The Occupational Pension Schemes (Administration, Investment and Charges and Governance) (Amendment) Regulations (Northern Ireland) 2021

Amendment of the Occupational Pension Schemes (Scheme Administration) Regulations

2.—(1) The Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997 are amended in accordance with paragraphs (2) and (3).

(2) In regulation 23(1) (annual statement regarding governance)—

(a) in paragraph (1)—

(i) after sub-paragraph (a) insert—

“(aa) state the return on investments, after deduction of any charges or transaction costs relating to those investments (calculated in accordance with regulation 25(1)(a)), relating to—

(i) each default arrangement; and

(ii) each fund—

(aa) which members are now able to select or were in the past able to select; and

(bb) in which assets relating to members are invested during the scheme year,

having regard to guidance issued by the Department under section 109(2A)(2) of the Pension Schemes Act (disclosure of information about schemes to members, etc);”;

(ii) in sub-paragraph (c)—

(aa) for paragraph (ii) substitute—

“(ii) state the levels of charges and transaction costs applicable to each fund—

(aa) which members are now able to select or were in the past able to select; and

(bb) in which assets relating to members are invested during the scheme year;”;

(bb) for paragraph (iv) substitute—

“(iv) where the trustees or managers are required to assess the extent to which the charges and transaction costs borne by members represent good value for members, explain that assessment and its results;”;

(iii) after sub-paragraph (ca) insert—

“(cb) explain the results of any assessment required by virtue of regulation 25(1A);”.

(b) after paragraph (1A)(3) insert—

“(1B) Paragraph (1)(cb) does not apply if—

(a) the Pensions Regulator has been notified under Article 57(4) or (5) of the 2005 Order(4) (the register: duties of trustees or managers) that the winding up of the scheme in question has commenced; and

(b) the trustees or managers of the scheme explain why they are not complying with paragraph (1)(cb) in the statement required under paragraph (1)(c)(iv).”.

(3) In regulation 25(5) (assessment of charges and transaction costs)—

(a) in paragraph (1)(a)—

(i) in head (i) for “; and” substitute “borne by members of the scheme;”;

(ii) in head (ii) for “costs,” substitute “costs borne by members of the scheme; and”;

(iii) after head (ii) add—

“(iii) the returns on investments earned by assets in the scheme; and”;

(iv) at the end omit “borne by members of the scheme; and”;

(b) after paragraph (1) insert—

“(1A) As part of the assessment referred to in paragraph (1)(b), the trustees or managers of a specified scheme (see paragraph (5)) must assess—

(a) the charges and transaction costs borne by members of the scheme by comparison with the charges and transaction costs borne by members of at least three schemes (“comparison schemes”)—

(i) each of which satisfies one of the conditions in paragraph (1D)(a); and

(ii) at least one of which satisfies the condition in paragraph (1D)(b);

(b) the return on investments by comparison with the return on investments for each of the three comparison schemes relating to—

(i) the default arrangement; and

(ii) any funds—

(aa) which members are now able to select or were in the past able to select; and

(bb) in which assets relating to members are invested,

and in each case the return on investments is to be calculated after deduction of any charges or transaction costs; and

(c) how the administrative and governance criteria set out in paragraph (1C) are met by the scheme.

(1B) In making the assessment required under paragraph (1)(b), the trustees or managers of the specified scheme must have regard to any guidance issued by the Department by virtue of paragraph 2 of Schedule 18 to the Pensions Act (Northern Ireland) 2015 (power to impose requirements relating to administration or governance) in relation to that assessment.

(1C) The administration and governance criteria are—

(a) the promptness and accuracy of core financial transactions;

(b) the quality of the records kept by the trustees or managers;

(c) the appropriateness of the default investment strategy followed by the trustees or managers;

(d) the quality of the scheme’s investment governance;

(e) the extent to which—

(i) the requirements of Articles 224 and 225(6) of the 2005 Order (requirement for knowledge and understanding: individual trustees and corporate trustees) are satisfied; and

(ii) the trustees or managers have the knowledge, understanding and skills to enable them—

(aa) properly to exercise their functions; and

(bb) to operate the scheme effectively;

(f) the quality of communication with the members of the scheme;

(g) the effectiveness of the management of any conflicts of interest that might arise between or among trustees and managers, or between trustees, managers and third parties.

(1D) The conditions are that—

(a) each comparison scheme is—

(i) an occupational pension scheme which on the relevant date held total assets equal to or greater than £100 million; or

(ii) a personal pension scheme, which is not an investment-regulated pension scheme within the meaning of paragraph 1 of Schedule 29A to the Finance Act 2004(7) (schemes other than occupational pension schemes);

(b) the trustees or managers have had discussions with the comparison scheme on a transfer of the rights of members of the specified scheme to that scheme if the specified scheme is wound up.

(1E) Where an occupational pension scheme provides both money purchase benefits within the meaning of section 176(1)(8) of the Pension Schemes Act (general interpretation) and benefits other than money purchase benefits—

(a) the trustees or managers of the scheme are only required to comply with the obligations in paragraphs (1A) and (1B) in relation to the assets held for its money purchase benefits; and

(b) the scheme may only be used as a comparison scheme in relation to the assets held for its money purchase benefits.”;

(c) after paragraph (3) add—

“(4) Paragraphs (1A) to (1E) do not apply if—

(a) the Pensions Regulator has been notified under Article 57(4) or (5) of the 2005 Order (the register: duties of trustees or managers) before the date on which the trustees or managers of the scheme are required to prepare a statement under regulation 23(1) (“the annual statement”) that the winding up of the scheme in question has commenced; and

(b) the trustees or managers of the scheme explain why they are not complying with paragraph (cb) in the annual statement.

(5) In this regulation—

“audited accounts” means the audited accounts which the trustees are required to obtain in accordance with regulation 2 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations (Northern Ireland) 1997(9) (requirement of trustees or managers to obtain documents);

“core financial transactions” has the same meaning as in regulation 24(10) (requirements for processing financial transactions);

“default arrangement” has the meaning given in regulation 1(2) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005(11);

“default investment strategy” means the default strategy referred to in regulation 2A(1)(c)(12) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005 (additional requirements in relation to default arrangement);

“ear-marked scheme” has the meaning given by regulation 1(2)(13) of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations (Northern Ireland) 1997;

“relevant date” means the date on which the trustees obtain the audited accounts for the scheme year that ended most recently;

“specified scheme” means a relevant scheme which, on the relevant date—

(i)

held total assets worth less than £100 million, and

(ii)

has been operating for 3 or more years.

(6) In this regulation, a reference to the “total assets” of a scheme means—

(a) in the case of a scheme in respect of which the trustees are required to obtain audited accounts, the total of the amount of the net assets of the scheme recorded in the audited accounts for the scheme year; or

(b) in the case of a scheme which is an ear-marked scheme, the value of the assets of the scheme represented by any policies of insurance or annuity contracts that are specifically allocated to the provision of benefits for individual members or any other person who has a right to benefits under the scheme.”.

(1)

Regulation 23 was added by regulation 17(1) of S.R. 2015 No. 309 and amended by regulation 5 of S.R. 2016 No. 192 and regulation 2 of S.R. 2018 No. 53

(2)

Subsection (2A) was inserted by section 38(4) of the Pension Schemes Act (Northern Ireland) 2016

(3)

Paragraph (1A) was inserted by regulation 2(b) of S.R. 2018 No. 53

(4)

The definition of “the 2005 Order” was inserted by paragraph 5(2) of Schedule 3 to S.R. 2005 No. 568

(5)

Regulation 25 was inserted by regulation 19 of S.R. 2015 No. 309

(6)

Article 225 was amended by paragraph 252(9) of Schedule 1 to S.I. 2009/1941

(7)

2004 c. 12; Schedule 29A was inserted by paragraph 13 of Schedule 21 to the Finance Act 2006 (c. 25)

(8)

The definition of “money purchase benefits” was amended by paragraph 19 of the Schedule to S.R. 2005 No. 434 and section 27(1) of the Pensions Act (Northern Ireland) 2012 (c. 3 (N.I.))

(9)

S.R. 1997 No. 40; regulation 2 was amended by regulation 2 of S.R. 2000 No. 107, regulation 8 of S.R. 2000 No. 382, regulation 2 of S.R. 2005 No. 421, the Schedule to S.R. 2006 No. 65; paragraph 5 of Schedule 9 to S.R. 2014 No. 79 and regulation 2 of S.R. 2016 No. 141

(10)

Regulation 24 was added by regulation 18 of S.R. 2015 No. 309

(11)

S.R. 2005 No. 569; the definition of “default arrangement” was inserted by regulation 20(2) of S.R. 2015 No. 309

(12)

Regulation 2A was inserted by regulation 20(3) of S.R. 2015 No. 309 and amended by regulation 4 of S.R. 2018 No. 165

(13)

The definition of “ear-marked scheme” was amended by paragraph 14 of the Schedule to S.R. 1997 No. 160