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Explanatory note

Original text. Later amendments are not shown.

(This note is not part of the Regulations)

These Regulations are made under the Pensions Act 1995 (“the 1995 Act”). They make amendments to the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996, the Occupational Pension Schemes (Deficiency on Winding Up etc.) Regulations 1996 and the Occupational Pension Schemes (Winding Up) Regulations 1996.

Regulation 1 provides for citation, commencement and interpretation.

Regulation 2 makes miscellaneous amendments to regulations 2, 7, 12, 16, 17, 18, 20 and 21 of, and Schedule 2, 3 and 4 to, the Occupational Pensions Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996 ("the principal Regulations"). The principal Regulations set out the details of the Minimum Funding Requirement imposed on certain occupational pension schemes by the provisions of sections 56 to 60 of the Pensions Act 1995 ("the Act") which has effect in relation to any actuarial valuation of the assets and liabilities of a scheme to which section 56 of the Act applies taking place on or after 6th April 1997. The general effect of the amendments made by regulation 2 to the principal Regulations are as follows-

  • Paragraph (1) introduces the changes made by regulation 2;

  • Paragraph (2) extends the transitional period as defined in regulation 2(1) of the principal Regulations to 31st December 2004;

  • Paragraph (3) makes it clear that a scheme's liabilities in respect of pure money purchase benefits are not to be taken into account in determining whether the scheme operates a gilts matching policy;

  • Paragraph (4) requires the scheme actuary to carry out a funding calculation by reference to the position 7 days before signing a certificate of the adequacy of the scheme's schedule of contributions rather than being required to determine the funding position on the same day that he signs that certificate. (There are several references to this date throughout the principal Regulations which are similarly amended by paragraphs (5), (6), (7), (10), (11), (12), and (13).);

  • Paragraph (5) extends to 10 years the period within which schemes which are underfunded on the minimum funding requirement basis must reach 100% funding on that basis;

  • Paragraph (6) clarifies the payments and contributions that must be shown seperately on the scheme's schedule of contributions;

  • Paragraph (7) removes the requirement for the adequacy of a scheme's schedule of contributions to be actuarially certified on an annual basis provided that the scheme is not less that 100% funded on the minimum funding requirement basis both at the effective date of the scheme's last minimum funding valuation and at the relevant date applying to the subsequent schedule of contributions. It also removes the requirement for certification of the schedule of contributions within a year of the previous certification where a scheme has obtained a full minimum funding valuation in the intervening period;

  • Paragraph (8) extends to 3 years the period within which schemes less than 90% funded on the minimum funding requirement basis must reach 90% funding on that basis;

  • Paragraph (9) of regulation 2 requires minimum funding requirement failure reports to be prepared within 3 months of the end of the relevant period; and

  • Paragraphs (10) to (13) contain various amendments to the principal Regulations reflecting the change to the effective date of the scheme actuary's funding calculation in certifying schedules of contributions, as referred to under paragraph (4) above.

Regulation 3 amends the Occupational Pension Schemes (Winding Up) Regulations 1996 so as to amend the calculation of liabilities in respect of any pension or other benefit (including any increase in a pension) which has become payable under a scheme in circumstances where the scheme winds up and the employer is not insolvent at the time the winding up commenced.

Regulation 4 amends the Occupational Pension Schemes (Deficiency on Winding Up etc.) Regulations 1996 so to provide that, where a scheme is in the process of winding up and the employer is not insolvent, the scheme’s liabilities are to be calculated so as to include the actual cost of winding up and the cost of securing pensions or other benefits in payment by way of annuities.

Regulation 5 makes consequential amendments to section 60(7A) of the 1995 Act.

An assessment of the cost to business of complying with these Regulations has been prepared. A copy of the Regulatory Impact Assessment has been placed in the libraries of both Houses of Parliament. Copies may be obtained from the Department for Work and Pensions, Regulatory Impact Unit, 3rd Floor, The Adelphi, 1–11 John Adam Street, London WC2N 6HT.