Citation, commencement and interpretation

1. —(1) These Regulations may be cited as the Registered Pension Schemes (Uprating Percentages for Defined Benefits Arrangements and Enhanced Protection Limits) Regulations 2006 and shall come into force on 6th April 2006.

(2) In these Regulations a reference to a numbered section or Schedule (without more) is a reference to the section of, or Schedule to, the Finance Act 2004 which bears that number.

(3) In the application of these Regulations to Northern Ireland, a reference to an enactment applying only in Great Britain shall be construed as including a reference to any enactment having corresponding effect in Northern Ireland.

Percentage referred to for the purposes of section 235(3)(c)

2. —(1) For the purpose of section 235(3)(c) (defined benefits arrangements: uprating of opening value) the percentage to which these Regulations refer is the percentage found as follows.

(2) In this regulation “the relevant percentage” is any of —

(a) the percentage by which the individual’s guaranteed minimum pension rights falls to be adjusted by virtue of one or more orders under section 148 of the Social Security Administration Act 1992( 3 );

(b) the percentage by which the individual’s earnings factors in respect of contracted-out employment by reference to the scheme shall be taken to be increased in accordance with section 16 of the Pension Schemes Act 1993 (revaluation of earnings factors)( 4 );

(c) the percentage by which the individual’s occupational pension falls to be adjusted by virtue of the application of subsections (1) and (2) of section 84 of the Pension Schemes Act 1993 (which provide that the method of revaluation is to be the final salary method except where the trustees or managers otherwise provide) ( 5 ); or

(d) the percentage by which a pension, payment of which has been deferred until after normal pension age in accordance with the rules of the pension scheme in question, falls to be increased so that the scheme’s trustees or managers can be reasonably satisfied that, when the member’s benefit becomes payable, the total value of the benefits provided under regulation 8 of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991(early retirement or deferred retirement) ( 6 ) is at least equal to the amount prescribed in regulation 11 of those Regulations (value of alternatives to short service benefit).

(3) The percentage in a particular case is found as follows.

• Step 1

  Determine whether any of the relevant percentages applies to the defined benefit arrangement.

• Step 2

  If any of the relevant percentages applies to the arrangement, determine whether that percentage applies to the whole of the arrangement.

• Step 3

  If one relevant percentage applies to the whole of the arrangement, that is the percentage to which these Regulations refer.

• Step 4

  If different percentages apply to different parts of the arrangement, the percentage to which these Regulations refer is that found by the formula—

  

  Here—

  • RP is the relevant percentage;

  • P is the amount of that part of the individual’s rights under the arrangement to which the relevant percentage applies;

  • W is the whole amount of the individual’s rights under the arrangement; and

  • SP is the greater of—

    (a)

    5%, or

    (b)

    the percentage (if any) by which the retail prices index for the month in which the pension input period ends is higher than it was for the month in which it began;

  • PT is the sum of the amounts of P1, P2, P3 and P4 ;

    (c)

    expressions with the suffix 1 refer to the percentage described in paragraph (2)(a);

    (d)

    expressions with the suffix 2 refer to the percentage described in paragraph (2)(b);

    (e)

    expressions with the suffix 3 refer to the percentage described in paragraph (2)(c);

    (f)

    expressions with the suffix 4 refer to the percentage described in paragraph (2)(d).

  This step is subject to paragraph (4).

(4) If—

(a) any relevant percentage is a value less than the greater of—

(i) 5%, or

(ii) the percentage (if any) by which the retail prices index for the month in which the pension input period ends is higher than it was for the month in which it began;

the value shall instead be taken to be whichever is the greater of the two values given in this sub-paragraph;

(b) two or more relevant percentages apply to the same part of the arrangement, the value of P1, P2, P3 or P4 (as the case may be) is found by determining which of those relevant percentages produces the greatest increase in the opening value in the pension input period in question.

Percentage increases in enhanced protection limits

3. —(1) For the purposes of paragraph 15(5)(b) of Schedule 36 (relevant indexation percentage for the purposes of the appropriate limit in relation to a relevant event), the annual percentage rate referred to in these Regulations is found by the formula—

(2) In paragraph (1)—

• terms defined in regulation 2(3) bear the same meaning as they do there;

• MRE is the number of complete tax months which have elapsed since 6 ^th April 2006 at the time when the relevant event occurs; and

• PP is the greater of—

  (a)

  an annual rate of 5% for the period beginning on 6 ^th April 2006 and ending with the last day of the tax month in which the relevant event occurs, or

  (b)

  the percentage (if any) by which the retail prices index for the month in which the relevant event occurs is higher than it was for April 2006;

(3) For the purposes of paragraphs 16(5A)(b) and 17(6)(b) of Schedule 36 (relevant indexation percentages for the purposes of limit on post-commencement earnings) the annual percentage rate referred to in these Regulations is that which would be found by the formula in paragraph (1) if—

(a) for MRE there were substituted MBE, where MBE is the number of complete tax months between the date on which the appropriate three year period ends and the date of the first relevant event; and

(b) in the definition of PP—

(i) in paragraph (a) for “6 ^th April 2006” there were substituted “the first day of the tax month in which the appropriate period ends”; and

(ii) in paragraph (b) for “April 2006” there were substituted “the month in which the appropriate period ends”.

(4) In this regulation “tax month” means the period beginning on the 6th day of a calendar month and ending on the 5th day of the following calendar month.