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Home > Individual and Bulk Transfers

17.0 Introduction

This section deals with sale and purchase agreements, individual and bulk transfers. It also includes a brief outline of the preservation requirements.


Pension protection on transfer of employment

Prior to 6 April 2005, contracts of employment would normally continue when an employer was acquired or employment was transferred under the Transfer of Undertakings (Protection of Employment) Regulations 1981 – known as TUPE.

Since 6 April 2005, it has been a condition of the employee’s contract with the new employer that the employer ensures the employee becomes (or is eligible to become) a member of an occupational scheme and:

(i)  where the scheme is a money purchase arrangement (including Stakeholder), that ‘relevant contributions’ (initially with the employer paying 6% of earnings, though under the Transfer of Employment (Pension Protection (Amendment) Regulations 2013 paying up to a maximum of 6% of earnings) are paid to the scheme,
(ii)  where the scheme is not a money purchase scheme, the requirement is that the scheme either meets the Reference Scheme Test [see 1.9or an alternative standard ‘as prescribed’.

Power to prohibit offer of incentives to transfer pension rights

The Government has powers (under the Pensions Act 2013) to introduce regulations to prohibit a person from ‘offering a financial or similar incentive to another person with the intention of inducing a member of a salary-related occupational pension scheme to transfer their rights out of that pension scheme into another pension scheme or arrangement’ [see 17.2.6]. Such prohibition may also apply to the offer of an incentive by the person who will provide the incentive, or by another person, for example an agent. Regulations also provide for penalties to be introduced if a prohibition order is contravened.

Scheme amendments

Prior to 6 April 1997, trustees were required to act in the best interests of members when approving scheme changes. Under Section 67 of the Pensions Act 1995 (which came into effect from 6 April 1997), the power to make any modification has been amended and strengthened, and cannot be exercised in a way that might affect members’ benefits unless (i) the actuary confirms that benefits will not be adversely affected under the proposed change or (ii) each member affected has consented in writing to the change. Since 6 April 2006, schemes had greater freedom to amend their rules within the constraints of the Code of Practice No 10 – Modification of Subsisting Rights. [See 16.7.7]

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