Commentary on Sections Summary Assumption of responsibility for a scheme Section 161: Effect of Board assuming responsibility for a scheme
559.This section sets out the effect of the Board issuing a transfer notice to the trustees or managers of a scheme. All the property, rights and liabilities of the scheme transfer to the Board when the transfer notice is received by the trustees or managers of the scheme. The trustees or managers of the scheme are discharged from their pension obligations to the scheme at this stage. The Board is required from that point to pay compensation to scheme members on an ongoing basis under the statutory rules set out in Chapter 3 of Part 2. The Board is also responsible for ensuring that any adjustment is made which is required to ensure the correct amount was paid from the beginning of the assessment period (e.g. under section 138 a person may have been receiving scheme benefits which were lower than the corresponding compensation entitlement and, if so, he will have to be paid the difference).
560.Subsection (2) sets out the effects of the Board assuming responsibility for an eligible scheme. The property, rights and liabilities of the scheme are transferred to the Board at the time the trustees or managers receive the transfer notice. This transfer is automatic and does not require the completion of any legal formalities. From that time, the trustees or managers of the scheme are discharged from their pension obligations (as defined) and the Board takes over responsibility for ensuring that compensation is and has been paid in accordance with the pension compensation provisions (as defined). The scheme is treated as having been wound up immediately after the transfer notice is received by the trustees or managers of the scheme and ceases to exist at this time.
561.Subsection (3) states that the liabilities transferred will not include money purchase benefits and any other liabilities as set out in regulations. Subsection (4) states that the trustees and managers are discharged of obligations in respect of guaranteed minimum pensions (Part V, Chapter 2 of the Pension Schemes Act 1993) and obligations to administer the scheme in accordance with the scheme rules or any other enactment.
562.Subsection (7) provides the power to make regulations to modify a term of a relevant “contract of insurance”. These are contracts entered by pension schemes to secure their liabilities in respect of a particular person. These contracts may require the scheme to pay the amount paid under the contract to the scheme member. But once the Board assumes responsibility for the scheme, this amount may exceed the member’s compensation entitlement under the Act. Under subsection (7) the contract may be modified so that the Board is not required to pay to the member an amount which exceeds his compensation entitlement.