Occupational Pension Schemes (Contracting-out) Regulations 1996

• Citation: S.I. 1996/1172
• Sections: 101

Section 1 Citation, commencement and interpretation.

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

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In these Regulations, unless the context otherwise requires—

“the 1993 Act" means the Pension Schemes Act 1993 as it had effect immediately before the second abolition date (except where otherwise stated) ;

“the 1995 Act" means the Pensions Act 1995;

“ the 2004 Act ” means the Pensions Act 2004

“the 2009 Regulations” means the Registered Pension Schemes (Authorised Payments) Regulations 2009;

“the actuary" means the actuary appointed for the scheme in pursuance of section 47(1) of the 1995 Act or the actuary otherwise authorised by virtue of these Regulations to provide certification in accordance with section 12A(6) of the 1993 Act ;

“the Administration Act" means the Social Security Administration Act 1992 ;

“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 who is, or the persons who are, appointed in accordance with section 270 of the Finance Act 2004 (meaning of “scheme administrator”);

“age-related payment" means a payment made by the Secretary of State in accordance with section 42A(3) of the 1993 Act ;

...

“the Contributions and Benefits Act" means the Social Security Contributions and Benefits Act 1992 ;

“earnings period" has the same meaning as in the Social Security (Contributions) Regulations 2001 ;

“emoluments" means so much of a person’s remuneration or profit derived from employed earner’s employment as constitutes earnings for the purposes of Parts 1 to 5 of the Contributions and Benefits Act, including any amount retrospectively treated as earnings (“retrospective earnings”) by retrospective contributions regulations;

“employer" includes a person who, by virtue of paragraphs (4) or (5) or regulations 12 to 14, is treated as an employer for the purposes of these Regulations;

“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;

...

“the Occupational Pensions Board" means the Occupational Pensions Board established under section 66 of the Social Security Act 1973 and dissolved under section 150 of the 1995 Act;

“overseas scheme” means an occupational pension scheme which has its main administration outside the United Kingdom but does not include a scheme which was contracted-out in the Isle of Man by virtue of satisfying section 9(2) ... of the 1993 Act as it had effect in the Isle of Man.

“pension debit” means a debit under section 29(1)(a) of the Welfare Reform and Pensions Act 1999;

“principal appointed day" has the same meaning as in section 7(2B) of the 1993 Act ;

“relevant statutory scheme” has the same meaning as in paragraph 1(1)(c) of Schedule 36 to the Finance Act 2004 (deemed registration of existing schemes);

“relevant transferee” means any person for whose benefit an order or provision is made by virtue of which section 29 of the Welfare Reform and Pensions Act 1999 (creation of pension debits and credits) applies, where the order or provision relates to the rights of another person who is a member of the scheme;

“retrospective contributions regulations” means regulations made by virtue of section 4B(2) of the Contributions and Benefits Act and, in relation to an amount of retrospective earnings, “the relevant retrospective contributions regulations” means the regulations which treated that amount as earnings;

...

“scheme" means an occupational pension scheme;

“section 9(2B) rights" are—

rights to the payment of pensions and accrued rights to pensions (other than rights attributable to voluntary contributions) under a scheme that was a salary-related contracted-out scheme , so far as attributable to an earner’s service in contracted-out employment on or after the principal appointed day; and

where a transfer payment has been made (other than a payment made in accordance with regulation 10 (transfers payments to occupational and personal pension schemes in respect of section 9(2B) rights) of the Contracting-out (Transfer and Transfer Payment) Regulations 1996 to such a scheme, whether before or after the second abolition date any rights arising under the scheme as a consequence of that payment which are derived directly or indirectly from—

such rights as are referred to in sub-paragraph (a) under another scheme that was a salary-related contracted-out scheme ; or

protected rights under another occupational pension scheme or under a personal pension scheme attributable to payments or contributions in respect of ... employment on or after the principal appointed day , where that transfer payment was made before the first abolition date ;

...

“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) In these Regulations, unless the context otherwise requires, a reference—

(a) to a numbered Part is to the Part of these Regulations bearing that number;

(b) to a numbered regulation or Schedule is to the regulation in, or Schedule to, these Regulations bearing that number;

(c) in a regulation or Schedule to a numbered paragraph is to the paragraph in that regulation or Schedule bearing that number;

(d) in a paragraph to a lettered or numbered sub-paragraph is to the sub-paragraph in that paragraph bearing that letter or number.

(4) 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.

(5) For the purposes of these Regulations and without prejudice to paragraph (4), 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).

(6) 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 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 Secretary of State 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.

(7) Any document required or authorised under the provisions of these Regulations to be sent to any person shall be deemed to have been sent if it was sent by registered post or by recorded delivery service 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.

Section 2 Making of elections for the issue of contracting-out certificates

(1) Subject to the provisions of 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 Secretary of State and shall include the particulars specified in regulation 6.

(2) In making or abstaining from making an election as to the inclusion of an employment in a contracting-out certificate, an employer may discriminate between different earners (otherwise than on the ground of the nature of their employment) in any case where such discrimination would be lawful apart from section 11(3) of the 1993 Act.

Section 3 Notices by employers of intended election.

(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 ... guaranteed minimum pensions or any benefits arising in respect of section 9(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 (being a date before the second abolition date) from which it is intended that the contracting-out certificate shall have effect;

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(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 Secretary of State,

(ii) the Secretary of State may defer his 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 Secretary of State has power to refuse to give effect to the election if he 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) ... how benefits would accrue to a member under the scheme if the employment were contracted-out and ,

(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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(a) to any earner concerned by—

(i) sending it to the earner in accordance with regulations 26 to 28 of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (giving information and documents),

(ia) delivering it to the earner, 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—

(i) sending it to that person in accordance with regulations 26 to 28 (giving information and documents) of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, or

(ii) delivering it to that person.

(4) Unless paragraph (5) applies, a notice under this regulation must specify a date of expiry which is not earlier than the date three months after the date on which the notice is given.

(5) Where—

(a) there is no independent trade union recognised in relation to the earners concerned, or

(b) before the notice has been given every such trade union has consented in writing to the notice specifying an earlier date than that which is required under paragraph (4),

the notice may specify an earlier date (but not earlier than the date one month after that on which the notice is given).

Section 4 Consultation with trade unions.

(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.

Section 5 Time for making an election.

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 Secretary of State may in his 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.

Section 6 Information to be included in an election.

(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 (being a date before the second abolition date) ;

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

(f) the persons 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;

(c) that the scheme is not one which is excluded from contracting-out under these Regulations;

(d) unless the scheme is one to which regulation 27 applies (modification applying to public service pension schemes), that the restrictions imposed under section 40 of the 1995 Act (restrictions on employer-related investments) apply to the scheme and the scheme complies with those restrictions;

(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(g) in the case of a scheme to which Part 3 of the 2004 Act (scheme funding) applies, that the requirements of sections 224, 225, 226 (if applicable) and 227 of that Act and any regulations under those provisions are complied with.

(3) In the case of a scheme which is electing to contract out under section 9(2) of the 1993 Act (salary-related contracted-out scheme) the employer shall also provide—

(a) unless the scheme is a public service pension scheme to which Part 3 of the 2004 Act does not apply, or a scheme in respect of which any Minister of the Crown has given a guarantee, or made any other arrangements for the purpose of securing that the assets of the scheme are sufficient to meet its liabilities, 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 (as it had effect immediately before the second abolition date)(requirement as to resources of the scheme); 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 12A of the 1993 Act .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 7 Amendment of an election.

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 or the date from which it is intended that the certificate is to have effect .

Section 8 Issue of contracting-out certificates.

(1) Subject to the provisions of this regulation, when the Secretary of State 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, he 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, being a date before the second abolition date .

(3) The Commissioners of Inland Revenue are not to issue a contracting-out certificate unless they consider it appropriate to do so and the scheme satisfied any contracting-out conditions or requirements which applied to the scheme from the date on which the certificate is to have effect.

Section 9 Making of elections by employers for the variation or surrender of contracting-out certificates.

(1) Subject to the provisions of paragraphs (2), (3) and (7) and regulation 10, an election with a view to the variation or surrender of a contracting-out certificate—

(a) may be made only after notices of intention have been given in accordance with paragraphs (4) and (5); and

(b) shall be made in writing to the Inland Revenue.

(2) Where a proposed variation is a change—

(a) in the name of the employer;

(b) in the address of the employer; or

(c) in the name of the scheme,

an election with a view to the variation of a certificate shall be made in writing to the Secretary of State within 3 months of the event to which the election relates or such longer period as the Secretary of State may in his 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 Secretary of State may approve, where a proposed variation would not alter—

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

(b) ... the benefits provided by the scheme; or

(c) the contributions (if any) payable by those earners to the scheme,

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

(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 Secretary of State may in his 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 (being a date before the second abolition date) from which it is intended that the variation or surrender is to have effect;

(c) specify the date of expiry of the notice in accordance with paragraphs (4) and (5) of regulation 3;

(d) specify the name and business address of the 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 Secretary of State, and

(ii) the Secretary of State may defer his 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, ...

(ea) where the notice is not about surrendering a contracting-out certificate due to the scheme winding up, contain a statement that the Secretary of State has power to refuse to give effect to the election if he 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 the earners concerned to, the scheme if the proposed variation or surrender took place.

(6) An employer who has given a notice under this regulation which is not about surrendering a contracting-out certificate due to the scheme winding up 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 Secretary of State may in his 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 or the date from which it is intended that the variation or surrender is to have effect .

Section 10 Special provision with regard to elections for the issue, variation or surrender of certificates where (before the second abolition date) the employment remains contracted-out.

(1) Subject to ... the provisions of this regulation, 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 Secretary of State is satisfied, that—

(a) any earner in respect of whose employment the election relates will continue to qualify for pensions which satisfy section 9(2) of the 1993 Act, ... under the scheme when the election takes effect;

(b) the accrued rights to pensions which satisfy section 9(2) of the 1993 Act ... of that earner under that scheme, will be unaffected; and

(c) the employment of the earner will continue to be contracted-out employment by reference to that same scheme, when the election takes effect

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

(2) Where, in accordance with paragraph (1), an election is made without compliance with the said provisions, the employer must give a 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;

(c) the date (being a date before the second abolition date) from when the change is to have effect; and

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

Section 11 Special circumstances in which the Secretary of State may determine earners to have been in contracted-out employment

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Section 12 Special provision for holding companies and subsidiaries

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Section 13 Special provision for public service pension schemes.

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Section 14 Special provision for holders of pensionable judicial office.

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Section 15 Further information and change of circumstances.

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

Section 16 Requirement to confirm relevant requirements are satisfied.

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Section 17 Further contracting-out conditions for salary-related contracted-out schemes

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Section 18 Requirement as to resources of the scheme.

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Section 19 Lump sum benefits and salary-related contracted-out schemes.

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Section 20 Payment of a lump sum instead of a pension payable under a relevant scheme

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Section 20A Suspension of section 9(2B) rights

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Section 21 Payable age in salary-related contracted-out schemes.

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Section 22 Each part of scheme to comply with section 12A of the 1993 Act.

(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 Secretary of State must be satisfied that the scheme satisfies section 12A of the 1993 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 Secretary of State must be satisfied that the scheme satisfies section 12A of the 1993 Act in relation to each such description of earners which is to be contracted-out.

Section 23 Requirements for meeting the statutory standard.

For the purposes of section 12A(4) of the 1993 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 comply with any standards adopted or prepared, and from time to time revised, by the Financial Reporting Council Limited which are relevant to the matters specified in section 12A(4) of the 1993 Act;

(b) may not certify that the pensions to be provided by the scheme for earners in employed earner’s employment and their widows, widowers or surviving civil partners collectively are 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, widowers or surviving civil partners 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 12A(1) of the 1993 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—

(i) earners who are not in contracted-out employment, ...

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) must not have regard to any money purchase benefits; ...

(f) may have regard to the payment of a lump sum but may not have regard to any payment of a lump sum made as a result of the death of an earner ; and

(g) must take no account of any provision made by the scheme for the suspension, in the circumstances specified in regulation 20A(2), (as it had effect immediately before the second abolition date) of benefits derived from section 9(2B) rights.

(h) must not have regard to any discretionary benefits; and

(i) must comply with the further requirements set out in Schedule 3.

Section 24 Circumstances when actuary other than actuary appointed under section 47 of the 1995 Act may certify broad equivalence.

For the purposes of section 12A(6) of the 1993 Act (scheme actuary appointed under section 47 of the 1995 Act to certify whether pensions are broadly equivalent to or better than those in a reference scheme except in prescribed circumstances) the prescribed circumstances are where a scheme is not required to appoint an actuary for the scheme under section 47 of the 1995 Act.

Section 25 Requirements for a reference scheme.

A reference scheme is a scheme which, in addition to complying with the requirements of section 12B(3) and (4) of the 1993 Act, complies with the requirements of Chapter II of Part IV of the 1993 Act (revaluation of benefits in the case of scheme members who leave pensionable service before attaining normal pension age) and section 51 of the 1995 Act (indexation of pensions).

Section 26 Reference scheme: circumstances in which widows', widowers' or surviving civil partners' pensions need not be payable

(1) For the purposes of section 12B(4)(a) of the 1993 Act (reference scheme to provide widows', widowers' and surviving civil partners' pensions except in prescribed circumstances), and subject to paragraph (2), the prescribed circumstances are where—

(a) the scheme member marries or forms a civil partnership after having received benefits under the scheme;

(b) the widow, widower or surviving civil partner of the scheme member—

(i) remarries or, as the case may be, marries;

(ii) forms a civil partnership or, as the case may be, forms a subsequent civil partnership or;

(iii) lives together with another person as if they were a married couple or civil partners,

after having received benefits under the scheme;

(c) the widow, widower or surviving civil partner of the scheme member is at the time of the member’s death living together with another person, whom he or she is not married to or in a civil partnership with, as if they were a married couple or civil partners.

(2) The following provisions do not apply where the scheme member died before 5th December 2005—

(a) paragraph (1)(b)(i) so far as it relates to a marriage or remarriage involving two people of the same sex;

(b) paragraph (1)(b)(ii); and

(c) paragraph (1)(b)(iii) and (1)(c) so far as they relate to the living together of two people of the same sex.

Section 27 Modification applying to public service pension schemes.

In the case of schemes which are public service pension schemes, section 9(2B) of the 1993 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).

Section 28 Service in a salary-related contracted-out scheme that does not qualify for further benefits

(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 the following provisions of this regulation, 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, namely that—

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

(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 111 of the 1993 Act) are the same as or more favourable than the guaranteed minimum pension and any benefits arising in respect of section 9(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 1965 .

Section 29 Schemes which cannot be certified under section 9(2B) of the 1993 Act.

For the purposes of section 9(2B)(d) of the 1993 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 registered under section 153 of the Finance Act 2004, unless it is, or was formerly, a relevant statutory scheme.

(b) a money purchase scheme.

Section 30 Further contracting-out requirements for money purchase contracted-out schemes

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Section 31 Deduction of minimum payments from earnings.

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Section 32 Minimum payments to be made by employers to trustees.

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Section 33 Calculation of minimum payments.

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Section 34 Manner of calculation or estimation of earnings.

Where the Secretary of State 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, he may—

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

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

Section 35 Manner of payment of the age-related payment.

The Secretary of State 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 Secretary of State may in his discretion approve.

Section 36 Verification of age.

(1) For the purposes of determining the appropriate age-related percentage in respect of an earner for the purposes of section 42A of the 1993 Act , the Secretary of State may require that earner to send documentary evidence of his date of birth.

(2) For the purposes of section 45B of the 1993 Act (information held as to the age to be disclosed by the Secretary of State 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.

Section 37 Circumstances in which the age-related payments are not to be paid.

(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.

(1A) Subject to paragraph (2), where the earner is no longer a member of the scheme which before the abolition date was a money purchase contracted-out scheme, an age-related payment shall be paid—

(a) to the trustees or managers of the scheme, if the earner has become a member of another scheme, and the scheme is able to transfer the payment to that other scheme,

(b) to the trustees or managers of another scheme of which the earner is a member, if known to HMRC , or

(c) in all other circumstances, to the earner.

(2) Where effect has been given to protected rights under section 28 of the 1993 Act (ways of giving effect to protected rights) as it had effect prior to the abolition date, 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 Secretary of State 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, widower or surviving civil partner , or if the earner was not married or a civil partner at the time of his or her death , they may at the Secretary of State’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, widower or surviving civil partner or, if the earner was not married or a civil partner at the time of his or her death , they may at the Secretary of State’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 Secretary of State, 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 32A of the 1993 Act (discharge of protected rights on winding up: insurance policies) as it had effect prior to the abolition date , the age-related payments 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 have reached pensionable age, shall be payable to the insurance company with which that policy of insurance is or was taken out or entered into.

Section 38 Adjustment of the amount of the age-related payment.

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.

Section 39 Circumstances in which schemes may change mode of contracting-out.

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Section 40 Schemes which may not be contracted-out under section 9(3) of the 1993 Act.

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Section 41 Provision of information as to resources.

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Section 42 Alteration of rules of contracted-out schemes.

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Section 43 Termination of periods of contracted-out employment.

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Section 44 Notifications to the Secretary of State.

(1) Whenever an earner’s service in contracted-out employment is treated as terminated before the second abolition date under the provisions of regulation 43, (as it had effect immediately before that date) 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 Secretary of State of that termination.

(2) If a notification required to be given under paragraph (1) was not given before the expected date of termination it shall be given within 6 months from the date on which the service terminated or, if the Secretary of State is satisfied that the notification could not reasonably have been given within that period, such longer period as he 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 Secretary of State may direct and shall contain such information as the Secretary of State may reasonably require for calculating guaranteed minimum pensions (including those to which persons are treated as entitled under section 48(2) of the 1993 Act), any entitlements arising in respect of section 9(2B) rights and contributions equivalent premiums and for related purposes.

(4) In any case where , before the second abolition date, a person transfers his responsibility for, or makes a transfer payment in respect of, a guaranteed minimum pension or any section 9(2B) rights to another person, the first person shall, within 5 weeks from the date of the transfer or transfer payment, notify the Secretary of State of its occurrence, giving such particulars as the Secretary of State may reasonably require to enable him to identify the second person.

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(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) An employer to whom a contracting-out certificate was issued or the trustees of the scheme to which the certificate related shall, if required to do so by the Secretary of State, in such manner and at such times as the Secretary of State may reasonably require, furnish to the Secretary of State such information relating to members of that scheme to which the contracting-out certificate related as he may reasonably require for the purpose of calculating guaranteed minimum pensions (including those to which persons are treated as entitled under section 48(2) of the 1993 Act) and any entitlement arising in respect of section 9(2B) rights.

Section 45 Approval of arrangements for schemes ceasing to be contracted-out.

(1) ...For the purposes of section 50(1B) of the 1993 Act (prescribed conditions to be met in order for arrangements to be approved on the cessation of contracting-out) arrangements for cessation of contracting-out before the second abolition date shall not be approved by the Secretary of State 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 37A of the (transfer of liabilities: schemes contracted-out on or after 6th April 1997) , section 19 of that Act (discharge of liability for guaranteed minimum pensions secured by insurance policies or annuity contracts), section 20 of that Act (transfer of guaranteed minimum pensions) ... ... and any regulations made under those provisions and the Secretary of State must be satisfied that such arrangements will be completed within two years of the date of cessation or such later date as the Secretary of State 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 paragraph (a) —

(a) in the case of a scheme where employment was contracted-out under section 9(2) of the 1993 Act (salary-related contracted-out scheme) the scheme must , until the second abolition date, continue to satisfy the requirements of that section and any regulations which would apply to the scheme by reason of it being a scheme to which section 9(2) of that Act relates, other than section 9(2B)(a) of that Act (requirement to comply with section 12A of that Act) and any regulations which relate to compliance with that section, and the scheme must contain a protection rule;

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3A) For the purpose of paragraph (3)(a) a protection rule is a rule which provides that the total amount of the benefits under the scheme for each member at normal pension age and the member’s widow, widower or surviving civil partner at the day following the date of death of the member will not be less than the aggregate of—

(a) any such benefits arising in respect of section 9(2B) rights and guaranteed minimum pensions;

(b) any other such benefits due in respect of rights which have accrued to the member in relation to service in employment which was contracted-out before the principal appointed day under section 9(2) of the 1993 Act; and

(c) any such benefits due in respect of rights which have accrued to the member in relation to service in employment which was not contracted-out.

(3B) The amount of the benefits mentioned in paragraph (3A)(a) and (b) and, so far as they relate to service on or before the date on which the scheme ceased to be contracted-out, those mentioned in paragraph (3A)(c) shall be calculated on an early leaver basis in accordance with Chapter I of Part IV of the 1993 Act and any regulations made under that Chapter, as if the member had ceased to be in pensionable service under the scheme on that date.

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Section 46 Supervision of schemes that have ceased to contract out before the second abolition date .

(1) Subject to such directions as the Secretary of State may give under section 53(1) of the 1993 Act (supervision of formerly contracted-out schemes) for the purposes of section 53(3) of the 1993 Act (requirement to discharge liabilities following issue of certificate of non-approval), liabilities in respect of such entitlement or rights as are referred to in section 52(2A)(a) ... of the 1993 Act must, subject to paragraphs (2) and (4) , be transferred or discharged in the manner permitted by paragraph (2) of regulation 45 within 6 months of the date a certificate of non-approval under sub-section (2) of section 50 is issued, unless the certificate has been cancelled.

(2) In the case of a scheme where employment was contracted-out under section 9(2) of the 1993 Act (salary-related contracted-out scheme), the discharge may be arranged in accordance with the requirements of regulation 3 and, in the case of a pension or accrued benefit under a relevant scheme, 11 of the Occupational Pension Schemes (Discharge of Liability) Regulations 1997 , notwithstanding that a member’s pensionable service has not terminated and the scheme is not winding up.

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(4) Every active and deferred member with any entitlement to ..., guaranteed minimum pensions or section 9(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.

Section 47 Circumstances in which the Secretary of State may vary or cancel a contracting-out certificate.

(1) Where the Secretary of State has reason to suppose that any employment to which a contracting-out certificate applied should not continue to be contracted-out employment and the employer has not shown to the satisfaction of the Secretary of State that it should so continue, the Secretary of State may determine that the employment should not continue to be treated as contracted-out employment and where he so determines, he shall cancel or vary the certificate with effect, subject to paragraph (2), from such date (being a date before the second abolition date) as he may specify and he shall notify the employer in writing of his determination, the reasons for it and of his powers to review that 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 scheme that was a salary-related contracted-out scheme where the Secretary of State 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 9(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 Secretary of State those resources were maintained at such a sufficient level; or

(b) in a case of a scheme that was 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 9(2B) rights under the scheme, the date may be a date not earlier than the date on which, in the opinion of the Secretary of State, the said cessation occurred; or

(c) in a case where the Secretary of State 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 Secretary of State 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 Secretary of State’s opinion, the scheme ceased to satisfy those requirements.

(3) In any case where the Secretary of State has cancelled or varied a certificate under the provisions of paragraph (1) above he 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

(c) the persons specified in regulation 3(1)(c) and (d),

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

Section 48 Special provision for overseas schemes.

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(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 49 Insolvent schemes.

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