(1) This regulation applies, subject to paragraph (3), where notice of termination of a worker’s employment is given before the end of the period of six weeks beginning with the automatic enrolment date or automatic re-enrolment date, as the case may be.

(2) Where this regulation applies—

(a) sections 3(2) (automatic enrolment) and 5(2) (automatic re-enrolment) of the Act are to be read as if for “must” there were substituted “may”;

(b) section 7(3) (jobholder’s right to opt in) of the Act is to be read as if there were inserted at the end—

unless notice of termination of employment of that jobholder has been given (and the jobholder and the employer have not agreed that such notice is withdrawn)

unless notice of termination of employment of that worker has been given (and the worker and the employer have not agreed that such notice is withdrawn)

(3) Where a jobholder and employer agree that the notice of termination of the jobholder’s employment referred to in this regulation is withdrawn, paragraphs (1) and (2) cease to apply on the date of that agreement and, subject to paragraph (4), for the purposes of sections 3(2) and 5(2) of the Act, as the case may be—

(a) the automatic enrolment date; or

(b) the automatic re-enrolment date,

is the date of that agreement.

(4) Where, on the date referred to in paragraph (3), section 3 or 5, as the case may be, does not apply to the jobholder, the next date on which one of those sections applies to that jobholder is to be taken as the automatic enrolment date or automatic re-enrolment date, as the case may be, in relation to that jobholder.

Former members

5C

(1) This regulation applies where a person (P) is a jobholder and—

(a) P ceased to be an active member of a qualifying scheme because of an action or omission by P or an action by the employer at P’s request; or

(b) at a time when P was a worker, but not a jobholder, ceased to be an active member of a scheme which would have been a qualifying scheme in relation to P, had P been a jobholder, because of an action or omission by P or an action by the employer at P’s request.

(2) This regulation also applies where a jobholder gives notice under section 8 of the Act (jobholder’s right to opt out).

(3) Where this regulation applies in relation to the jobholder mentioned in paragraphs (1) or (2)—

(a) during the period of 12 months beginning with the date that jobholder ceased to be an active member or gives notice, sections 3(2) and 5(2) of the Act are to be read as if for “must” there were substituted “may”; and

(b) after the expiry of that period, section 3(2) of the Act does not apply.

Tax protection

5D

(1) This regulation applies where an employer has reasonable grounds to believe that one of the following provisions applies in relation to a jobholder—

(a) paragraph 7 (primary protection) or 12 (enhanced protection) of Schedule 36 (pension schemes etc: transitional provisions and savings) to the Finance Act 2004;

(b) paragraph 14 of Schedule 18 to the Finance Act 2011 (fixed protection 2012);

(d) paragraph 1 of Schedule 6 to the Finance Act 2014 (individual protection 2014).

(e) paragraph 1 (fixed protection 2016) or 9 (individual protection 2016) of Schedule 4 to the Finance Act 2016.

(2) Where this regulation applies, in relation to the jobholder referred to in paragraph (1), sections 3(2) and 5(2) of the Act are to be read as if for “must” there were substituted “may”.

Winding-up lump sum

5E

(1) This regulation applies to a worker where—

(a) that worker has received a winding-up lump sum as defined in paragraph 10 of Schedule 29 to the Finance Act 2004 (winding-up lump sums) (“paragraph 10”);

(b) at the time the winding-up lump sum was paid, the worker was employed by the person mentioned in sub-paragraph (1)(c) of paragraph 10; and

(i) the worker has ceased to be employed and been re-employed by that person; and

(ii) after re-employment, either section 3(1) (automatic enrolment) or 5(1A) or (1B) (automatic re-enrolment) of the Act applies to the worker.

(2) In relation to the worker to whom this regulation applies—

(a) during the period of 12 months beginning with the date on which the winding-up lump sum was paid—

(i) sections 3(2) and 5(2) of the Act are to be read as if for “must” there were substituted “may”; and

(ii) sections 7 and 9 of the Act do not apply; and

(b) after the expiry of that period, section 3(2) of the Act does not apply.

Effect of exercise of discretion

5F

(1) This regulation applies to an employer who—

(a) exercises a discretion under section 3(2) or 5(2) of the Act, as conferred by regulations 5B, 5C, 5D, 5E, 5EA or 5EB, so that the prescribed arrangements are made whereby the jobholder will become an active member of an automatic enrolment scheme;

(b) makes the arrangements referred to in section 7(3) of the Act for a jobholder, unless notice of termination of employment of that jobholder has been given (and the jobholder and the employer have not agreed that such notice is withdrawn); or

(c) makes the arrangements referred to in section 9(2) of the Act for a worker, unless notice of termination of employment of that worker has been given (and the worker and the employer have not agreed that such notice is withdrawn).

(2) In relation to the employer to whom this regulation applies, the employer is to be treated for all purposes as if the employer were acting under the duty which would apply by virtue of section 3(2) or 5(2) of the Act or were required to make the arrangements in section 7(3) or 9(2) of the Act but for the provisions of this Part.

Information to be given to workers

PART 7B

Alternative quality requirements: UK defined benefits schemes

Alternative quality requirements for UK defined benefits schemes

32L

(1) A defined benefits scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if section 23A(1)(a) of the Act (alternative quality requirements for UK defined benefits schemes) is satisfied and for the purpose of that section, the scheme is of a prescribed description if the conditions in paragraph (2) are satisfied.

(2) The conditions referred to in paragraph (1) are—

(a) the benefits provided to the member are calculated by reference to factors which include the contributions made to the scheme by, or on behalf or in respect of, the member;

(b) the contributions referred to in sub-paragraph (a) are converted in accordance with the scheme rules, as soon as reasonably practicable and no later than one month after their receipt into the scheme, into a right to an income for life;

(d) following any conversion referred to in sub-paragraph (b), the amount of the member’s benefits under the scheme cannot be reduced unless this is at the member’s request;

(e) following any valuation of the scheme’s assets and determination of its liabilities, the trustees or managers of the scheme have absolute discretion to use any excess assets to increase the benefits of the members in relation to whose contributions the excess assets may be attributed; and

(f) where a member’s benefits are increased using the excess assets referred to in sub-paragraph (e), the amount of those benefits cannot be reduced unless this is at the member’s request.

(3) For the purposes of paragraph (2)(c), pensionable age is to be determined in accordance with paragraph 1 of Schedule 4 to the Pensions Act 1995 (pensionable ages for men and women).

32M

(1) A defined benefit scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if section 23A(1)(b) of the Act is satisfied.

(2) Terms defined for the purpose of section 23A have the meanings prescribed in the following paragraphs.

(3) Subject to paragraphs (4), (5A) and (6), the relevant members are the active members of the defined benefits scheme of which the jobholder is a member.

(4) Subject to paragraph (5A), where there is or was, as the case may be, a material difference in the cost of providing the benefits accruing for different groups of relevant members over the relevant period by taking into account the criteria under which members accrue or accrued benefits including—

(a) the rate at which benefits accrue or accrued;

(b) the provision of survivor’s benefits;

(d) the definition of ‘pensionable earnings’ used by the scheme;

(e) the method of revaluation provided for by Schedule 3 to the 1993 Act (methods of revaluing accrued pension benefits);

(f) the method of an annual increase in the rate of pension provided for under section 51 of the 1995 Act (annual increase in rate of pension) or under the scheme rules;

(g) the maximum pensionable service period;

(h) the calculation of service; and

(i) the terms for retirement before normal pension age,

the relevant members are the active members of each such group.

(5) For the purposes of paragraph (4), whether a difference in cost is a material difference is to be determined by the actuary.

(5A) Subject to paragraph (5C), where the conditions in paragraph (5B) are met, the employer of the jobholder may choose, notwithstanding paragraph (4), that the relevant members are the members of the scheme who were active members and in contracted-out employment on the effective date of the most recent written report from an actuary.

(5B) The conditions to be met for the purposes of paragraph (5A) are—

(a) the jobholder was in contracted-out employment on 5th April 2016; and

(b) the rules of the scheme of which the jobholder is a member have not been amended, on or after the coming into force of these Regulations, in any way which would mean that the rules of the scheme would not satisfy the contracting-out requirements if those requirements were still in force.

(5C) Paragraph (5A) applies until the earliest of—

(a) the date the first written report determining whether there is, or was, a material difference in the cost of providing the benefits accruing for different groups of relevant members over the relevant period, taking into account the criteria mentioned in paragraph (4), is signed by an actuary after 5th April 2016;

(b) 5th April 2019.

(5D) For the purposes of paragraph (5A), the effective date of the most recent written report is the date by reference to which the information in that report is stated.

(6) Subject to paragraphs (4) and (5A), in the case of a multi-employer scheme, the employer of the jobholder may choose that the relevant members are the active members who are also employed by that employer.

(7) Subject to paragraph (8), the relevant period is—

(a) where the most recent written report signed (including by way of an electronic signature (within the meaning given in section 7(2) of the Electronic Communications Act 2000) by an actuary provides details of the cost of accruals by reference to a period which begins later than the date of that report, that period; and

(b) in any other case, any period of 12 months.

(8) Where, after the date of the report referred to in paragraph (7)(a) or the period referred to in paragraph (7)(b) begins (whether or not it has ended), a change is made to the benefits provided to a relevant member, the relevant period is a period of 12 months commencing with the day on which that change takes effect.

(9) Relevant earnings are the earnings which the scheme uses to determine pensionable earnings provided that they are equal to or more than the relevant member’s—

(a) qualifying earnings;

(b) basic pay;

(c) ... basic pay and, taking all the relevant members together, the pensionable earnings of those members constitute at least 85 per cent of the earnings of those members in the relevant period;

(d) earnings; or

(e) basic pay above—

(i) the amount of the lower earnings limit specified for the purposes of section 5(1)(a)(i) of the Social Security Contributions and Benefits Act 1992 (earnings limits and thresholds for Class 1 contributions); or

(ii) the amount of the basic state pension specified in the first figure in section 44(4) of that Act (category A retirement pension).

(10) Subject to paragraph (11), for the purposes of section 23A(1)(b), the prescribed percentage is, in relation to—

(a) paragraph (9)(a) and (c), 10 per cent.;

(b) paragraph (9)(b), 11 per cent.;

(d) paragraph (9)(e), 13 per cent..

(11) Where the scheme does not provide pension benefits payable on the death of a relevant member, the respective percentages mentioned in paragraph (10) are to be reduced by 1 per cent.

(12) In this regulation—

“actuary” means an actuary appointed by the scheme or the employer;

“basic pay” means the gross earnings of the relevant member from their employment by the employer, disregarding the gross amount of—any commission, bonuses, overtime or similar payments;any shift premium pay, as defined in regulation 32K as if —“jobholder” read “relevant member”; and“within a certification period” and “during the certification period” were omitted; andany reasonable allowance with respect to—any duty of the relevant member, such as a duty in connection with the fire or bomb warden, that is ancillary to the main duties of the relevant member’s employment;the cost of relocation of the relevant member to a different place of work;in a case not covered by sub-paragraph (ii), the purchase, lease or maintenance of a vehicle;in a case not covered by sub-paragraph (ii) or (iii), the purchase, lease or maintenance of an item;in a case not covered by sub-paragraph (ii), (iii) or (iv), the delivery of a service to the relevant member;

“contracted-out employment” has the meaning given in section 8(1) of the 1993 Act (meaning of “contracted-out employment”);

“contracting-out requirements” means the requirements set out in section 9 of the 1993 Act (requirements for certification of schemes: general) as they had effect immediately before 6th April 2016;

“multi-employer scheme” means an occupational pension scheme in relation to which there is more than one employer;

“normal pension age” has the meaning given by section 180 of the 1993 Act (normal pension age);

“pensionable earnings” means the gross earnings of the relevant member on which contributions are payable to the pension scheme in question by the employer or the relevant member.

Company directors

5EA

(1) This regulation applies to a jobholder who holds office as a director of the company by which that jobholder is employed.

(2) In relation to the jobholder to whom this regulation applies, sections 3(2) (automatic enrolment) and 5(2) (automatic re-enrolment) of the Act are to be read as if for “must” there were substituted “may”.

Limited liability partnerships

5EB

(1) This regulation applies where a person (P) is a jobholder and—

(a) P is a member of a limited liability partnership;

(b) qualifying earnings are payable to P by that limited liability partnership; and

(c) P is not treated for income tax purposes as being employed by that limited liability partnership under section 863A of the Income Tax (Trading and other Income) Act 2005 (limited liability partnerships: salaried members).

(2) Where this regulation applies, in relation to the jobholder referred to in paragraph (1), sections 3(2) and 5(2) of the Act are to be read as if for “must” there were substituted “may”.

Effect of exercise of discretion

Alternative quality requirements for a collective money purchase scheme

32EA

(1) In relation to—

(a) a money purchase scheme to which section 20 of the Act applies, under which all the benefits that may be provided are collective money purchase benefits;

(b) a money purchase scheme to which section 20 of the Act applies, in respect of any jobholders accruing rights to benefits under a collective money purchase scheme; and

(i) to the extent that requirements within section 24(1)(a) of the Act apply; and

(ii) in respect of any jobholders accruing rights to benefits under a collective money purchase scheme,

the prescribed alternative requirement is set out in paragraph (2).

(2) The requirement is, subject to paragraphs (3) and (4), that taking all relevant jobholders together, the contributions by, or on behalf of, or in respect of, those relevant jobholders over the certification period are of a total amount equal to at least the prescribed percentage (specified in paragraph (7)) of the applicable category of total relevant earnings for those jobholders (specified in paragraph (6)) over that period.

(3) Where there is or was, as the case may be, a difference in the rights to benefits accruing under a collective money purchase scheme for different groups of relevant jobholders over the certification period as regards all or any of the criteria set out in paragraph (4)(a), and that difference (or those differences taken together) mean that there is or was as the case may be a material difference in the cost of providing those rights, the relevant jobholders for the purposes of paragraph (2) are the relevant jobholders in each such group.

(4) For the purposes of paragraph (3)—

(a) the criteria are—

(i) the rate at which rights to benefits under a collective money purchase scheme accrue or accrued;

(ii) the provision of survivor’s benefits;

(iii) the normal pension age;

(iv) the definition of ‘pensionable earnings’ used by the scheme;

(v) differences in the calculation or methodology applying to the revaluation and indexation of benefits;

(vi) the calculation of service; and

(vii) the terms for retirement before normal pension age; and

(b) whether a difference in cost is a material difference is to be determined by the actuary.

(5) Where, after the certification period begins (whether or not it has ended), a change is made to the benefits provided to the relevant jobholders under a collective money purchase scheme, the certification period is a period of 18 months commencing with the day on which that change takes effect.

(6) For the purposes of paragraph (2), the relevant earnings are the earnings which the scheme uses to determine pensionable earnings for the purposes of providing collective money purchase benefits to the relevant jobholders, provided that they must be equal to or more than those relevant jobholders’ earnings in one of the following categories—

(a) qualifying earnings;

(b) basic pay;

(c) basic pay in circumstances where, taking all the relevant jobholders together, the pensionable earnings of those jobholders constitute at least 85% of the earnings of those jobholders in the certification period;

(d) earnings; or

(e) basic pay above—

(i) the amount of the lower earnings limit specified for the purposes of section 5(1)(a)(i) of the Social Security Contributions and Benefits Act 1992 (earnings limits and thresholds for Class 1 contributions); or

(ii) the amount of the basic state pension specified in the first figure in section 44(4) of that Act (category A retirement pension).

(7) For the purposes of this regulation, the prescribed percentage is, in relation to the category of earnings described in—

(a) paragraph (6)(a) and (c), 10%;

(b) paragraph (6)(b), 11%;

(d) paragraph (6)(e), 13%.

(8) Where the scheme does not provide pension benefits payable on the death of a relevant jobholder, the respective percentages mentioned in paragraph (7) are to be reduced by 1%.

Alternative requirements for a personal pension scheme

Alternative requirements for a hybrid scheme

Scheme not to be treated as satisfying the relevant quality requirement in certain circumstances

Contributions under alternative requirements during transitional periods

Pension schemes based in an EEA State other than the United Kingdom

Definitions

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