The Pensions Regulator (Contribution Notices) (Sum Specified Following Transfer) Regulations (Northern Ireland) 2010

Made: 28th July 2010

Coming into operation: 29th July 2010

The Department for Social Development makes the following Regulations in exercise of the powers conferred by Articles 35A(5) and 287(2) of the Pensions (Northern Ireland) Order 2005[^f00001].

Citation, commencement and interpretation

1

• (1) These Regulations may be cited as the Pensions Regulator (Contribution Notices) (Sum Specified Following Transfer) Regulations (Northern Ireland) 2010 and shall come into operation on 29th July 2010.

• (2) In these Regulations—

• “baseline sum” means the sum which the Regulator estimates to be the amount of the liabilities of the initial scheme, were those liabilities to be determined, calculated and verified in accordance with Article 75(5)[^f00002] of the 1995 Order (deficiencies in the assets);

• “earner” is to be construed in accordance with sections 3[^f00003] (“earnings” and “earner”), 4[^f00004] (payments treated as remuneration and earnings) and 112[^f00005] (certain sums to be earnings) of the Contributions and Benefits Act;

• “the relevant time” has the meaning given by Article 35(4)[^f00006] (the sum specified in an Article 34 contribution notice);

• “rights acquired” means rights allowed to an earner under the rules of a work-based pension scheme, which is not an occupational pension scheme, by reference to a transfer to the scheme of, or a transfer payment to the trustees or managers of the scheme in respect of, any of the earner’s rights (including transfer credits allowed) under an occupational pension scheme;

• “transfer credits” has the meaning given by section 176(1)[^f00007] of the Pension Schemes Act;

• “work-based pension scheme” has the meaning given by Article 4(3).

• (3) In these Regulations any reference to a numbered Article is a reference to the Article of the Pensions (Northern Ireland) Order 2005 bearing that number.

Manner of determination of contribution notice sum

2

• (1) This regulation applies where—

• (a) the Regulator determines to issue a contribution notice under Article 34[^f00008] (contribution notices where avoidance of employer debt) in relation to a transferee scheme in accordance with Article 35A(2);

• (b) the transferee scheme—

• (i) is a scheme to which Article 75 of the 1995 Order (deficiencies in the assets) does not apply, or

• (ii) is a scheme to which that Article applies but the liabilities of the scheme which would be taken into account for the purposes of that Article do not relate to the members of the initial scheme, and

• (c) the transfer of the members of the initial scheme is determined by the Regulator to amount to an act or failure to act falling within Article 34(5).

• (2) Subject to regulation 3, the sum specified by the Regulator in the contribution notice may be either the whole or a specified part of the amount calculated in accordance with the following provisions.

• (3) Stage one of the calculation is to identify the attributable amount, being the amount of the baseline sum at the relevant time which, in the Regulator’s opinion, is attributable to the members transferred.

• (4) Stage two of the calculation is to deduct from the attributable amount the amount of the aggregate cash value of the transfer credits and rights acquired in the transferee scheme by the members transferred, substituting zero if the calculation results in an amount less than zero.

• (5) Where this regulation applies and the Regulator is satisfied that, otherwise than by virtue of the transfer, the act or failure to act falling within Article 34(5) resulted in the amount of the baseline sum being less than it would otherwise have been, the Regulator may increase the baseline sum by such amount as the Regulator considers appropriate.

• (6) For the purposes of this regulation—

• (a) in estimating the baseline sum the Regulator is to disregard the reduction of the liabilities of the initial scheme brought about by the transfer, and

• (b) the aggregate cash value of the transfer credits and rights acquired in the transferee scheme is the aggregate cash value which, in the Regulator’s opinion, those credits and rights held at the time of their acquisition.

Manner of determination of contribution notice sum: transfer not amounting to act or failure to act

3

• (1) Where regulation 2 would apply but for the fact that the transfer of the members of the initial scheme is not determined by the Regulator to amount to an act or failure to act falling within Article 34(5) (contribution notices where avoidance of employer debt), the sum specified by the Regulator in the contribution notice may be either the whole or a specified part of the amount of the shortfall sum in the initial scheme at the relevant time which, in the Regulator’s opinion, is attributable to the members transferred.

• (2) In this regulation “shortfall sum” is to be construed, subject to paragraph (3), in accordance with Article 35 (the sum specified in an Article 34 contribution notice).

• (3) In estimating the amounts described in Article 35(2)(a) or (b) for the purposes of this regulation, the Regulator is to disregard any reduction of the liabilities of the initial scheme brought about by the transfer.

Signed

Sealed with the Official Seal of the Department for Social Development on 28th July 2010

Dave Wall — A senior officer of the Department for Social Development

Explanatory note

(This note is not part of the Regulations)

EXPLANATORY NOTE

These Regulations prescribe how, following a transfer of the accrued pension rights of two or more members of a defined benefit pension arrangement (“the initial scheme”) to a defined contribution pension arrangement (“the transferee scheme”), the Pensions Regulator (“the Regulator”) is to determine the sum specified in a contribution notice (“the sum”) issued in relation to the transferee scheme.

Regulation 1 provides for citation, commencement and interpretation.

Regulation 2 sets out how the Regulator is to determine the sum in cases where the transfer amounts to an act or failure to act falling within Article 34(5) of Pensions (Northern Ireland) Order 2005 (“the 2005 Order”). In these cases, the Regulator is to estimate what the full liabilities of the initial scheme would be at the time of the act or failure to act, were they to be calculated in accordance with Article 75 of the Pensions (Northern Ireland) Order 1995 (“the liabilities”), identify so much of the liabilities as are attributable to the members transferred, and deduct from those attributed liabilities the aggregate cash value of the transfer credits and rights acquired by the members transferred in the transferee scheme. The sum may be the whole or a specified part of the resulting amount. The Regulator may increase the liabilities by an amount it considers to be appropriate where it is satisfied that, otherwise than as a result of the transfer, the act or failure to act falling within Article 34(5) of the 2005 Order resulted in the amount of the liabilities being less than they would otherwise have been. The Regulator is required, in estimating the full liabilities of the initial scheme, to disregard the reduction in liabilities brought about by the transfer, and to calculate the aggregate cash value of the transfer credits and rights acquired in the transferee scheme as at the time of the acquisition of those credits and rights.

Regulation 3 sets out how the Regulator is to determine the sum in cases where the transfer does not amount to an act or failure to act falling within Article 34(5) of the 2005 Order. Here, the sum is to be either the whole or a specified part of that amount of the shortfall sum in the initial scheme at the relevant time which, in the opinion of the Regulator, is attributable to the members transferred. Subject to one minor qualification, “shortfall sum” has, for these purposes, the meaning set out in Article 35(2) of the 2005 Order. The minor qualification is that the Regulator is required, in identifying the shortfall sum, to disregard any reduction in liabilities brought about by the transfer.

As these Regulations make in relation to Northern Ireland only provision corresponding to provision contained in regulations made by the Secretary of State for Work and Pensions in relation to Great Britain, the requirement to consult under Article 289(1) of the 2005 Order does not apply by virtue of paragraph (2)(e) of that Article.

Footnotes

[^f00001]: S.I. 2005/255 (N.I. 1); Article 35A was inserted by paragraph 9 of Schedule 8 to the Pensions (No. 2) Act (Northern Ireland) 2008 (c.13 (N.I.)); see also Article 288(3)(ab) as inserted by paragraph 12 of Schedule 8 to that Act

[^f00002]: Article 75 was amended by Article 248 of the Pensions (Northern Ireland) Order 2005 and is modified by S.R. 2005 No. 168

[^f00003]: Section 3 was amended by Articles 45 and 46 of the Social Security (Northern Ireland) Order 1998 (S.I. 1998/1506 (N.I. 10)) and paragraph 4 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671)

[^f00004]: Section 4 was amended by Schedule 2 to the Social Security (Incapacity for Work) (Northern Ireland) Order 1994 (S.I. 1994/1898 (N.I. 12)), Article 47(1) of the Social Security (Northern Ireland) Order 1998, paragraph 5 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999, section 78(3) of the Child Support, Pensions and Social Security Act 2000 (c. 19), paragraph 1(1) of Schedule 2 to the Employment (Northern Ireland) Order 2002 (S.I. 2002/2836 (N.I. 2)) and paragraph 193 of Schedule 6 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1)

[^f00005]: Section 112 was amended by Schedule 1 to the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)) and paragraph 21 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999

[^f00006]: Article 35 was amended by paragraph 8(2) of Schedule 8 to the Pensions (No. 2) Act (Northern Ireland) 2008

[^f00007]: The definition of “transfer credits” was amended by paragraph 26 of Schedule 10 to the Pensions (Northern Ireland) Order 2005

[^f00008]: Article 34 was amended by paragraphs 2(1), 6, 7 and 8(1) of Schedule 8 to the Pensions (No. 2) Act (Northern Ireland) 2008