Explanatory note

These Regulations modify Chapter 3 of Part 2 of the Pensions Act 2004 (“the Act”) (pension protection provisions) as it applies where any liability to provide pensions or other benefits to or in respect of any member or members under an occupational pension scheme that is an eligible scheme (as defined in section 126 of the Act) is discharged during an assessment period or on the day when that period will begin. An assessment period is defined in section 132 of the Act and, broadly, is the period beginning with an insolvency event occurring in relation to a scheme’s employer and ending with either the Board of the Pension Protection Fund (“the Board”) assuming responsibility for the scheme or ceasing to be involved with it.

Most discharges of liability during an assessment period are prohibited under section 135 of the Act. But regulations under section 135(4) may allow transfers of, or transfer payments in respect of, members' rights and other steps to discharge liability in respect of rights to pensions or other benefits, and under section 135(9) the Board may validate actions that would otherwise contravene section 135. The modifications of the Act made by these Regulations apply in cases where a discharge occurs that is so allowed or validated (“a relevant discharge”).

Regulation 1 provides for citation and commencement.

Regulation 2 modifies sections 143 and 158 of the Act so that the actuarial valuations that are used to determine if the Board is to assume responsibility for a scheme under section 127, 128 or 158 of the Act must take into account the effect of a relevant discharge that occurs before the valuation is approved by the Board. Section 143 is also modified so that the Board need not obtain such valuations if it considers that a relevant discharge may occur.

Regulation 3 inserts a new paragraph, paragraph 23A, into Schedule 7 which provides that where a relevant discharge occurs the compensation payable under that Schedule is determined on the basis that the discharge occurred immediately before the assessment period began, and the scheme rules provided for it to occur, and hence for the rights corresponding to the discharged liabilities to cease. Compensation payable before the discharge will not be affected. Similar provision is made for discharges of liability occurring on the date the assessment period begins, but before the period begins.

As these Regulations are made before the expiry of the period of six months beginning with the coming into force of the provisions of the Act by virtue of which they are made, the requirement for the Secretary of State to consult such persons as he considers appropriate does not apply.

A regulatory impact assessment has not been produced for this instrument as it has no impact on the costs of business.