the Taxes Act or a scheme which has applied for such approval which has not yet been determined, to the extent permitted under the rules of that scheme in accordance with that approval, or

(b) in the case of a relevant statutory scheme within the meaning of section 611A of the Taxes Act[^f00022], to the extent permitted under the regulations or rules governing the scheme as a relevant statutory scheme.

Trivial commutation of benefits derived from section 5(2B) rights

20

For the purposes of section 8C(1)(c) of the Act[^f00023] (regulations may prohibit or restrict the payment of a lump sum instead of a pension under a relevant scheme except in prescribed circumstances or on prescribed conditions), any benefits which have accrued in respect of an earner’s section 5(2B) rights under a scheme may not be paid as a lump sum instead of a pension unless—

(a) such benefits are payable under the rules of the scheme;

(b) the aggregate of all benefits including benefits in respect of section 5(2B) rights payable to the earner (or his widow or widower) does not exceed £260 per annum, and

(c) the Department is satisfied that the scheme provides a reasonable basis for ascertaining the sum to be paid on commutation.

21

For the purposes of section 8D of the Act[^f00024] (regulations may provide for the ages for payment of benefits in salary related contracted-out schemes) in respect of an earner’s service on or after the principle appointed day, schemes must provide for benefits to be paid by reference to an age which is equal for men and women and which—

(a) in the case of a scheme which is exempt approved within the meaning of section 592(1) of the Taxes Act or a scheme which has applied for such approval which has not yet been determined, is permitted under the rules of that scheme in accordance with that approval, or

(b) in the case of a relevant statutory scheme within the meaning of section 611A of the Taxes Act, is permitted under the regulations or rules governing the scheme as a relevant statutory scheme.

Each part of scheme to comply with section 8A of the Act

22

(1) Where a scheme makes provision in relation to earners in one category of employment which differs from provision made in the case of earners in another such category, the Department must be satisfied that the scheme satisfies section 8A of the Act in relation to each of the categories of employment which is to be contracted out.

(2) Where a scheme makes provision in relation to one description of earners within a category of employment which differs from provision made in the case of another description of earners within that category, the Department must be satisfied that the scheme satisfies section 8A of the Act in relation to each such description of earners which is to be contracted out.

Requirements for meeting the statutory standard

23

For the purposes of section 8A(4) of the Act (regulations may provide for the manner of, and criteria for, determining whether pensions are broadly equivalent to those under a reference scheme) in determining whether the pensions provided under the scheme are broadly equivalent to or better than those which would be provided under a reference scheme, the actuary—

(a) must follow guidance note GN 28 prepared from time to time by the Institute of Actuaries and Faculty of Actuaries[^f00025] and approved by the Department;

(b) may not certify that the pensions to be provided by the scheme for earners in employed earner’s employment and their widows or widowers are collectively broadly equivalent to, or better than, those which would be provided for such persons under a reference scheme if the pensions to be provided for more than 10 per cent. of such earners or their widows or widowers are not broadly equivalent to the pensions which would be provided for them under a reference scheme;

(c) must have regard to the pensions to be provided under the scheme for the persons specified in section 8A(1) of the Act who are in the scheme at the date from which the certificate has effect;

(d) must not have regard to any pensions to be provided under the scheme in respect of earners who are not in contracted-out employment;

(e) must not have regard to any money purchase benefits, and

(f) may have regard to the payment of a lump sum.

Circumstances when actuary other than actuary appointed under Article 47 of the Order may certify broad equivalence

24

For the purposes of section 8A(6) of the Act (actuary other than scheme actuary appointed under Article 47 of the Order to certify whether pensions are broadly equivalent to, or better than, those in a reference scheme in prescribed circumstances) the prescribed circumstances are where a scheme is not required to appoint an actuary for the scheme under Article 47 of the Order.

Requirements for a reference scheme

25

A reference scheme is a scheme which, in addition to complying with the requirements of section 8B(3) and (4) of the Act, complies with the requirements of Chapter II of Part IV of the Act (revaluation of benefits in the case of scheme members who leave pensionable service before attaining normal pension age) and Article 51 of the Order (indexation of pensions).

Reference scheme: circumstances in which widows' or widowers' pensions need not be payable

26

For the purposes of section 8B(4)(a) of the Act (reference scheme to provide widows' and widowers' pensions except in prescribed circumstances) the prescribed circumstances are where—

(a) the scheme member marries after having received benefits under the scheme, or

(b) the widow or widower of the scheme member remarries or lives together as husband and wife with another person to whom he or she is not married after having received benefits under the scheme, or

(c) the widow or widower of the scheme member is living together as husband and wife with another person to whom he or she is not married at the time of the member’s death.

Modification applying to public service pension schemes

27

In the case of schemes which are public service pension schemes, section 5(2B) of the Act (requirements for salary related contracted-out schemes in relation to service on or after the principal appointed day) is modified by omitting paragraph (b) (a requirement that the restrictions on employer-related investments apply to the scheme and the scheme complies with those restrictions).

28

(1) This regulation applies in cases in which any description of benefit under a salary related contracted-out scheme is subject to a limit (however imposed) operating so as to prevent service beyond a particular length from qualifying for further benefits.

(2) Subject to paragraph (3), in cases to which this regulation applies, the employment of an earner in employed earner’s employment shall be treated as contracted-out employment in relation to him, notwithstanding that his further service in the employment does not qualify him for further benefits under the scheme, where the following conditions are satisfied—

(a) the earner’s service in employed earner’s employment has qualified him for benefit up to a limit imposed by the scheme;

(b) the annual rate of the benefit by way of pension for which that service has qualified him is not less than half the pensionable earnings on which it is calculated, and

(c) the total benefits payable under the scheme (other than benefits attributable to voluntary contributions within the meaning of section 107 of the Act) are the same as or more favourable than the guaranteed minimum pension and any benefits arising in respect of section 5(2B) rights to which the earner would be entitled in respect of service in that employment and any linked qualifying service during which the earner was in contracted-out employment and any periods of service in that employment which would be contracted-out employment by virtue of this regulation.

(3) For the purposes of paragraph (2)(c) “total benefits” includes benefits which have accrued to the earner in respect of service in employment whether or not contracted-out employment and whether with the same or another employer, except any part of such benefits which consists of equivalent pension benefits for the purposes of Part III of the National Insurance Act (Northern Ireland) 1966[^f00026].

Schemes which cannot be certified under section 5(2B) of the Act

29

For the purposes of section 5(2B)(d) of the Act (prescribed class or description of schemes which may not be salary related contracted-out schemes) the prescribed schemes are—

(a) a scheme which is not exempt approved within the meaning of section 592(1) of the Taxes Act, unless either it has applied for such approval which has not yet been determined or it is a relevant statutory scheme within the meaning of section 611A of that Act;

(b) a money purchase scheme.

Part IV — Money Purchase Contracted-out Schemes

Further contracting-out requirements for money purchase contracted-out schemes

30

(1) For the purpose of section 5(3) of the Act[^f00027] (money purchase schemes) the prescribed requirements are—

(a) restrictions imposed under Article 40 of the Order (restriction on employer-related investments) apply to the scheme and the scheme complies with those restrictions;

(b) in a case where the rules of the scheme provide for a member to make payments in addition (“additional payments”) to the minimum payments that are made to that scheme, those payments shall, subject to paragraph (2), be invested so as to provide money purchase benefits;

(i) in the case of an insured scheme, the insurance company to be notified of any alteration in the membership of the scheme and the amount of earnings of any member;

(ii) minimum payments to be invested on behalf of the member within one month of the end of the income tax month to which they relate and age-related payments to be invested on behalf of the member within one month of the date of payment by the Department.

(2) The requirement referred to in paragraph (1)(b) shall not apply in a case where the rules of the scheme provide that the additional payments made shall entitle the member to benefits which are not money purchase benefits and such benefits are paid in addition to the benefits derived from minimum payments.

Deduction of minimum payments from earnings

31

(1) Every employer, on making during any tax year to any earner any payment of emoluments in respect of which minimum payments are payable may deduct minimum payments in accordance with this regulation.

(2) An employer shall not be entitled to recover any minimum payments paid or to be paid by him on behalf of any earner otherwise than by deduction in accordance with this regulation.

(3) Subject to paragraph (4), on making any payment of emoluments to the earner the employer may deduct from those emoluments an amount which bears the same ratio to the amount of the minimum payments relating to those emoluments as A does to A plus B, where—

(a) A is the appropriate flat-rate percentage for primary Class 1 contributions specified in an order made under section 38B of the Act[^f00028], and

(b) B is the appropriate flat-rate percentage for secondary Class 1 contributions specified in that order.

(4) Where two or more payments of emoluments fall to be aggregated under paragraph 1(1) of Schedule 1 to the Contributions and Benefits Act, the employer may deduct the amount of the minimum payments based thereon which are payable by the earner either wholly from one such payment or partly from one and partly from the other or any one or more of the others.

(5) In the circumstances specified in paragraph (6), if the employer on making any payment of emoluments to an earner does not deduct therefrom the full amount of minimum payments which by virtue of these Regulations he is entitled to deduct, he may recover the amount so underdeducted by deduction from any subsequent payment of emoluments to that earner during the same tax year, so however that any amount deducted under this paragraph may be in addition to, but shall not exceed, any amount deducted from the same payment of emoluments under paragraphs (3) or (4).

(6) Paragraph (5) applies only where—

(a) the underdeduction occurred by reason of an error made by the employer in good faith;

(b) the emoluments in respect of which the underdeduction occurred are deemed to be earnings by virtue of regulations made under section 112 of the Contributions and Benefits Act;

(c) the underdeduction occurred as a result of the variation of the contracting-out certificate issued in respect of the employment in respect of which the payment of emoluments is made, or

(d) the emoluments in respect of which the underdeduction occurred are, under regulation 17B of the Social Security (Contributions) Regulations (Northern Ireland) 1979[^f00029], not paid through the secondary contributor in relation to the employment.

Minimum payments to be made by employers to trustees

32

(1) For the purposes of section 4(1) of the Act[^f00030], the employer of an earner whose employment is contracted out by reference to a money purchase contracted-out scheme shall, subject to paragraph (2), make to the trustees of that scheme any minimum payments which fall to be made by him, other than amounts deductible by virtue of regulation 31(4) which he did not deduct, within 14 days of the end of the income tax month in which there arose the liability for Class 1 contributions in respect of the earnings to which those minimum payments relate.

(2) An employer shall for the purposes of paragraph (1) be deemed to have deducted from the last of any number of payments of emoluments which fall to be aggregated under paragraph 1(1) of Schedule 1 to the Contributions and Benefits Act the amount of minimum payments deductible from those payments which he did not deduct from the earlier payments.

(3) Subject to paragraph (4), if the employer has paid to the trustees on account of minimum payments an amount which he was not liable so to pay, the amounts which he is liable so to pay subsequently, in respect of other payments of emoluments made by him during the same tax year, shall be reduced by the amount so overpaid, so however that if there was a corresponding overdeduction from any payment of emoluments to an earner this paragraph shall only apply in so far as the employer has reimbursed the earner therefor.

(4) Paragraph (3) applies only where the overdeduction occurred by reason of an error made by the employer in good faith.

Calculation of minimum payments

33

(1) Subject to paragraphs (3) and (4), minimum payments shall be calculated in accordance with section 4(2) of the Act, so however that each such calculation shall be to the nearest penny and any amount of half a penny or less shall be disregarded.

(2) In the alternative, but subject to paragraphs (3) to (5), minimum payments may be calculated in accordance with a scale prepared for that purpose by the Department.

(3) Where the amount of the earnings to which the scale is to be applied does not appear in the scale, the amount of the minimum payments shall be calculated by reference to the next smaller amount of earnings in the appropriate column in the scale.

(4) Where the scale would, but for the period to which it relates, be appropriate and the earnings period in question is a multiple of the period in the scale, the scale shall be applied by dividing the earnings in question so as to obtain the equivalent earnings for the period to which the scale relates and by multiplying the amount of minimum payments shown in the scale as appropriate to those equivalent earnings by the same factor as the earnings were divided.

(5) Unless the Department agrees to the contrary, all the minimum payments to be made in a tax year in respect of the earnings paid to or for the benefit of an earner in respect of his employed earner’s employment or, where he has more than one such employment and the earnings therefrom are aggregated under paragraph 1(1) of Schedule 1 to the Contributions and Benefits Act, in respect of those employments, shall be calculated either in accordance with paragraph (1) or in accordance with paragraph (2) but not partly in accordance with one and partly in accordance with the other of those paragraphs.

Manner of calculation or estimation of earnings

34

Where the Department cannot readily ascertain the amount of earnings in any tax week or is satisfied that records of earnings in any tax week have not been maintained or retained or are otherwise unobtainable, it may—

(a) compute, in such manner, as it thinks fit, an amount which shall be regarded as the amount of earnings, or

(b) take their amount to be such as it may specify in the particular case.

35

The Department shall make the age-related payment—

(a) by automated credit transfer into a bank or building society account relating to the relevant scheme and which accepts payments made by automated credit transfer, or

(b) in such other manner as the Department may in its discretion approve.

Verification of age

36

(1) For the purposes of determining the appropriate age-related percentage in respect of an earner for the purposes of section 38A of the Act[^f00031], the Department may require that earner to send documentary evidence of his date of birth.

(2) For the purposes of section 41B of the Act[^f00032] (information held as to the age to be disclosed by the Department to trustees or managers of a money purchase scheme and such other persons as may be prescribed) the prescribed person shall be the person who is responsible for administering the scheme.

37

(1) An age-related payment shall not be paid in respect of an earner for the tax year or part of the tax year in which that earner—

(a) reaches pensionable age, or

(b) dies and in which he would have reached pensionable age.

(2) Where effect has been given to protected rights under section 24 of the Act[^f00033] (ways of giving effect to protected rights) age-related payments shall not, except as provided for by paragraphs (3) to (6), be paid in respect of an earner for any tax year or part of a tax year before effect had been given to that earner’s protected rights.

(3) Where effect has been given to the earner’s protected rights by the purchase of an annuity or by the provision by the scheme of a pension and the amount of the age-related payment in question is at least 10 times as great as the weekly lower earnings limit for the tax year in which the Department first becomes aware that the age-related payment is payable or would have been payable but for paragraph (2), the age-related payments shall be paid (in the case of an annuity) to the insurance company from which the annuity had been purchased, or (in the case of a pension) to the trustees or managers of the scheme.

(4) Where effect has been given to the earner’s protected rights but the circumstances described in paragraph (3) do not exist the age-related payments shall be payable to the earner or the earner’s widow or widower, or if the earner died unmarried, they may at the Department’s discretion be paid to any person.

(5) Where effect has been given to the earner’s protected rights by the provision of a lump sum, the age-related payment shall be payable to the earner or the earner’s widow or widower or, if the earner died unmarried, that payment may at the Department’s discretion be paid to any person.

(6) Where effect has been given to the earner’s protected rights by virtue of a transfer payment to another money purchase contracted-out scheme or a salary related scheme and either the whole or part of a contributions equivalent premium has not been paid or no election to pay the whole or part of the contributions equivalent premium has been received by the Department, or to an appropriate personal pension scheme or an overseas scheme, the age-related payments shall be payable up to the date on which the transfer payment was made to the trustees or managers of that other scheme.

(7) Where effect has been given to the earner’s protected rights by means of an appropriate policy of insurance by virtue of section 28A of the Act[^f00034] (discharge of protected rights on winding up: insurance policies), the age-related payment in respect of the tax year or part of the tax year before the tax year in which either the earner reaches pensionable age, or dies and in which he would reach pensionable age, shall be payable to the insurance company with which that policy of insurance is or was taken out or entered into.

38

Where the amount of the age-related payment payable in respect of an earner would otherwise not be a whole number of pence, it shall be adjusted to the nearest whole number of pence, and any amount of half a penny or less shall be disregarded.

Circumstances in which schemes may change mode of contracting out

39

Subject to any regulations made under Article 146 of the Order, a scheme which has been contracted out by virtue of section 5(3) of the Act may become contracted out under section 5(2) of the Act only if its trustees have been discharged of all liability to give effect to protected rights.

Schemes which may not be contracted out under section 5(3) of the Act

40

For the purposes of section 5(3)(aa) of the Act[^f00035] (prescribed class or description of scheme which may not be a money purchase contracted-out scheme) the prescribed class or description is a scheme which is not exempt approved within the meaning of section 592(1) of the Taxes Act, unless it either—

(a) has applied for such approval which has not yet been determined, or

(b) it is a relevant statutory scheme within the meaning of section 611A of the Taxes Act.

Part V — Further Requirements (all Schemes) and Overseas Schemes

Provision of information as to resources

41

The employer in relation to a scheme and the trustees of a scheme must provide the Department, in such manner and at such times as the Department may reasonably require, with such reports, accounts, and with such other documents and information relating to the resources of the scheme as the Department may reasonably require for the purposes of Part III of the Act and these Regulations.

Alteration of rules of contracted-out schemes

42

(1) For the purposes of section 33(1) of the Act[^f00036] (prohibition on alteration of rules of contracted-out scheme unless the alteration is of a prescribed description) the rules of a salary related contracted-out scheme cannot be altered—

(a) in relation to any section 5(2B) rights under the scheme unless—

(i) the trustees of the scheme have informed the actuary in writing of the proposed alteration to the scheme rules;

(ii) the actuary has considered the proposed alteration and has confirmed to the trustees of the scheme in writing that he is satisfied that the scheme will continue to satisfy the statutory standard in accordance with section 8A of the Act after the alteration is made, and

(iii) the alteration is not one which would otherwise prevent the scheme from satisfying the conditions of section 5(2B) of the Act, and

(b) in relation to any guaranteed minimum pensions under the scheme unless the alteration will not affect any of the matters dealt with in Part III of the Act and sections 83 to 88 (protection of increases in guaranteed minimum pensions) and 105 and 106 of the Act (annual increases of guaranteed minimum pensions) and any regulations made under those provisions which relate to guaranteed minimum pensions and that the alteration will not otherwise prevent the scheme from satisfying the conditions of section 5(2A) of the Act[^f00037].

(2) For the purposes of section 33(1) of the Act the rules of a scheme contracted-out under section 5(3) of the Act (a money purchase contracted-out scheme) cannot be altered in relation to any protected rights, unless the alteration will not affect any of the matters dealt with in Part III of the Act or any regulations made under those provisions which relate to protected rights and the alteration will not otherwise prevent the scheme from satisfying the conditions of section 5(3) of the Act.

(3) Where section 33 of the Act continues to apply after a scheme has ceased to be contracted out, this regulation shall continue to apply so long as the circumstances provided for in subsections (3) or (4) of that section continue to apply.

Termination of periods of contracted-out employment

43

(1) Subject to paragraphs (2) and (7), an earner’s employment shall be treated as having ceased to be contracted-out employment when any of the following circumstances applies—

(a) the earner’s contract of service has expired or been terminated;

(b) in the absence of a contract of service, the service itself has ended;

(c) the cancellation or surrender of the contracting-out certificate by virtue of which his employment was contracted-out employment has taken effect, except in a case where, within 6 months of the cancellation or surrender, or such longer period as the Department may allow in a particular case, he becomes a member in contracted-out employment of another contracted-out scheme under the same employer to which his accrued rights to guaranteed minimum pensions, section 5(2B) rights or his protected rights, as the case may be, are transferred;

(d) a variation of the contracting-out certificate by virtue of which his employment was contracted-out employment has taken effect such that the certificate no longer applies to his employment, except in a case where, within 6 months of the variation, or such longer period as the Department may allow in a particular case, he again comes within the description of earners in relation to which the said contracting-out certificate applies or he becomes a member in contracted-out employment of another contracted-out scheme under the same employer to which his accrued rights to guaranteed minimum pensions, section 5(2B) rights or his protected rights, as the case may be, are transferred;

(e) the earner has ceased to be within the description of earners in relation to which the contracting-out certificate applies or has ceased to be a member of the scheme, except in a case where, within 6 months of the ceasing, or such longer period as the Department may allow in a particular case, he again comes within the description of earners in relation to which the said contracting-out certificate applies or he becomes a member in contracted-out employment of another contracted-out scheme under the same employer to which his accrued rights to guaranteed minimum pensions, section 5(2B) rights or his protected rights, as the case may be, are transferred, and

(f) the earner’s employer dies or disposes of the whole or part of his business so that the earner ceases to be employed by that employer and the contracted-out employment is not, or cannot be, treated as continuing under the new employer under paragraph (5).

(2) In such cases as are specified in paragraph (3), an earner’s employment shall not be treated as having ceased to be contracted-out employment by reason only of the circumstances mentioned in paragraph (1)(a) and (b) where the service in question is one (other than the last) of a series of employments to all of which the same scheme applies.

(3) The cases mentioned in paragraph (2) are—

(a) where all the employments are with the same employer or where the earner is employed by another employer in employment which is contracted out by reference to the same scheme as the first employment and, in respect of the employment first mentioned in paragraph (2)—

(i) no state scheme premium or contributions equivalent premium has been paid or any that has been paid has been refunded;

(ii) the calculation of the earner’s guaranteed minimum pension arising out of his service in that employment is not subject to any provision of the scheme prescribed by regulations made under section 12(3) of the Act[^f00038];

(iii) the earner’s accrued rights to guaranteed minimum pensions or to section 5(2B) rights under the scheme arising out of his service in that employment have not been transferred in accordance with the provisions of the scheme under section 8C(1) or 16(1) of the Act or regulations made thereunder or, as the case may be, effect has not been given to protected rights under the scheme arising out of his service in that employment by the making of a transfer payment in accordance with the provisions of the scheme under section 24(2)(b)(i) of the Act;

(iv) the scheme is one for which there is a common fund,

and any interval between one employment and the next is no longer than 6 months or such longer period as the Department may allow in a particular case, and

(b) where a woman has a right to return to work under Article 20 of the Industrial Relations (No. 2) (Northern Ireland) Order 1976[^f00039] (right to return to work following pregnancy or confinement) and does in fact return to work pursuant to that right.

(4) The total period of contracted-out employment which consists of a series of employments to which paragraph (2) applies shall not include any interval between employments.

(5) In cases where an earner’s employer dies or otherwise ceases to be the employer in relation to the earner’s contracted-out employment and his business is taken over by a new employer, the earner’s service in contracted-out employment under the old employer may be treated as continuing under the new employer if—

(a) the earner’s service after the change of employer continues to qualify him for guaranteed minimum pensions, section 5(2B) rights or protected rights, as the case may be, under the contracted-out scheme by virtue of which he qualified for such benefits or such rights before the change, or if his service does not so qualify him the earner is nevertheless to be treated as being in contracted-out employment by virtue of regulation 28;

(b) the new employer accepts all the responsibilities of the former employer for any contributions to the scheme and any state scheme premiums or contributions equivalent premiums which are outstanding in respect of the scheme at the time of the change, and

(c) the new employer notifies the Department of the change within one month of its taking place or such longer period as the Department may consider reasonable in the particular case and provides the Department with such documents and information as it may reasonably require.

(6) In a case where an earner’s service in contracted-out employment is to be treated as continuing by virtue of paragraph (5) the contracting-out certificate issued to the former employer shall be treated as issued to the new employer and the Department may vary that certificate in such respects as may be necessary in the circumstances.

(7) In cases where an earner is employed concurrently in two or more contracted-out employments by reference to the same scheme and with the same employer his employment in any one of those employments shall not be treated as having terminated by reason only of the circumstances mentioned in paragraph (1)(a) and (b) until all such employments are treated as having so terminated.

(8) Where an earner ceases to be liable for Class 1 contributions under the Contributions and Benefits Act in respect of any contracted-out employment because he is employed outside Northern Ireland and where, and for as long as, service in the employment outside Northern Ireland continues to qualify him for benefits under the scheme by reference to which his employment was contracted-out employment, the earner’s service in that employment shall be treated as not having terminated.

(9) In this regulation—

“common fund” means a fund into which all contributions, however derived, are paid, and to the whole of which recourse may be had to meet any liabilities of the scheme for the payment of benefit;

“holding company” has the same meaning as in regulation 12(2);

“state scheme premium” means a premium paid or payable under Chapter III of Part III of the Act before the principal appointed day, or under those provisions as continued in force by an order made under Article 1 of the Order.

Notifications to the Department

44

(1) Whenever an earner’s service in contracted-out employment is treated as terminated under regulation 43, the employer of that earner in that service shall, except where the termination is due to the death of the earner or occurs on a date later than the end of the tax year preceding that in which he attains pensionable age, or where the amount of a contributions equivalent premium in respect of that service would not exceed £17, notify the Department of that termination.

(2) A notification required to be given under paragraph (1) may be given at any time within the period of one month before the expected date of termination but if not so given shall be given within 6 months from the date on which the service terminated or, if the Department is satisfied that the notification could not reasonably have been given within that period, such longer period as it may approve in a particular case or class of case.

(3) A notification required to be given under paragraph (1) shall be given in writing in such form as the Department may direct and shall contain such information as the Department may reasonably require for calculating guaranteed minimum pensions (including those to which persons are treated as entitled under section 44(2) of the Act[^f00040]), any entitlements arising in respect of section 5(2B) rights and contributions equivalent premiums and for related purposes.

(4) In any case where a person transfers his responsibility for, or makes a transfer payment in respect of, a guaranteed minimum pension or any section 5(2B) rights to another person, the first person shall, within 5 weeks from the date of the transfer or transfer payment, notify the Department of its occurrence, giving such particulars as the Department may reasonably require to enable it to identify the second person.

(5) Except in a case to which paragraph (6) applies, within 5 weeks after effect has been given to protected rights of a member of the scheme, the trustees of that scheme shall notify the Department in writing that effect has been given to those rights, giving such particulars as the Department may reasonably require to enable it—

(a) to identify the means by which effect has been given to them;

(b) where effect has been given to them by means of a pension, annuity or lump sum, to identify the recipient of it;

(c) where effect has been given to them by means of an annuity, to identify the insurance company responsible for paying the annuity;

(d) where effect has been given to them by means of a transfer payment, to identify the personal or occupational pension scheme to which the transfer payment was made, and

(e) where effect has been given to them by means of an appropriate policy of insurance under section 28A(1) of the Act (discharge of protected rights on winding up: insurance policies), to identify the member in respect of whom, and the insurance company with which, that policy was taken out or entered into.

(6) Where the member is a married woman or widow, and effect has been given to her protected rights at a time when an election is operative that her liability in respect of primary Class 1 contributions shall be a liability to contribute at a reduced rate, paragraph (5) shall not apply.

(7) An employer to whom a contracting-out certificate has been issued or the trustees of the scheme to which the certificate relates shall, if required to do so by the Department, in such manner and at such times as the Department may reasonably require, furnish to the Department such information relating to members of that scheme to which the contracting-out certificate relates as it may reasonably require for the purpose of calculating guaranteed minimum pensions (including those to which persons are treated as entitled under section 44(2) of the Act), any entitlement arising in respect of section 5(2B) rights and in order to know for what, if any, protected rights the scheme is responsible, and from what minimum contributions, minimum payments or transfer payments they derive, and for related purposes.

Approval of arrangements for schemes ceasing to be contracted out

45

(1) Subject to regulation 74 (transitional arrangements relating to schemes ceasing to contract out before the principal appointed day), for the purposes of section 46(1B) of the Act[^f00041] (prescribed conditions to be met in order for arrangements to be approved on the cessation of contracting-out) arrangements shall not be approved by the Department unless the conditions specified in paragraphs (2) or (3) are satisfied.

(2) To the extent that the arrangements concern the transfer of rights or the discharge of liabilities they must meet the requirements of (as the case may be) section 8C of the Act[^f00042] (transfer or discharge of section 5(2B) rights), section 15 of the Act (discharge of liability for guaranteed minimum pensions secured by insurance policies or annuity contracts), section 16 of the Act (transfer of accured rights), section 24(2)(b) and (3) of the Act[^f00043] (transfer of protected rights) or section 28A of the Act (discharge of protected rights on winding up) and any regulations made under those provisions and the Department must be satisfied that such arrangements will be completed within 2 years of the date of cessation or such later date as the Department may specify in relation to a particular case or class of case.

(3) To the extent that the arrangements concern the preservation of rights within the scheme, the scheme must comply with the requirements of sub-paragraph (a) or (b), as the case may be—

(a) in the case of a scheme where the employment was contracted out under section 5(2) of the Act[^f00044] (salary related contracted-out scheme) the scheme must continue to satisfy the requirements of that section and any regulations which would apply to the scheme by reason of its being a scheme to which section 5(2) of the Act relates, other than section 5(2B)(a) of the Act (requirement to comply with section 8A of the Act) and any regulations which relate to compliance with that section, and the scheme must contain a rule which provides that the amount of any benefits under the scheme arising in respect of section 5(2B) rights and guaranteed minimum pensions for each member and his widow or widower shall, at normal pension age, be the higher of A and B where—

A is the aggregate of— the amount of such benefits calculated on an early leaver basis in accordance with Chapter I of Part IV of the Act and any regulations made under that Chapter as if the member had ceased to be in pensionable service at the date on which the scheme ceased to be contracted out, and the amount of any benefits due in respect of rights which have accrued to the member in relation to service which was not contracted out, and

B is the amount of benefits otherwise payable under the scheme;

(b) in the case of a scheme where employment was contracted out under section 5(3) of the Act (money purchase contracted-out scheme) the scheme must, subject to paragraph (4), continue to satisfy the requirements of section 5(3) of the Act and any regulations which apply to the scheme by reason of its being a scheme to which section 5(3) of the Act relates.

(4) For the purposes of paragraph (3)(b), in determining whether a scheme complies with the requirements concerning the calculation of protected rights in accordance with section 23(2) of the Act, regard shall be had only to any rights of the member to money purchase benefits which have accrued under the scheme up to the date it ceased to be contracted out.

Supervision of schemes that have ceased to contract out

46

(1) Subject to such directions as the Department may give under section 49(1) of the Act[^f00045] (supervision of formerly contracted-out schemes) for the purposes of section 49(3) of the Act[^f00046] (requirement to discharge liabilities following issue of certificate of non-approval), the liabilities in respect of such entitlement or rights as are referred to in section 48(2A)(a) or (b) of the Act[^f00047] must, subject to paragraphs (2) to (4), be transferred or discharged in the manner permitted by regulation 45(2) within 6 months of the date a certificate of non-approval under section 46(2) of the Act[^f00048] is issued, unless the certificate has been cancelled.

(2) In the case of a scheme where employment was contracted out under section 5(2) of the Act (salary related contracted-out scheme), the discharge may be arranged in accordance with the requirements of regulation 5(4) of the Occupational Pension Schemes (Discharge of Liability) Regulations (Northern Ireland) 1985[^f00049], notwithstanding that a member’s pensionable service has not terminated and the scheme is not winding up.

(3) In the case of a scheme where employment was contracted out under section 5(3) of the Act (money purchase contracted-out scheme), the discharge may be arranged in the manner specified by regulations made under section 28A of the Act, notwithstanding that the scheme is not winding up.

(4) Every active and deferred member with any entitlement to protected rights, guaranteed minimum pensions or section 5(2B) rights under the scheme must be notified of the issue of the certificate of non-approval and the reasons for it and allowed a period of 3 months from the date of such notification in which he may elect to transfer any such rights before they are discharged.

Circumstances in which the Department may vary or cancel a contracting-out certificate

47

(1) Where the Department has reason to suppose that any employment to which a contracting-out certificate applies should not continue to be contracted-out employment and the employer has not shown to the satisfaction of the Department that it should so continue, the Department may determine that the employment should not continue to be treated as contracted-out employment and where it so determines, it shall cancel or vary the certificate with effect, subject to paragraph (2), from such date as it may specify and the Department shall notify the employer in writing of its determination, the reasons for it and of the Department’s powers to review its determination.

(2) The date from which the cancellation or variation is to have effect may not be earlier than the date of the cancellation or variation, as the case may be, except—

(a) in a case of a salary related contracted-out scheme where the Department considers that the resources of the scheme have not been maintained at a sufficient level for maintaining all claims in respect of guaranteed minimum pensions and section 5(2B) rights so far as falling to be met out of those resources, the date may be the latest date on which in the opinion of the Department those resources were maintained at such a sufficient level;

(b) in a case of a salary related contracted-out scheme where the earners in employments to which the contracting-out certificate applies have ceased to qualify for guaranteed minimum pensions or benefits arising from section 5(2B) rights under the scheme, the date may be a date not earlier than the date on which, in the opinion of the Department, the said cessation occurred;

(c) in a case where the Department discovers that the scheme did not satisfy the requirements for being a contracted-out scheme at the date the contracting-out certificate was issued, the date may be the date from which the certificate had effect or any later date, or

(d) in a case where the Department considers that the scheme has ceased to satisfy the requirements for being a contracted-out scheme, the date may be any date not earlier than when, in the Department’s opinion, the scheme ceased to satisfy those requirements.

(3) In any case where the Department has cancelled or varied a certificate under paragraph (1) it may require the employer to give notice of the cancellation or variation, in the manner specified in regulation 3(3), to—

(a) the earners in relation to whom the employment was contracted out by virtue of the certificate immediately before its cancellation or variation;

(b) the trustees (if any) and administrator of the scheme by reference to which the employment was contracted out immediately before the cancellation or variation of the certificate, and

and the Department may require any such notice to include such particulars (including particulars of the consequences of the cancellation or variation) as it considers appropriate.

Special provision for overseas schemes

48

(1) In the case of an overseas scheme the modification and, as the case may be, the additional requirements specified in this regulation apply.

(2) A notice of intention to make an election which relates to an overseas scheme shall, in addition to the requirements of regulation 3(2), specify that the scheme is an overseas scheme.

(3) An overseas scheme shall have an administrator for the scheme who is resident in the United Kingdom and appointed in accordance with section 590(2)(c) of the Taxes Act.

(4) Any obligation placed on an employer by Part II (certification of employments) may be discharged by an administrator for the scheme appointed in accordance with paragraph (3).

(5) In the case of an overseas scheme which is a salary related scheme—

(a) the trustees or managers must appoint an actuary to the scheme who satisfies the requirements of regulations made under Article 47(5) of the Order and such an actuary may provide certification to the Department in accordance with section 8A(6) of the Act[^f00050];

(b) regulation 18 shall not apply;

(c) subject to regulation 73, for the purposes of section 5(2B)(c)(i) of the Act[^f00051], the requirement as to the amount of resources of the scheme is that such resources, were the scheme to wind up at any time, are sufficient to meet any liability for the following—

(i) pensions or other benefits which, in the opinion of the trustees, are derived from the payment by any member of the scheme of voluntary contributions;

(ii) where a person’s entitlement to payment of a pension or other benefit has arisen, liability for that pension or benefit and for any pension or other benefit which will be payable to dependants of that person on his death and any increases to such pensions;

(iii) equivalent pension benefits, guaranteed minimum pensions and protected rights which have accrued to or in respect of any members of the scheme and any increases to such pensions;

(iv) pensions or other benefits which have accrued after the principal appointed day to or in respect of members whose employment is contracted out by reference to the scheme and any increases to such pensions;

(v) in respect of members with less than two years' pensionable service who are not entitled to accrued rights under the scheme, the return of contributions,

and such liabilities and resources shall be calculated, determined and valued in a manner approved by the Department, and

(d) section 5(2B)(b) of the Act is modified with effect that the Department must be satisfied that not more than 5 per cent. of the current market value of the scheme’s resources are invested in a person who is an employer, or connected with an employer, in relation to the scheme if such investments are required to meet the liabilities specified in sub-paragraph (c) and the value of such investments shall be calculated and determined in a manner approved by the Department.

(6) In the case of an overseas scheme which is a money purchase scheme—

(a) the trustees or managers of the scheme must appoint an auditor who satisfies the requirements of regulations made under Article 47(5) of the Order;

(b) regulation 30(1)(a) shall not apply, and

(c) the Department must be satisfied that not more than 5 per cent. of the current market value of the scheme’s resources are invested in a person who is an employer, or connected with an employer, in relation to the scheme if such investments are required to meet the scheme’s liabilities for protected rights and the value of such investments shall be calculated and determined in a manner approved by the Department.

(7) An overseas scheme must provide, in respect of any members who are resident in Northern Ireland, for revaluation of accrued rights in accordance with sections 79 to 82 of the Act[^f00052] and for indexation of pensions in accordance with Articles 51 to 54 of the Order.

Part VI — Restoration of State Scheme Rights

Insolvent schemes

49

(1) Where paragraph 5(3B) of Schedule 1 to the Act[^f00053] applies in relation to a member of a contracted-out scheme which is being wound up and the conditions set out in paragraph (3) are satisfied, the member shall be treated as if sections 42 to 44[^f00054] or, as the case may be, 44A(1) of the Act[^f00055]—

(a) except as provided in sub-paragraph (b), did not apply,

(b) in a case where the cash equivalent of the member’s rights is less than the amount required for restoring his state scheme rights, applied only in so far as they extinguish such part of the member’s state scheme rights as, in the opinion of the Department, corresponds to that shortfall.

(2) For the purposes of paragraph 5(3B)(b) of Schedule 1 to the Act, the debt due from the trustees of the scheme to the Department shall be only such part of the amount required for restoring the member’s state scheme rights as does not exceed the amount which, in the opinion of the Department, is the amount available from the resources of the scheme to meet the liability for the cash equivalent of the member’s rights.

(3) The conditions referred to in paragraph (1) are that—

(a) in the case of a money purchase contracted-out scheme, there has been a determination by the Compensation Board that the conditions set out in Article 79(1) of the Order (cases where compensation provisions apply) are satisfied, and

(b) no later than 3 months after the date on which the trustees notify the member in accordance with regulation 50, or such further period as the Department may allow in a particular case, the Department has received from—

(i) the member, or

(ii) where the Department is satisfied that the member cannot be traced, the trustees,

a written application for the member’s state scheme rights to be restored in accordance with this regulation.

(4) For the purposes of this regulation and paragraph 5(3A) to (3D) of Schedule 1 to the Act[^f00056]—

(a) the cash equivalent of a member’s rights under a scheme shall be determined—

(i) in the case of a scheme to which Article 56 of the Order applies (minimum funding requirement) as if the requirement of Article 56(1) were satisfied, or

(ii) in the case of a money purchase scheme, as if there had been no reduction in the value of its assets attributable to an act or omission constituting a prescribed offence for the purposes of Article 79(1)(c) of the Order;

(b) the extent (if any) to which the resources of the scheme are insufficient to meet that cash equivalent shall be determined—

(i) on the assumption that those resources include any payment to the trustees under the compensation provisions, and

(ii) where Article 73 of the Order (preferential liabilities on winding up) applies, in accordance with the requirements of that Article;

(c) the amount required for restoring the member’s state scheme rights shall be an amount determined in accordance with regulations made under paragraph 5(3C)(c) of Schedule 1 to the Act.

(5) In this regulation “Compensation Board” and “compensation provisions” have the same meaning as in Article 121(1) of the Order.

Member to be informed of the option to restore state scheme rights

50

Where the Department has advised the trustees of a scheme that it is of the opinion that the conditions referred to in paragraph 5(3A) of Schedule 1 to the Act are satisfied in respect of any member, the trustees must inform the member in writing of that fact—

(a) when they give notice of any proposal to discharge a liability of the scheme in respect of the member in accordance with regulations under Article 74 of the Order (discharge of liabilities by insurance, etc.) or under section 28A of the Act[^f00057] (discharge of protected rights on winding up: insurance policies);

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