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

“(1B)

Paragraph (1)(cb) does not apply if—

(a)

the Pensions Regulator has been notified under Article 57(4) or (5) of the 2005 Order12 (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).”.

“(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 22514 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 200415 (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)16 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.”;

“(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) 199717 (requirement of trustees or managers to obtain documents);

“core financial transactions” has the same meaning as in regulation 2418 (requirements for processing financial transactions);

“default arrangement” has the meaning given in regulation 1(2) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 200519;

“default investment strategy” means the default strategy referred to in regulation 2A(1)(c)20 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)21 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—

1. (i)

   held total assets worth less than £100 million, and

2. (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.”.

“(db)

the value of the assets held by the scheme for the purpose of providing benefits to members, calculated on the last day of the scheme year which ended most recently;”;

“(ha)

subject to paragraph (3A), in the case of a specified scheme—

(i)

whether, on the basis of the most recent assessment required by virtue of regulation 25(1A) of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997 (assessment of charges and transaction costs), the trustees or managers of the scheme consider that the scheme provides good value for members;

(ii)

where a value assessment was carried out for the previous scheme year, whether, on the basis of that value assessment, the trustees or managers of the scheme considered that the scheme provided good value for members;

(hb)

subject to paragraph (3A), in the case of a specified scheme where the trustees or managers of the scheme have stated under sub-paragraph (ha)(i) that they do not consider that the scheme provides good value for members—

(i)

whether the trustees or managers propose to transfer the money purchase benefits of its members into another scheme, and whether or not they also propose to wind up the scheme, and

(ii)

if the trustees or managers do not propose to wind up the scheme—

(aa)

their reasons for not doing so, and

(bb)

what improvements they propose to make to the scheme to ensure that it does provide good value for members,”.

“(6)

For the purposes of this regulation, “transaction costs” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015.”.

“(1A)

For the purposes of the definition of “charges”, the costs solely attributable to holding a physical asset include—

(a)

the costs of managing and maintaining the asset;

(b)

fees for valuing the asset;

(c)

the cost of insuring the asset;

(d)

ground rent charges, rates, taxes and utilities bills incurred in relation to the asset.”;

“(4A)

When a charge under a single charge structure is calculated on a pro rata basis under paragraph (3) and paragraph (4B) applies, no account is to be taken of any performance fee charged within the period for which the calculation is made.

(4B)

This paragraph applies if the performance fee in question is calculated and deducted from the value of the investments to which it relates each time the value of those investments is calculated for the purposes of buying or selling units.”.

“(3A)

The assumption which may be made for the purposes of paragraph (2) is that, where the charges include a performance fee to which regulation 7(10) applies, the charge to be imposed on the member in relation to the forthcoming charges year will be X divided by Y, where—

(a)

X is the sum of the performance fees accrued in relation to the return earned by the assets in the default arrangement during each of the years preceding the charges year in question, up to a maximum of 5 preceding charges years, and

(b)

Y is—

(i)

5, or

(ii)

where the investment period is less than 5 charges years, the number of charges years in the relevant period.”.

“(6)

The prohibition in paragraph (2) does not apply to a charge imposed to reimburse a service provider for any payment made to an adviser for advice or a service referred to in paragraph (3)(a) or (b) where—

(a)

the charge is imposed under a relevant contract which—

(i)

was entered into before 6th April 2016, and

(ii)

has not been varied or renewed on or after that date, and

(b)

the payment was made before 1st October 2021.”;

“(7)

Where the prohibition in paragraph (2) applies it overrides any term of a relevant contract to the extent that the term conflicts with it.”.

“(2A)

This paragraph applies where the relevant contract—

(a)

was entered into before 6th April 2016, and

(b)

has not been varied or renewed on or after that date.

(2B)

Subject to paragraph (5), where paragraph (2A) applies regulation 11A does not apply until the expiry of the period of 6 months beginning with 1st October 2021.”;

“(3A)

In a case to which paragraph (2A) applies, subject to paragraph (5), the service provider must confirm in writing to the trustees or managers of the specified scheme within one month beginning with 1st April 2022 that it is complying with the prohibition in regulation 11A(2) in relation to all members to whom paragraph (2A) applies.”;