The Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015

Made: 16th July 2015

Coming into operation in accordance with regulation 1

The Department for Social Development makes the following Regulations in exercise of the powers conferred by sections 109(1) and 177(2) to (4) of the Pension Schemes (Northern Ireland) Act 1993 , Articles 35(1), (3) and (4), 36(1), (1A)(a) and (9), 47(6)(a), 68(2)(e) and 166(1) to (3) of the Pensions (Northern Ireland) Order 1995 , Article 3(5) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 , and now vested in it , Articles 55(2)(h), 236(1) and 287 of the Pensions (Northern Ireland) Order 2005 and sections 42 and 51(6) of, and paragraphs 1(1), (2)(a), (3) and (5), 2(1) to (3) and (5), 3, 6 and 7 of Schedule 18 to, the Pensions Act (Northern Ireland) 2015 .

PART 1 — INTRODUCTION

Citation and commencement

1

• (1) These Regulations may be cited as the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015.

• (2) Subject to paragraph (3), these Regulations shall come into operation on 17th July 2015.

• (3) The following provisions shall come into operation on 6th April 2016—

• (a) in regulation 4(2) the words “With the exception of regulation 11,”;

• (b) regulation 11, and

• (c) regulation 23.

Interpretation

2

• (1) In these Regulations—

• “the Administration Regulations” means the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997[^f00007];

• “annually” means per charges year;

• “arrangement” means an allocation of contributions to— an investment, or more than one investment according to a strategy adopted by the trustees or managers;

• “charges” means administration charges other than— transaction costs; where an order of the court provides for the recovery by the trustees or managers of costs incurred in complying with the order, the amount of those costs; charges permitted by regulations made under Article 22[^f00008] (charges by pension arrangements in relation to earmarking orders) or 38 (charges in respect of pension sharing costs) of the Welfare Reform and Pensions (Northern Ireland) Order 1999; winding-up costs; costs solely associated with the provision of death benefits;

• “charges year” means a period of 12 months specified for the purposes of the scheme in any scheme document or, if no such year is specified, a period of 12 months commencing on— either 1st or 6th April as the trustees or managers may decide, or if no such decision is made, 1st April;

• “combination charge structure” has the meaning given in regulation 5(3);

• “contributing member” is a member of a relevant scheme in relation to whom a contribution is being made to that scheme for the purposes of accruing money purchase benefits;

• “contribution”, in relation to a member, means a payment made by, or on behalf or in respect of, that member;

• “contribution percentage charge” has the meaning given in regulation 5(3);

• “default arrangement” has the meaning given in regulation 3;

• “employer” has the meaning given in section 78 of the Pensions (No. 2) Act;

• “executive pension scheme” means a scheme— in relation to which a company is the only employer and the sole trustee, and the members of which are either current or former directors of the company and include at least one third of the current directors;

• “existing rights charge” has the meaning given in regulation 5(3);

• “flat fee charge” has the meaning given in regulation 5(3);

• “jobholder” has the meaning given in section 78 of the Pensions (No. 2) Act;

• “qualifying scheme” has the meaning given in section 78 of the Pensions (No. 2) Act;

• “relevant small scheme” means a scheme with fewer than 12 members, where— all the members are trustees of the scheme and either— the provisions of the scheme provide that any decision made by the trustees is made by the unanimous agreement of the trustees who are members of the scheme, or the scheme has a trustee who is independent in relation to the scheme for the purposes of Article 23[^f00009] of the 1995 Order (power to appoint independent trustees), and is registered in the register maintained by the Regulator in accordance with regulations made under Article 23(4) of the 1995 Order, or all the members are directors of a company which is the sole trustee of the scheme and either— the provisions of the scheme provide that any decision made by the company in its capacity as a trustee is made by the unanimous agreement of the directors who are members of the scheme, or one of the directors of the company is independent in relation to the scheme for the purposes of Article 23 of the 1995 Order and is registered in the register maintained by the Regulator in accordance with regulations made under Article 23(4) of the 1995 Order;

• “single charge structure” has the meaning given in regulation 5(2);

• “transaction costs” means the costs incurred as a result of the buying, selling, lending or borrowing of investments;

• “winding-up costs” means the costs of winding up the pension scheme including (but not limited to) the cost of— legal advice; tracing, consulting and communicating with members; advice on exiting investments, and selection of an alternative scheme or investments;

• “worker” has the meaning given in section 78 of the Pensions (No. 2) Act;

• “writing”’ includes by electronic communication and “electronic communication” has the meaning given in section 4(1) of the Electronic Communications Act (Northern Ireland) 2001[^f00010].

• (2) For the purposes of paragraph 1(5) of Schedule 18 to the Pensions Act (Northern Ireland) 2015, “relevant scheme” means—

• (a) an occupational pension scheme under which all the benefits which may be provided are money purchase benefits, or

• (b) where some but not all the benefits which may be provided under an occupational pension scheme are money purchase benefits, that scheme in so far as it relates to those benefits,

other than a scheme with only one member, an executive pension scheme or a relevant small scheme.

• (3) Where, in these Regulations, the circumstances require one or more of the calculations listed in paragraph (4) to be made in relation to a period of less than a charges year, that calculation shall be done on a pro rata basis.

• (4) The calculations referred to in paragraph (3) are—

• (a) a charge under a single charge structure;

• (b) a flat fee charge;

• (c) an existing rights charge.

• (5) The Interpretation Act (Northern Ireland) 1954[^f00011] shall apply to these Regulations as it applies to an Act of the Assembly.

Default arrangement

3

• (1) Subject to paragraph (6), a “default arrangement”, in relation to an employer, means an arrangement which—

• (a) on or after the relevant date is used by a qualifying scheme (which is a relevant scheme) in relation to one or more relevant jobholders, and

• (b) satisfies one or more of the descriptions in paragraph (2).

• (2) The descriptions referred to in paragraph (1) are—

• (a) an arrangement under which the contributions of one or more workers are allocated to a fund or funds where those workers have not expressed a choice as to where those contributions are allocated;

• (b) subject to paragraph (3), an arrangement which, on the relevant date, was an arrangement under which the contributions of 80% or more of the workers who were contributing members of the scheme on that date were allocated where those workers were required to make a choice as to where their contributions were allocated;

• (c) an arrangement which first received contributions from workers after the relevant date, and under which, at any point after the relevant date, the contributions of 80% or more of workers who are contributing members of the scheme are allocated where those workers were required to make a choice as to where their contributions are allocated.

• (3) An arrangement does not satisfy the description in paragraph (2)(b) if, at any time before the relevant date—

• (a) each worker whose contributions were allocated under the arrangement (“the original arrangement”) at that time was informed that contributions payable on or after the relevant date would be allocated under a default arrangement satisfying the description in paragraph (2)(a) (“the new arrangement”) unless the worker agreed that allocation of the worker’s contributions under the original arrangement should continue, and

• (b) in the event that a worker did not agree that allocation of that worker’s contributions to the original arrangement should continue, that worker’s contributions payable on or after the relevant date were allocated to the new arrangement.

• (4) A worker’s agreement, referred to in paragraph (3)(a), must—

• (a) be in writing, and

• (b) include a statement that the worker acknowledges that charges under the original arrangement may be higher than would otherwise be permitted under these Regulations.

• (5) Where an arrangement is a default arrangement in relation to an employer by virtue of paragraph (1), it continues to be such an arrangement regardless of whether it continues to satisfy that paragraph.

• (6) An arrangement is not a default arrangement if—

• (a) at any time before a benefit under that arrangement comes into payment, it provides for a pensions promise to be obtained from a third party in relation to any such benefit, or

• (b) it provides no benefits other than benefits which are attributable to additional voluntary contributions.

• (7) For the purposes of paragraph (6)—

• (a) a “pensions promise” is a promise about the level of the benefit;

• (b) an arrangement provides for a promise to be obtained from a third party if it—

• (i) requires the promise to be obtained from a third party, or

• (ii) provides for the worker to be given the option of requiring a promise to be obtained from a third party (whether or not the option is subject to conditions).

• (8) For the purposes of paragraph (7)(a), a promise about the level of the benefit includes a promise about factors that will be used to calculate the level of the benefit, but does not include a promise if, or to the extent that, it consists merely of a promise that the level of benefit will be calculated by reference to an amount available for its provision.

• (9) In this regulation—

• “contributing member” does not include a member whose contributions are solely additional voluntary contributions;

• “relevant date” means the date referred to in regulation 1(2) or, if later, the employer’s staging date;

• “relevant jobholder” means a jobholder of the employer referred to in paragraph (1);

• “staging date” means the date on which sections 2[^f00012] to 9 of the Pensions (No. 2) Act (employers’ duties) first apply to the employer;

• “worker” means a worker of the employer referred to in paragraph (1).

PART 2 — RESTRICTIONS ON CHARGES

Restrictions on charges

4

• (1) Subject to regulations 9 and 10, the trustees or managers of a relevant scheme must not impose or permit to be imposed on a member of that scheme to whom this Part applies charges which—

• (a) exceed the limits specified in this Part, or

• (b) are of a description prohibited by this Part.

• (2) With the exception of regulation 11, this Part applies—

• (a) to a member of a relevant scheme to the extent of the value of that member’s rights under a default arrangement, and

• (b) beginning with the date on which the first contribution to the default arrangement referred to in sub-paragraph (a) is received by the trustees or managers on or after the date on which this regulation comes into operation.

Prohibited charge structures

5

• (1) The description of the charges which are prohibited under regulation 4(1)(b) are charges under a charge structure other than—

• (a) a single charge structure, or

• (b) a combination charge structure.

• (2) In these Regulations, a “single charge structure” is one under which the charges imposed on the member are calculated solely by reference to the value of the member’s rights under the scheme.

• (3) In these Regulations, a “combination charge structure” is one under which charges are calculated by reference to the value of the member’s rights under the scheme (an “existing rights charge”) and either—

• (a) calculated as a percentage of the value of contributions (a “contribution percentage charge”), or

• (b) calculated by reference to a period of time and not by reference to contributions or to the value of a member’s rights under the scheme (a “flat fee charge”).

• (4) For the purposes of regulation 4(1)(b), neither the charge structure, nor the type of combination charge structure, that applies to a member may be changed during a charges year.

Limits on charges

6

• (1) The limits on charges for the purposes of regulation 4(1)(a) are the limits specified in this regulation and the trustees or managers must choose whether to assess them in accordance with regulation 7 or 8 (but see regulation 8(6)).

• (2) The limit in relation to a single charge structure is 0∙75% annually of the value of the member’s rights under the default arrangement.

• (3) The limit in the case of a combination charge structure whose charges fall within regulation 5(3)(a) is—

• (a) in relation to the contribution percentage charge, 2∙5% of the contributions allocated under the default arrangement—

• (i) annually, or

• (ii) where in relation to a charges year, regulation 4 does not apply to the member for the whole of the year, in the period for which that regulation applies, and

• (b) in relation to the existing rights charge, the percentage annually of the value of the member’s rights under the default arrangement which is the figure in Column 2 of the following Table which corresponds to the contribution percentage charge rate in Column 1 of the Table which is imposed on the member.

Column 1	Column 2
Contribution percentage charge rate (%)	Existing rights charge rate (%)
1 or lower	0∙6
Higher than 1 but no higher than 2	0∙5
Higher than 2 but no higher than 2∙5	0∙4

• (4) The limit in the case of a combination charge structure whose charges fall within regulation 5(3)(b) is—

• (a) in relation to the flat fee charge, £25 annually, and

• (b) in relation to the existing rights charge, the percentage annually of the value of the member’s rights under the default arrangement which is the figure in Column 2 of the following Table which corresponds to the annual flat fee charge in Column 1 of the Table which is imposed on the member.

Column 1	Column 2
Flat fee charge (£)	Existing rights charge rate (%)
10 or less	0∙6
More than 10 but no more than 20	0∙5
More than 20 but no more than 25	0∙4

Assessment of charges

7

• (1) If the trustees or managers make the choice under regulation 6(1) to assess charges in accordance with this regulation, the following provisions apply.

• (2) Trustees or managers must calculate the value of the member’s rights under the default arrangement at reference points set at equal intervals during the charges year of no more than 3 months (but see paragraphs (3), (6) and (7)).

• (3) Where trustees or managers change the intervals between reference points chosen for the purposes of paragraph (2) during the charges year, the start of the first new interval must commence on the day following the reference point at the end of the previous interval.

• (4) The limit of permitted charges under—

• (a) a single charge structure, or

• (b) an existing rights charge in a combination charge structure,

is exceeded if the charges imposed on the member annually exceed the average of the reference point values multiplied by the applicable percentage.

• (5) The applicable percentage is—

• (a) in the case of a single charge structure, 0∙75%, and

• (b) in the case of an existing rights charge in a combination charge structure, the percentage in Column 2 of the Table—

• (i) in regulation 6(3), where a contribution percentage charge is imposed, and

• (ii) in regulation 6(4), where a flat fee is imposed.

• (6) Where a member has rights in the default arrangement at only one reference point referred to in paragraph (2), paragraph (4) is to be read as if “average of the reference point values” read “value at the reference point”.

• (7) Where a member has no rights in the default arrangement at a reference point referred to in paragraph (2), paragraph (4) is to be read as if “average of the reference point values” read “value of that member’s rights in the default arrangement on the final day of the charges year or, where the member has no such rights on that day, on the final day on which the member has such rights,”.

• (8) In this regulation, monthly, 2 monthly and 3 monthly intervals are to be treated as equal intervals.

Alternative assessment of charges

8

• (1) If the trustees or managers make the choice under regulation 6(1) to assess charges in accordance with this regulation, the limit of permitted charges under—

• (a) a single charge structure, or

• (b) an existing rights charge in a combination charge structure,

is not exceeded, if on the first day of the charges year, the charges regime to be applied to the member’s rights meets the requirement in paragraph (2) and that charges regime is applied to the member’s rights throughout that charges year.

• (2) The requirement referred to in paragraph (1) is that the charges regime would not result in charges being imposed on the member exceeding the limit of permitted charges when calculated in accordance with regulation 7, if the assumptions in paragraph (3) are made for the purposes of those calculations.