The Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations (Northern Ireland) 2024

Citation, commencement, application and interpretation

1.—(1) These Regulations may be cited as the Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations (Northern Ireland) 2024 and, subject to paragraph (2), shall come into operation on 30th March 2024.

(2) Regulation 5(2)(a)(iv) shall come into operation on 5th April 2028.

(3) Regulations 2(3)(a) and (4) and 4(a) (requirements to report on specified performance-based fees) apply in relation to the first scheme year of an occupational pension scheme which ends after 6th April 2023.

(4) Regulations 2(3)(b) and (5) and 4(b) to (d) (requirements to assess and report on asset allocation) apply in relation to the first scheme year of an occupational pension scheme which ends after 1st October 2023.

(5) Where, before 6th April 2023, the trustees or managers of an occupational pension scheme have chosen to calculate the charge imposed annually in accordance with the performance-fee smoothing provision, or the trustees or managers have chosen to make the performance-fee smoothing assumption, the amendments in regulation 5(3) to (6) (omission of provisions enabling smoothing of performance fees) do not apply until the first charges year of that scheme which ends after the earlier of—

(a) the date which is 5 years after the end of the first charges year in which the trustees or managers first chose to calculate the charge imposed annually in accordance with the performance-fee smoothing provision, or first chose to make the performance-fee smoothing assumption, and

(b) 5th April 2028.

(6) Regulation 3(2) applies in relation to an occupational pension scheme with effect from the earlier of—

(a) the first date on which the default statement of investment principles prepared in accordance with regulation 2A of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005(1) (additional requirements in relation to default arrangement) is revised after 1st October 2023, and

(b) 1st October 2024.

(7) Regulation 3(3) and (4) (amendment of the requirements relating to the statement of investment principles in the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005) applies in relation to an occupational pension scheme with effect from the earlier of—

(a) the first date on which the statement of investment principles prepared under Article 35 of the Pensions (Northern Ireland) Order 1995 (investment principles) is revised after 1st October 2023, and

(b) 1st October 2024.

(8) For the purposes of this regulation—

“the Charges and Governance Regulations” means the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015(2);

“charges year” and “qualifying collective money purchase scheme”(3) have the meanings given in regulation 2(1) of the Charges and Governance Regulations;

“the performance-fee smoothing assumption” means the assumption set out in regulation 8(3A)(4) (alternative assessment of charges – default arrangements(5)) or 8A(4)(6) (alternative assessment of charges – qualifying collective money purchase schemes), as applicable, of the Charges and Governance Regulations, as those assumptions applied immediately before 6th April 2023;

“the performance-fee smoothing provision” means the provision in regulation 7(10)(7) (assessment of charges – default arrangements(8)) or 7A(10)(9) (assessment of charges – qualifying collective money purchase schemes), as applicable, of the Charges and Governance Regulations, as those provisions applied immediately before 6th April 2023;

“scheme year” has the meaning given in regulation 1(2) of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997(10).

(9) The Interpretation Act (Northern Ireland) 1954(11) shall apply to these Regulations as it applies to an Act of the Assembly.

Amendment of the Occupational Pension Schemes (Scheme Administration) Regulations

2.—(1) The Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997(12) are amended in accordance with paragraphs (2) to (5).

(2) In regulation 1(2) (interpretation) after the definition of “the Solvency 2 Directive”(13) insert—

““specified performance-based fees” has the same meaning as in regulation 2(1)(14) of the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015;”.

(3) In regulation 23(1)(15) (annual statement regarding governance)—

(a) after sub-paragraph (a) insert—

“(aza) state the amount of any specified performance-based fees incurred in relation to each default arrangement (if any) during the scheme year, calculated in accordance with regulation 25(1)(a), as a percentage of the average value of the assets held for the purposes of that default arrangement during the scheme year;”;

(b) after sub-paragraph (cb)(16) insert—

“(cc) state the results of any calculations required by virtue of regulation 25A;”.

(4) In regulation 25(1)(17) (assessment of charges and transaction costs)—

(a) in sub-paragraph (a) after head (iii) add—

“(iv) the specified performance-based fees incurred in respect of assets in the scheme; and”;

(b) in sub-paragraph (b) after “charges” insert “, specified performance-based fees”.

(5) After regulation 25 insert—

“Assessment of asset allocation

25A.— (1) The trustees or managers of a relevant scheme to which this provision applies must, at intervals of no more than one year, calculate the percentage of relevant scheme assets allocated to each of the asset classes in paragraph (3).

(2) This provision applies to a relevant scheme unless it is a collective money purchase scheme which is not a qualifying collective money purchase scheme.

(3) The asset classes are—

(a) cash;

(b) bonds creating or acknowledging indebtedness, issued by—

(i) a company;

(ii) His Majesty’s Government in the United Kingdom; or

(iii) the government of any country or territory other than the United Kingdom;

(c) shares listed on a recognised stock exchange;

(d) shares not listed on a recognised stock exchange;

(e) infrastructure comprising of physical structures, facilities, systems or networks that provide or support essential public services and including water, gas and electricity networks, roads, telecommunications facilities, schools, hospitals and prisons;

(f) property which does not fall within sub-paragraph (e);

(g) instruments creating or acknowledging indebtedness which do not fall within sub-paragraph (b); and

(h) any other assets which do not fall within sub-paragraphs (a) to (g).

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

(5) Where relevant scheme assets are invested in a collective investment scheme, the trustees or managers of the relevant scheme must refer to the assets held by the collective investment scheme when making the calculation required by paragraph (1).

(6) In this regulation—

“collective investment scheme” has the same meaning as in regulation 1(2) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005;

“default arrangement” has the same meaning as in regulation 25;

“qualifying collective money purchase scheme” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015;

“recognised stock exchange” has the meaning given by section 1005 of the Income Tax Act 2007(18);

“relevant scheme assets” means—

(a)

in relation to a relevant scheme which is not a qualifying collective money purchase scheme, the assets allocated to that scheme’s default arrangements; and

(b)

in relation to a qualifying collective money purchase scheme, the assets held for the purposes of the scheme.”.

Amendment of the Occupational Pension Schemes (Investment) Regulations

3.—(1) The Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005(19) are amended in accordance with paragraphs (2) to (4).

(2) In regulation 2A (additional requirements in relation to default arrangement)—

(a) in paragraph (1)—

(i) after sub-paragraph (a) insert—

“(aa) their policy in relation to investment in illiquid assets;”;

(ii) in sub-paragraph (c) after “the aims and objectives mentioned in sub-paragraph (a)” insert “, the policy mentioned in sub-paragraph (aa)”;

(b) after paragraph (1) insert—

“(1A) For the purposes of paragraph (1)(aa), their policy in relation to investment in illiquid assets must include—

(a) a statement as to whether or not investments held for the purposes of the default arrangement will include illiquid assets;

(b) where those investments will include illiquid assets—

(i) a description of the age profile of those members in respect of whom investments will be held in illiquid assets;

(ii) an explanation of whether investments will be held directly in illiquid assets, or via a collective investment scheme;

(iii) an explanation of the types of illiquid assets in which investments will be held, and

(iv) an explanation of why the trustees or managers have a policy of investing in illiquid assets including their assessment of the advantages to members of investing in illiquid assets, when compared to investments in other classes of assets;

(c) where those investments will not include illiquid assets, an explanation of why the trustees or managers have a policy of not investing in illiquid assets, and

(d) an explanation of whether the trustees have any plans to invest in illiquid assets or increase their investment in illiquid assets, in the future.”;

(c) after paragraph (6) insert—

“(6A) For the purposes of this regulation, “illiquid assets” means assets of a type which cannot easily or quickly be sold or exchanged for cash and, where assets are invested in a collective investment scheme, includes any such assets held by the collective investment scheme.”.

(3) After regulation 2A insert—

“Additional requirements in relation to qualifying collective money purchase schemes

2B.— (1) The trustees of a qualifying collective money purchase scheme must ensure that the statement of investment principles prepared under Article 35 covers their policy in relation to investment in illiquid assets with respect to assets held for the purposes of the qualifying collective money purchase scheme.

(2) For the purposes of this regulation, their policy in relation to investment in illiquid assets must include—

(a) a statement as to whether or not investments held for the purposes of the qualifying collective money purchase scheme will include illiquid assets;

(b) where those investments will include illiquid assets—

(i) a description of the age profile of those members in respect of whom investments will be held in illiquid assets;

(ii) an explanation of whether investments will be held in respect of the qualifying collective money purchase scheme directly in illiquid assets, or via a collective investment scheme;

(iii) an explanation of the types of illiquid assets in which investments will be held, and

(iv) an explanation of why the trustees have a policy of investing in illiquid assets, including their assessment of the advantages to members of the qualifying collective money purchase scheme of investing in illiquid assets, when compared to investments in other classes of assets;

(c) where those investments will not include illiquid assets, an explanation of why the trustees have a policy of not investing in illiquid assets, and

(d) an explanation of whether the trustees have any plans to invest in illiquid assets or increase their investment in illiquid assets for the purposes of the qualifying collective money purchase scheme, in the future.

(3) For the purposes of this regulation—

“illiquid assets” has the same meaning as in regulation 2A(6A);

“qualifying collective money purchase scheme” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015.”.

(4) In regulation 6 (disapplication of Article 35 and of regulations 2 and 3 in respect of certain schemes)—

(a) in the heading after “regulations 2” insert “, 2B”;

(b) in paragraph (1) after “regulations 2” insert “, 2B”.

Amendment of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations

4.  In regulation 29A(2) of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2014(20) (publishing charges and transaction costs and other relevant information(21))—

(a) after sub-paragraph (a) insert—

“(aza) paragraph (1)(aza);”;

(b) in sub-paragraph (c) for “(1)(ca), and” substitute “(1)(ca);”;

(c) in sub-paragraph (d) for “(1)(cb).” substitute “(1)(cb), and”;

(d) after sub-paragraph (d) add—

“(e) paragraph (1)(cc).”.

Amendment of the Occupational Pension Schemes (Charges and Governance) Regulations

5.—(1) The Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015(22) are amended in accordance with paragraphs (2) to (6).

(2) In regulation 2 (interpretation)—

(a) in paragraph (1)—

(i) in the definition of “charges” after paragraph (f)(23) add—

“(g) specified performance-based fees;”;

(ii) after the definition of “collective flat fee charge”(24) insert—

““collective investment scheme” has the meaning given in regulation 1(2) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005(25);”;

(iii) after the definition of “flat fee charge” insert—

““fund manager” has the meaning given in Article 121(1) of the 1995 Order;

“fund of funds” means a collective investment scheme which has a policy of investing in other collective investment schemes;”;

(iv) omit the definition of “performance fee”(26);

(v) after the definition of “single charge structure” insert—

““specified performance-based fees” means fees or profit-sharing arrangements, or any part of fees or profit-sharing arrangements, which are—

(a)

payable by or on behalf of the trustees or managers of a pension scheme to a fund manager in relation to investments (“the managed investments”) managed by the fund manager, either directly or as part of a collective investment scheme, for the purposes of the scheme;

(b)

calculated only by reference to investment performance, whether in terms of the capital appreciation of the managed investments, the income produced by the managed investments or otherwise;

(c)

only payable when—

(i)

investment performance exceeds a pre-agreed rate, which may be fixed or variable, or

(ii)

the value of the managed investments exceeds a pre-agreed amount;

(d)

calculated over a pre-agreed period of time, and

(e)

subject to pre-agreed terms designed to mitigate the effects of short-term fluctuations in the investment performance or value of the investments;”;

(b) after paragraph (1A)(27) insert—

“(1B) When determining whether or not fees or profit-sharing arrangements, or any part of fees or profit-sharing arrangements, are specified performance-based fees for the purposes of these Regulations—

(a) a rate, amount, period of time or term is pre-agreed if—

(i) it has been agreed between the trustees or managers and the fund manager to whom the fees are payable, before the trustees or managers make the investments to which the fees relate, or

(ii) where the trustees or managers have invested in a fund of funds, it is set out in the investment policy of the fund of funds to which the trustees or managers agreed when they invested in the fund of funds, and

(b) regard must be had to any guidance issued by the Department by virtue of paragraph 1(2)(b) of Schedule 18 to the Pensions Act (Northern Ireland) 2015 (power to restrict charges).”;

(c) omit paragraphs (4A)(28) and (4B).

(3) In regulation 7 (assessment of charges – default arrangements(29)) omit paragraphs (9)(30), (10), (11) and (12).

(4) In regulation 7A(31) (assessment of charges – qualifying collective money purchase schemes) omit paragraphs (9), (10), (11) and (12).

(5) In regulation 8 (alternative assessment of charges – default arrangements(32))—

(a) in paragraph (2)(33) omit “and, if the trustees or managers so choose, the assumption in paragraph (3A)”;

(b) omit paragraph (3A)(34).

(6) In regulation 8A(35) (alternative assessment of charges – qualifying collective money purchase schemes)—

(a) in paragraph (2) omit “and, if the trustees so choose, the assumption in paragraph (4)”;

(b) omit paragraph (4).

Revocation

6.  The Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment No. 2) Regulations (Northern Ireland) 2023(36) are revoked.

Sealed with the Official Seal of the Department for Communities on 26th March 2024

(L.S.)

Patrick Rooney

A senior officer of the Department for Communities