The Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations (Northern Ireland) 2024

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make provision relating to the funding of occupational pension schemes to which Part IV of the Pensions (Northern Ireland) Order 2005 (“the 2005 Order”) (scheme funding) applies. They implement the amendments to that Part made by Schedule 11 to the Pension Schemes Act 2021 (funding of defined benefit schemes).

Part 1 of these Regulations contains preliminary matters and sets out (in regulation 2) where some of the key concepts used in the Regulations are defined.

Part 2 of these Regulations makes provision relating to the new requirement, in Article 200A of the 2005 Order (funding and investment strategy), for schemes to have a funding and investment strategy.

Regulations 3 to 6 define the key concepts underlying how schemes must give effect to this requirement. In particular, regulation 3 sets out how the maturity of a scheme is to be measured and the meaning of “significant maturity” in relation to a scheme; regulation 4 sets out the meaning of “low dependency investment allocation” in relation to the assets of a scheme; regulation 5 sets out the meaning of “low dependency funding basis” in relation to the calculation of the liabilities of a scheme; and regulation 6 sets out the meaning of “strength of the employer covenant” and how it is assessed.

Regulation 7 sets out how the “relevant date” is to be determined.

Regulation 8 sets out the actuarial methods and assumptions to be used for the purposes of specifying the funding level the trustees and managers intend the scheme to have achieved as at the relevant date. In particular, the liabilities of the scheme for this purpose must be calculated on a low dependency funding basis.

Regulation 9 ensures that when, in determining or revising a scheme’s funding and investment strategy, the trustees or managers of a scheme are required to use actuarial assumptions in the calculation of the liabilities of a scheme on a low dependency funding basis and the duration of liabilities measure, the trustees or managers must choose either the same set of assumptions or, in relation to the economic assumptions in a calculation of the duration of liabilities measure, the same methodology as is used for calculating the other assumptions.

Regulation 10 introduces Schedule 1 which sets out matters the trustees or managers must take into account, and principles they must follow, in determining or revising the scheme’s funding and investment strategy. The matters in Schedule 1 relate to estimates in relation to scheme maturity by the actuary appointed by the trustees or managers, and investment risk on and after the relevant date. The principles in Schedule 1 make provision regarding the minimum requirements that a scheme is subject to on and after the relevant date; the level of risk that can be taken in relation to the calculation of the liabilities of the scheme as it moves towards that date; and the liquidity of the assets of the scheme.

Regulation 11 makes provision regarding the level of detail required in a funding and investment strategy.

Regulation 12 sets out the period within which a funding and investment strategy must be determined and subsequently reviewed and revised.

Part 3 of these Regulations makes provision regarding the statement of strategy. The statement of strategy is prepared by the trustees or managers of a scheme under Article 200B of the 2005 Order (statement of strategy). It consists of two parts: Part 1 is a written statement of the funding and investment strategy, and Part 2 is a written statement of supplementary matters.

Regulation 13 introduces Schedule 2 which sets out supplementary matters to be included in Part 2 of the statement of strategy, in addition to those required by Article 200B of the 2005 Order.

Regulation 14 sets out the period within which Part 2 of a statement of strategy must be reviewed and revised.

Regulation 15 sets out requirements to be met by the person who is the chair of the trustees who is required by Article 200B(6) of the 2005 Order to sign the statement of strategy.

Regulation 16 makes provision regarding the level of detail required in Part 2 of a statement of strategy.

Regulation 17 makes provision regarding the form of the statement of strategy. Regulation 18 makes provision for when the trustees or managers shall send the statement of strategy to the Pensions Regulator.

Part 4 of these Regulations amends the Occupational Pension Schemes (Scheme Funding) Regulations (Northern Ireland) 2005. The amendments made by regulation 19(2), (3) and (5) are to take account of the new requirements relating to funding and investment strategies. In particular, they make provision for additional matters to be included in an actuarial valuation. The amendments made by regulation 19(4) make provision for determining whether a recovery plan is appropriate having regard to the nature and circumstances of the scheme.

As these Regulations make in relation to Northern Ireland only provision corresponding to provision contained in regulations made by the Secretary of State for Work and Pensions in relation to Great Britain, the requirement to consult under Article 289(1) of the 2005 Order does not apply by virtue of paragraph (2)(e) of that Article.

An assessment of the cost to business of the Regulations is detailed in a Regulatory Impact Assessment, a copy of which has been laid in the Business Office and the Library of the Northern Ireland Assembly. Copies of the Assessment are available from the Department for Communities, Social Security Policy, Legislation and Decision Making Services, Level 8, Causeway Exchange, 1-7 Bedford Street, Belfast BT2 7EG or from the website: https://www.communities-ni.gov.uk/articles/pension-information. A copy of the Assessment is also annexed to the Explanatory Memorandum which is available alongside this Statutory Rule on the website: http://www.legislation.gov.uk/nisr.