28CApprovals in respect of asset allocation(1)

The Regulatory Authority (“the Authority”) may approve a relevant Master Trust or a group personal pension scheme in respect of the asset allocation requirement only if the Authority determines that at least the prescribed percentage (by value) of the assets held in main default funds of the scheme are qualifying assets.

(2)

Regulations under subsection (1) may prescribe a percentage by reference to—

(a)

all of the assets of the scheme that are held in main default funds, or

(b)

a prescribed description of the assets of the scheme that are so held.

(3)

In this section “qualifying asset” means an asset of a prescribed description that is held in a main default fund of a relevant Master Trust or group personal pension scheme.

(4)

A description of asset may be prescribed under subsection (3) only if it represents a direct or indirect holding in any of the following asset classes—

(a)

private equity;

(b)

venture capital;

(c)

private credit;

(d)

interests in land;

(e)

infrastructure;

(f)

unlisted equity securities not falling within paragraphs (a) to (e).

In this subsection “unlisted equity securities” means equity securities not listed on a recognised stock exchange within the meaning of the Income Tax Acts (see section 1005 of the Income Tax Act 2007) (including equity securities admitted to trading that are not listed on such an exchange).

(5)

Regulations under subsection (3) must secure that a description of asset is prescribed under that subsection in respect of each asset class mentioned in subsection (4)(a) to (f).

(6)

A description prescribed under subsection (4) may for example relate to—

(a)

whether an asset is located in the United Kingdom or elsewhere;

(b)

the presence or absence of other prescribed factors linking an asset to economic activity in the United Kingdom.

(7)

Regulations under this section may not have the effect of requiring, as a condition of a scheme's approval under subsection (1)—

(a)

more than 10% (by value) of all of the assets of the scheme that are held in main default funds to be qualifying assets, or

(b)

more than 5% (by value) of all of the assets so held to be of a UK-specific description.

(8)

In subsection (7)(b) “UK-specific description” means a description framed by reference to whether an asset is located in the United Kingdom or meets any other condition linked to economic activity in the United Kingdom.

(9)

For the purposes of this section assets of a relevant Master Trust or group personal pension scheme are held in “main default funds” if—

(a)

the jobholders by or in respect of whom contributions have been made to the scheme have not (or predominantly have not) expressed a choice as to where the contributions are allocated, and

(b)

the arrangements under which the assets are held meet any other conditions that may be prescribed.

(10)

Regulations may make provision—

(a)

about how the meeting of the asset allocation requirement is to be evidenced;

(b)

requiring the trustees or managers of relevant Master Trusts or the providers of group personal pension schemes to have regard to any guidance issued by the Secretary of State about the effect of any regulations under this section.

(11)

Regulations may make provision—

(a)

as to a time limit within which the Authority must decide an application for approval;

(b)

as to procedures in connection with approvals or where an approval has been given;

(c)

about the period for which an approval has effect;

(d)

about the withdrawal of an approval, including conditions for and procedures in connection with withdrawals;

(e)

about the provision to the Authority of information required for the purposes of deciding applications (including any additional information the Authority may require in a particular case);

(f)

requiring the Authority to report to the Secretary of State any information the Secretary of State may require relating to the allocation of assets by relevant Master Trusts or group personal pension schemes;

(g)

for the Authority’s decision on the application to be referred to the Upper Tribunal;

(h)

for the Authority to maintain and publish—

(i)

a list of relevant Master Trusts that are approved under this section, and

(ii)

a list of group personal pension schemes that are approved under this section,

(or a single list of the pension schemes mentioned in sub-paragraphs (i) and (ii)).

(12)

Regulations under subsection (11)(d) may in particular make provision—

(a)

about steps, including communications with a relevant Master Trust or group personal pension scheme, that the Authority must take before deciding to withdraw an approval;

(b)

setting a minimum period that must elapse between notification that approval is to be withdrawn and the withdrawal of the approval;

(c)

where the Authority has given notice to the trustees or managers of a relevant Master Trust or the provider of a group personal pension that its approval is likely to be withdrawn and any other prescribed conditions are met, requiring the trustees or managers or provider to—

(i)

act in relation to the scheme as if its approval has been withdrawn, and

(ii)

take steps for ensuring that persons (such as employers) who may be affected in the event of the scheme losing that approval are promptly informed if such a loss should occur;

(d)

permitting the Authority to impose, on a person who fails to comply with a requirement under paragraph (c), a penalty determined in accordance with the regulations that does not exceed £100,000.

(13)

Before making regulations under subsection (1) the Secretary of State must prepare and publish a report setting out—

(a)

a joint assessment by the Financial Conduct Authority and the Pensions Regulator of the extent to which there is evidence of competitive conditions restricting relevant Master Trusts and group personal pension schemes from investing in qualifying assets, including in circumstances where such investments may be in the best interests of members of such schemes;

(b)

the Secretary of State’s assessment of the extent to which relevant Master Trusts and group personal pension schemes have made progress towards achieving—

(i)

10% (by value) of scheme assets held in main default funds to be qualifying assets, and

(ii)

5% (by value) of scheme assets so held to be of a UK-specific description (within the meaning of subsection (7)(b));

(c)

the Secretary of State’s assessment of any barriers to relevant Master Trusts or group personal pension schemes investing in qualifying assets, including in particular where such assets are located in the United Kingdom;

(d)

the steps taken by the Secretary of State or the Authority to address any such barriers;

(e)

how the financial interests of members of relevant Master Trusts and group personal pension schemes are or would be affected by the proposed regulations;

(f)

what effects the proposed measures could be expected to have on economic growth in the United Kingdom;

(g)

any other matters the Secretary of State considers appropriate.

(14)

The power to make regulations under subsection (1) may only be exercised once.

(15)

Before making regulations under subsection (1), the Secretary of State must have regard to the joint assessment of the Financial Conduct Authority and the Pensions Regulator mentioned in subsection (13)(a).

(16)

Before making regulations under this section, the Secretary of State must consult the Treasury.

(17)

The Secretary of State must consult such persons as the Secretary of State considers appropriate before publishing a report under subsection (13).

(18)

The Secretary of State may not make regulations under subsection (1) before 1 January 2028.

(19)

Provision under this section overrides any provision of the trust deed or rules of the scheme in question, so far as they are in conflict (and for that purpose, a provision of the trust deed or rules of the scheme is “in conflict” with provision under this section so far as the former does not allow for the assets of the scheme to be managed in such a way as to meet the conditions for approval under this section).