The Stakeholder Pension Schemes (Amendment) Regulations (Northern Ireland) 2005

Explanatory Note

(This note is not part of the Regulations.)

These Regulations amend the Stakeholder Pension Schemes Regulations (Northern Ireland) 2000 (“the principal Regulations”).

Regulation 1 provides for citation and commencement.

Regulation 2(2) amends regulation 1 of the principal Regulations. The definition of “securities” is amended so as to include shares in an investment trust, and the definition of the “dilution levy” is amended by reference to the Financial Services Authority (“the FSA”) Handbook. The provision in regulation 1(8) of the principal Regulations for references to notice in writing to be taken to include notice sent to a member of a scheme electronically is replaced by a provision to allow all of the communications to members provided for in the Regulations to be sent electronically.

Regulation 2(4) amends regulation 6 of the principal Regulations, which provides for the trustees or manager of a scheme which is in the course of winding up to transfer the rights of members to another scheme. The effect of the amendment is that a member who withdraws an application for a transfer to a scheme of his choice must be given a month’s notice before the trustees or manager of the scheme may transfer his rights to a scheme of their choice.

Regulation 2(5) amends regulation 8 of the principal Regulations which prohibits the trustees or manager of a scheme from holding units or shares in a collective investment scheme or an insurance-linked fund which are not “single-priced”. The amendment is intended to make it clear that this prohibition only applies in relation to investments held directly by the trustees or manager and not to investments held by the collective investment scheme or fund.

Regulation 2(6) inserts regulations 10A to 10E into the principal Regulations to provide for the rights of a member of a stakeholder pension scheme who has made no choice as to how his contributions should be invested to be subject to “lifestyling”, from at least five years before his retirement date. “Lifestyling” is defined in regulation 10A(5) as a process aimed at reducing the potential for variations in the value of a member’s rights caused by market conditions. Regulation 10B excludes the obligation to provide for lifestyling in the case of a scheme which is closed to new members, and regulation 10E allows individual members to opt out of the lifestyling process before it has begun. Lifestyling is to be provided automatically in the case of eligible members joining a scheme after these Regulations come into operation, but only on request (following a notification procedure provided for in regulation 10D) in the case of existing members.

Regulation 2(8) and (9) concerns the deductions that the trustees or manager of a scheme may make to sums attributable to the rights of members. Regulation 13(2) of the principal Regulations, which provides for deductions to be made in order to comply with orders made in matrimonial proceedings, is extended to cover compliance with court orders generally. Regulation 14 of the principal Regulations is replaced by regulations 14 to 14C, which incorporate a number of changes. The cap on charges deducted from the value of a member’s rights is raised, in respect of the first 10 years of membership for individuals joining a scheme on or after 6th April 2005, from 1 per cent. to 1.5 per cent. per year; the cap is also expressly applied in relation to indirect as well as direct management costs. The range of permitted deductions is extended to include costs incurred in complying with a court order, indirect as well as direct dealing costs, charges connected with property holdings and market value adjustments. Regulation 14B gives the trustees or manager of a scheme the option of deducting dealing costs and charges connected with property holdings from the value of funds held for the purposes of the scheme rather than the value of members' rights.

Regulation 2(10) amends regulation 15 of the principal Regulations under which the trustees or manager of a scheme invested in a with-profits fund must obtain actuarial certificates from the insurer maintaining the fund. The effect of the amendments is that certificates relating to the insurer’s supervisory systems and controls and certificates needed in order to allow the trustees or manager to make declarations about systems and controls relating to the scheme may be given by the same person. The amendments are made to take account of changes to rules of the FSA concerning actuarial functions.

The regulations also make consequential amendments and revocations.

An assessment of the cost to business of these Regulations is detailed in a Regulatory Impact Assessment, copies of which have been laid in the Business Office and the Library of the Northern Ireland Assembly. Copies of the Assessment are available from the Department for Social Development, Social Security Policy and Legislation Division, Room 5, Block 5, Stormont Estate, Upper Newtownards Road, Belfast BT4 3SJ.