Section 12 Employer cost capI1I2I3

Scheme regulations for a scheme under section 1 which is a defined benefits scheme must set a rate, expressed as a percentage of pensionable earnings of members of the scheme, to be used for the purpose of measuring changes in the cost of the scheme.

Subsection (1) must be complied with before the end of the period of one year beginning with the day on which the scheme’s first valuation under section 11 is completed.

A reference in this section to “the employer cost cap” of a scheme under section 1 is a reference to the rate set by virtue of subsection (1) in relation to the scheme.

The employer cost cap F3of a scheme under section 1 is to be setF4, and the changes in the cost of such a scheme are to be measured, in accordance with Treasury directions.

Treasury directions may in particular specify—

The power to give directions by virtue of subsection (4)(d) is not affected by any statement made before 27 May 2021 by the Treasury, or any Minister of the Crown, relating to the data, methodologies and assumptions that are, or are not, to be used for the purposes mentioned in subsection (4)(b).

Treasury regulations must make—

For cases where the cost of F13a scheme under section 1 would otherwise go beyond F14either of the margins specified under subsection (5)(a), scheme regulations may provide for—

The steps referred to in subsection (6) may include the increase or decrease of members' benefits or contributions.

Treasury directions may specify the time at which any increase or decrease of members’ benefits or contributions that is provided for under subsection (6) is to take effect.

Treasury directions may require that provision contained in scheme regulations under subsection (6) permits steps to be—

only after the scheme actuary has certified that the steps would, if taken, achieve the target cost for the scheme.

Treasury directions under subsection (7B) may specify—

for the purposes of determining whether any steps would, if taken, achieve the target cost for the scheme.

In subsection (7B) “the scheme actuary”, in relation to a scheme under section 1, means the actuary who carried out, or is for the time being exercising actuarial functions in relation to, the valuation under section 11 by reference to which it has been determined that the costs of the scheme have gone, or may go, beyond either of the margins specified under subsection (5)(a).

Treasury regulations under this section may—

Treasury regulations under this section are subject to the negative Commons procedure.