# The Pension Schemes (Transfers, Reorganisations and Winding Up) (Transitional Provisions) Order 2006, Note: Explanatory note


(This note is not part of the Order)
Part 4 of the Finance Act 2004 (c. 12) makes new provision for pension schemes on and after 6th April 2006. Schedule 36 to that Act, which falls within Part 4, contains transitional provisions and savings, designed to protect rights which existed before 6th April 2006. The general principles are that rights are protected in the scheme under which they were held on 5th April 2006, and that protection is lost if the individual's rights are transferred out of the scheme on or after 6th April 2006; but some protection may be retained if, on or after 6th April 2006, an individual's rights are transferred out of the original pension scheme as part of a block transfer.
This Order exercises the power to make further transitional provision. Article 1 deals with citation, commencement and interpretation; and articles 2 and 3 deal, respectively, with the original pension scheme condition and the employee condition: expressions used in more than one context in later provisions.
This Order then deals with three matters of a transitional nature.
The first matter, dealt with in articles 4 to 8, relates to the transfer (or transfers) of an undertaking during the period beginning with 10th December 2003 and ending with 5th April 2006. Under Part 4 of the Finance Act 2004 such a transfer would have the effect that the right to retire before the normal minimum pension age would be lost. These articles ensure that, where rights are transferred in the period beginning with 10th December 2003 and ending with 5th April 2006, and where the Transfer of Undertakings (Protection of Employment) Regulations 1981 (S.I. 1981/1794) apply to the transfers of the undertaking, the right to retire before the normal minimum pension age is preserved. The conditions that must be met before article 8 applies are indicated in article 4. There must be a pension scheme (“the original pension scheme”) whose rules conferred a right to retire before the normal minimum pension age (article 2), and the employee must have been entitled to take advantage of that right as it existed in relation to the original pension scheme (article 3). There must then be either one transfer of the relevant undertaking (article 5) or two or more such transfers (article 6), which have the overall result that an employee's pension rights are transferred from the original pension scheme to a different pension scheme (“the new pension scheme”). The new pension scheme must also have rules which confer a right to retire before the normal minimum pension age (article 7). The effect of article 8 is to preserve the employee's right to retire before the normal minimum pension age in these circumstances.
The second matter, dealt with in articles 9 to 12, relates to reorganisations during the period beginning with 10th December 2003 and ending with 5th April 2006. The conditions that must be met before article 12 applies are indicated in article 9. There must be a pension scheme (“the original pension scheme”) whose rules conferred a right to retire before the normal minimum pension age (article 2), and the employee must have been entitled to take advantage of that right as it existed in relation to the original pension scheme (article 3). There must then be a reorganisation (article 10), which has the overall result that the pension rights of an employee (or former employee) are transferred from the original pension scheme to a different pension scheme (“the new pension scheme”). The new pension scheme must also have rules which confer a right to retire before the normal minimum pension age (article 11). Article 12 preserves the employee's right to retire before the normal minimum pension age in these circumstances.
The third matter, dealt with in articles 13 to 16, relates to the case where a pension scheme is being wound up. The conditions that must be met before article 16 applies are indicated in article 13. The conditions relate to the rights of members of the pension scheme that is being wound up (article 14), and to the nature of the annuities purchased for a member (article 15). In these circumstances, article 16 operates to secure the individual's accrued pension rights by providing that the member is to be treated as having become a member of a new pension scheme as the result of a block transfer to it.
The Board of Inland Revenue published a regulatory impact assessment in respect of the provisions of Part 4 of the Finance Act 2004 and subordinate legislation under it, on 8 April 2004. The assessment is available on the website for Her Majesty's Revenue and Customs at www.hmrc.gov.uk/ria/simplifying-pensions.pdf or (for hard copies) by writing to the Ministerial Correspondence Unit, 1st Floor Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB.

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Source: https://www.legislation.gov.uk/uksi/2006/573/note (the official version)
Page: https://openlegislation.uk/pension-schemes-transfers-reorganisations-and-winding-up-transitional-provisions-order-2006/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.