Regulation 22 Application of compensation cap where compensation becomes payable on different dates

Paragraph 26 of Schedule 7 to the Act (compensation cap) applies with the modification specified in F1paragraph (3) where a person becomes entitled to relevant compensation in respect of a benefit (“benefit A”) and he has previously—

For the purposes of paragraph (1)(b), a scheme is a relevant connected occupational pension scheme if it is an eligible scheme for the purposes of Part 2 of the Act when the person becomes entitled to the relevant compensation in respect of benefit A.

After paragraph 26(6) insert—

“F2(6A)

Where sub-paragraph (6B) or sub-paragraph (6BA) applies to a person, sub-paragraphs (6C) and (6D) apply (instead of sub-paragraph (1)) in relation to the entitlements referred to in the sub-paragraph which applies to him.

F3(6B)

This sub-paragraph applies if—

(a)

a person becomes entitled to relevant compensation in respect of a benefit (“benefit A”) that is attributable to a pension credit from a transferor; and

(b)

before the person becomes entitled to relevant compensation in respect of benefit A, he has become entitled to—

(i)

relevant compensation in respect of one or more other benefits under the scheme or a connected occupational pension scheme that are also attributable to a pension credit from the same transferor (“benefit or benefits C”); or

(ii)

one or more lump sums under the scheme or a relevant connected occupational pension scheme (“sum or sums L”) that are also attributable to a pension credit from the same transferor.

F4(6BA)

This paragraph applies if—

(a)

a person becomes entitled to relevant compensation in respect of a benefit (“benefit A”) that is attributable to the person’s pensionable service; and

(b)

before the person becomes entitled to relevant compensation in respect of benefit A, he has become entitled to—

(i)

relevant compensation in respect of one or more other benefits under the scheme or a connected occupational pension scheme that are also attributable to his pensionable service (“benefit or benefits C”); or

(ii)

one or more lump sums under the scheme or a relevant connected occupational pension scheme (“sum or sums L”) that are also attributable to his pensionable service.

(6BB)

For the purposes of sub-paragraphs (6B)(b)(ii) and (6BA)(b)(ii), a scheme is a relevant connected compensation pension scheme if it is an eligible scheme when the person becomes entitled to the relevant compensation in respect of benefit A.

(6C)

If the previous aggregate cap percentage is or exceeds 100, no relevant compensation is payable in respect of benefit A.

(6D)

If the previous aggregate cap percentage is less than 100—

(a)

the amount of the compensation in respect of benefit A, and

(b)

the amount of any payments by way of periodic compensation for benefit or benefits C that are payable on or after the assessment date for the relevant compensation in respect of benefit A,

must be restricted in accordance with sub-paragraph (6H).

(6E)

For the purposes of this paragraph, “the previous aggregate cap percentage” means the aggregate of—

(a)

the cap percentage for the relevant compensation in the case of each of benefit or benefits C, and

(b)

the cap percentage in the case of each of sum or sums L.

(6F)

For the purposes of this paragraph, “the cap percentage”, in the case of any relevant compensation or lump sum, means—

$$\left(\mathrm{AAV}x\mathrm{100}\right)/\mathrm{ACC}$$

where—

AAV is the appropriate annual value, and

ACC is the appropriate compensation cap.

(6G)

In sub-paragraph (6F)–

“the appropriate annual value” means—

(a)

in the case of each of benefit A, benefit or benefits B and benefit or benefits C, the annual value of that benefit at the time when the relevant compensation becomes or, in the case of periodic compensation, first becomes payable, and

(b)

in the case of each of sum or sums L—

(i)

if the person became entitled to that sum on or after 6th April 2005, the annualised value of that sum at the time that sum became payable, and

(ii)

otherwise, the annualised value of that sum on 6th April 2005, (calculated on the assumption that on that date the person was the same age as when he became entitled to that sum);

“the appropriate compensation cap” means—

(a)

in the case of each of benefit A, benefit or benefits B and benefit or benefits C, the compensation cap at the time when the person becomes entitled to relevant compensation in respect of the benefit, and

(b)

in the case of each of sum or sums L—

(i)

if the person became entitled to that sum on or after 6th April 2005, the compensation cap at the time when he became so entitled, and

(ii)

otherwise, the compensation cap on 6th April 2005.

F5(6GA)

Where sub-paragraph (6B) or (6BA) applies, “the compensation cap” has the meaning given by paragraph 26A, except that the reference in sub-paragraph (2) of that paragraph to the length of the person’s pensionable service is to be treated as if it were a reference to the total length of the person’s pensionable service at the time when he becomes entitled to the relevant compensation in respect of benefit A.

(6H)

Where sub-paragraph (6D) applies—

(a)

the relevant compensation in respect of benefit A is required to be restricted in accordance with sub-paragraph (3), but taking references in that sub-paragraph to the cap fraction as references to the revised cap fraction, and

(b)

the amount of any payments by way of periodic compensation for benefit or benefits C payable on or after the assessment date for the relevant compensation in respect of benefit A is required to be restricted to the revised cap fraction of the amount that would be payable apart from this sub-paragraph.

((6I))

For the purposes of this paragraph, “the revised cap fraction” means—

100 / the aggregate cap percentage

((6J))

For the purposes of this paragraph, “the aggregate cap percentage” means the aggregate of—

(a)

the previous aggregate cap percentage,

(b)

the cap percentage for the relevant compensation in the case of benefit A, and

(c)

in a case within sub-paragraph (2)(b)(i), the cap percentage for the relevant compensation in the case of each of benefit or benefits B.”.