Commentary on Sections Summary Restrictions on schemes during the assessment period Section 138: Payment of scheme benefits
448.This section restricts the scheme benefits paid to members of a scheme during an assessment period.
449.Subsection (2) provides that the amount of the benefits payable to scheme members during the assessment period must be reduced, if necessary, so that they do not exceed the level of compensation that would be payable if the scheme had been taken over by the Board from the beginning of the assessment period. Subsections (3) and (4) provide that during the assessment period no benefits are payable in respect of Chapter 5, Part 4 of the Pension Schemes Act 1993 (early leavers; cash transfer sum and contribution refund). This restriction does not apply to money purchase benefits.
450.Subsection (5) provides that benefits can be paid during an assessment period in relation to pension credits (where there has been a pension sharing order).
451.Where a pension scheme is being wound up, the effect of sections 73 to 73B of the Pensions Act 1995 (as inserted by section 270(winding up) of this Act) is that the benefits payable may be reduced. Subsection (6) provides that where a scheme is being wound up during the assessment period the benefits payable are those that would have been payable by the scheme had it not been winding up. This is subject to any reduction required under subsections (2) and (3) so that the benefits are paid at the same level as that available under the pension compensation provisions.
452.If the Board does not assume responsibility for the scheme, adjustments may need to be made in the future to make up amounts not paid by virtue of this section or to recover amounts overpaid by virtue of section 138(6) (see sections 150(1) to (3) (consequences of the Board ceasing to be involved with a scheme) and 154(13) (requirement to wind up schemes with sufficient assets to meet protected liabilities)).
453.Subsection (8) provides that for the purposes of ensuring that benefits are paid during an assessment period in accordance with subsections (2) and (3) the trustees or managers of the scheme may take such steps as they consider appropriate (including steps adjusting future payments under the scheme rules) to recover any overpayment or pay any shortfall. Subsection (9) provides for civil penalties under section 10 of the Pensions Act 1995 (civil penalties) to apply to the trustees or managers of a scheme who fail to take all reasonable steps to secure compliance with subsections (2) and (3).
454.Subsection (10) provides that regulations may provide that in certain circumstances benefits payable during an assessment period are not to be reduced to the level of pension compensation payable from the Pension Protection Fund. Regulations may also allow, in certain circumstances, for a member who has attained normal pension age and continues in employment to postpone taking benefits from the scheme. This can be postponed for the whole or part of the assessment period and can be on such terms and conditions as may be prescribed. This prevents a person becoming a person in receipt of a pension where, had there not been an assessment period, he would have postponed payment of his pension.
455.Subsection (11) defines “normal pension age” as the age specified in the scheme rules as the earliest age at which the pension or other benefit becomes payable without actuarial adjustment (excluding early payment on the grounds of ill health). Provision is made for cases where different ages are specified in relation to different parts of a benefit.
456.Subsection (12) provides that regulations may set out that in prescribed circumstances a benefit will be treated (for the purpose of subsection (2)) as having become payable before the assessment period commenced. This may, for example, be used where a member dies before the assessment period commences and as a person becomes entitled to a benefit not immediately on the death but later during the assessment period.