The Stakeholder Pension Schemes (Amendment) (No.2) Regulations 2001

Made: 13th March 2001

Laid before Parliament: 15th March 2001

Coming into force: 5th April 2001

The Secretary of State for Social Security, in exercise of powers conferred by sections 3(2), 10(3), 41(1) and (6), 124(1) and 174(2) and (3) of the Pensions Act 1995, and sections 1(1)(b), (3), (5) and (7), 3(1), (3)(b), (5) and (9), 8(1), and 83(4)(a) and (b) and (6)(a) and (b) of the Welfare Reform and Pensions Act 1999, and of all other powers enabling him in that behalf, having consulted such persons as he considered appropriate, hereby makes the following Regulations:

Citation, commencement and interpretation

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• (1) These Regulations may be cited as the Stakeholder Pension Schemes (Amendment) (No.2) Regulations 2001 and shall come into force on 5th April 2001.

• (2) In these Regulations, unless the context otherwise requires, a reference to a numbered regulation or numbered schedule, is to the regulation or schedule bearing that number in the Stakeholder Pension Schemes Regulations 2000 .

Amendment of regulation 1

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• (1) Regulation 1 (citation, commencement and interpretation) shall be amended as follows.

• (2) In paragraph (2) for “and Part IV shall come into force on 8th October 2001.” substitute—

and— (a) regulation 23 shall come into force on 6th April 2001; and (b) Part IV (except regulation 23) shall come into force on 8th October 2001.

• (3) In paragraph (3)—

• (a) after the definition of “beneficiary” insert—

“dilution levy” has the meaning given by— (a) in relation to— (i) a scheme to which Part 4A (single pricing and dealing) of The Financial Services (Regulated Schemes) Regulations 1991 applies; or (ii) where a scheme to which those Regulations apply has constituent parts for the purposes of Table 12.1 of those Regulations (umbrella schemes: application of regulations) as modified by Part 4C of those Regulations (single pricing: adaptation of regulations), each such constituent part to which that Part 4A applies, Schedule 4 to those Regulations as modified by that Part 4C; (b) in relation to a company in relation to which The Financial Services (Open-Ended Investment Companies) Regulations 1997 apply, Schedule 3 to those Regulations;

and

• (b) after the definition of “reporting accountant” insert—

“scheme instruments” means instruments establishing a stakeholder pension scheme;

• (4) After paragraph (7) insert—

(8) In paragraph (3), references in the definition of “dilution levy” to— (a) The Financial Services (Regulated Schemes) Regulations 1991 are references to those Regulations; and (b) The Financial Services (Open-Ended Investment Companies) Regulations 1997 are references to those Regulations, as in force on the date on which the Stakeholder Pension Schemes (Amendment) (No.2) Regulations 2001 were made.

Amendment of regulation 3

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• (1) Regulation 3 (requirements applying to all stakeholder pension schemes as regards instruments establishing such schemes) shall be amended as follows.

• (2) In paragraph (1) for “the instruments establishing a stakeholder pension scheme (the “scheme instruments”)” substitute “ the scheme instruments ”.

• (3) In paragraph (5A) for “Subject to paragraphs (10) and (11) and to regulation 17(1),” substitute—

Subject to paragraph (10) and to regulation 17(1) and (5),

• (4) After paragraph (5A) insert—

(5B) The scheme instruments must, except to the extent necessary to ensure that the scheme has tax-exemption or tax-approval, permit as means of payment of contributions to the scheme payment from a bank account or building society account by— (a) cheque; (b) direct debit; (c) standing order; (d) direct credit (other than standing order), and (for the avoidance of doubt) for the purposes of this paragraph, those means of payment do not include payment by cash, credit card or debit card (or by any combination thereof).

• (5) Omit paragraph (11).

Amendment of regulation 4

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• (1) Regulation 4 (additional requirements as regards instruments establishing a stakeholder pension scheme established under a trust) shall be amended as follows.

• (2) In paragraph (3) for “The instruments establishing a stakeholder pension” substitute “ The scheme instruments of a ”.

• (3) In paragraph (4)(a) for “or by this regulation” substitute “ , by this regulation or by regulation 6 ”.

Amendment of regulation 8

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In regulation 8(6) (requirement applying to all stakeholder pension schemes as regards investments) for the definition of “contract of insurance” substitute—

“contract of insurance” means a contract— (a) any (or any part) of whose objects is within any of classes I, III and VII of insurance business specified in Schedule 1 to the Insurance Companies Act 1982 (classes of long term business); and (b) which is carried out by a person authorised under that Act to carry on insurance business including carrying out such a contract;

Amendment of regulation 10

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• (1) Regulation 10 (requirement for manager of schemes not established under a trust to have regard to certain matters, and to take advice, relating to investment) shall be amended as follows.

• (2) In paragraph (4) after “proper advice as to whether the investment” insert “ or investment option ”.

• (3) After paragraph (4) insert—

(4A) The manager of the scheme, and any person managing funds held for the purposes of the scheme, must, if retaining any investment or investment option for the purposes of the scheme— (a) determine at what intervals the circumstances, and in particular the nature of the investment or investment option, make it desirable to obtain and consider in relation to that investment or investment option such advice as is mentioned in paragraph (4); and (b) obtain and consider such advice accordingly.

• (4) In paragraph (5) for “For the purposes of paragraph (4)” substitute “ For the purposes of this regulation ”.

• (5) In paragraph (6)—

• (a) for “Paragraph (4) does not apply” substitute “ Paragraphs (4) and (4A)(b) do not apply ”; and

• (b) for “themselves” substitute “ himself ”.

• (6) In paragraph (7)—

• (a) after “To the extent that paragraph (4)” insert “ or (4A)(b) ”; and

• (b) for “persons who may themselves give proper advice” to the end substitute—

a person who may himself give proper advice— (a) must— (i) before making any investment or selecting any investment option for the purposes of the scheme, consider; and (ii) if so retaining any investment or investment option, consider at such intervals as are determined by him in relation to that investment or investment option under paragraph (4A)(a), whether the investment or investment option is satisfactory having regard to the matters mentioned in paragraph (3) and the principles contained in the statement under regulation 9; and (b) must record in writing the reasons why he considers that any— (i) investment he makes or retains; or (ii) investment option he selects or retains, is satisfactory having regard to those matters and principles.

• (7) For paragraph (8) substitute—

(8) No person shall be regarded as having complied with— (a) paragraph (4) unless the advice to be obtained and considered by him under that paragraph is given or (by the giver of the advice) confirmed in writing; (b) paragraph (4A)(a) unless the determination to be made by him under that paragraph is recorded by him in writing; (c) paragraph (4A)(b) unless the advice to be obtained and considered by him under that paragraph is given or (by the giver of the advice) confirmed in writing.

Amendment of regulation 11

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• (1) Regulation 11 (requirement for manager of schemes not established under trust to appoint a reporting accountant) shall be amended as follows.

• (2) In paragraph (1) for “Subject to paragraph (2), for” substitute “ For ”.

• (3) Omit paragraph (2).

• (4) For paragraph (3) substitute—

(3) There shall be appointed as reporting accountant for the scheme (“the reporting accountant”), by the trustees or manager of the scheme, a person who is eligible under paragraph (4) for such appointment.

• (5) For paragraph (4) substitute—

(4) A person is eligible for appointment as the reporting accountant only if— (a) he is not or, in the case of a partnership, no partner or employee of the partnership is a member of the scheme; (b) he is not or, in the case of a partnership, neither the partnership nor any partner or employee of the partnership is connected with or an associate of the manager, or any of the trustees, of the scheme; (c) he is eligible (but subject to paragraph (10)) under section 25 of the Companies Act 1989 (“the 1989 Act”) for appointment as a company auditor; and (d) he is not by virtue of section 27 of the 1989 Act ineligible for appointment as company auditor of a company which is an employer in relation to the scheme.

• (6) In paragraphs (6) to (8), for “manager” in each place where it occurs substitute “ trustees or manager ”.

• (7) In paragraph (7)—

• (a) after “in the event of his resignation” insert “ (including where he resigns solely or partly because he is required to do so by paragraph (7A)) ”; and

• (b) for sub-paragraph (b) substitute—

(b) a declaration that he knows of no such circumstances, but for the purposes of this paragraph, such circumstances shall not include the mere fact of his being, or having become, ineligible as mentioned in paragraph (7A).

• (8) After paragraph (7) insert—

(7A) Where the reporting accountant is or becomes ineligible, by virtue of paragraph (11) or of not satisfying the conditions in paragraph (4), for his appointment as such— (a) he shall not act as the reporting accountant (except if required to do so under paragraph (6), and except as required by his agreement under paragraph (7) and as required by sub-paragraphs (c) and (d)); (b) anything done for the purposes of these Regulations by him acting as such while ineligible in contravention of sub-paragraph (a) shall by the trustees or manager be taken for those purposes not to have been done; (c) he shall resign (with immediate effect) by notice in writing immediately he is or becomes aware, or, as the case may be, should reasonably be or become aware, that he is or has become so ineligible; (d) he shall state in that notice— (i) that he is resigning by reason of ineligibility; and (ii) the ground on which he is or has become so ineligible; (e) notwithstanding sub-paragraph (c), if he is still in place when the trustees or manager are or become aware, or should reasonably be or become aware, that he is or has become so ineligible, the trustees or manager shall remove him immediately.

• (9) In paragraph (8)—

• (a) for “Where” substitute “ Except in cases falling within paragraph (9), where ”; and

• (b) for “shall appoint” to the end substitute—

shall appoint, in accordance with this regulation, another reporting accountant— (a) within 3 months of the date of that removal, resignation or death; or (b) if earlier, as soon as is required in order not to prevent compliance with regulation 12(5) and (6).

• (10) After paragraph (8) insert—

(9) Where under paragraph (7A) the reporting accountant resigns with immediate effect or is removed, the trustees or manager shall appoint, in accordance with this regulation, another reporting accountant— (a) within one month of the date of that resignation or removal; or (b) if earlier, as soon as is required in order not to prevent compliance with regulation 12(5) and (6). (10) For the purposes of paragraph (4)(c), a person is not eligible under section 25 of the 1989 Act for appointment as a company auditor if section 34 of that Act applies to him (individuals retaining only authorisation under section 13(1) of the Companies Act 1967) . (11) In this regulation references to a person are references to an individual, a body corporate or a partnership.

Amendment of regulation 12

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• (1) Regulation 12 (requirement for annual declaration) shall be amended as follows.

• (2) In paragraph (2)—

• (a) after “ending on” insert “ and including ”; and

• (b) for sub-paragraphs (a) to (d) substitute—

(a) a statement that the trustees or manager are responsible for ensuring— (i) that there are in place; and (ii) proper use of, systems which and controls which ensure the proper administration of the scheme; (b) a statement describing each of the— (i) principal systems; and (ii) principal controls, designed to ensure the proper administration of the scheme and which were in place for all or any part of the period in relation to which the declaration is made (whether put in place during or prior to that period); (c) a statement, in relation to each of those principal systems and principal controls, of which particular aspect of the proper administration of the scheme that system or control was designed to ensure; (d) a statement that the (not merely the principal) systems designed as mentioned in sub-paragraph (b) and in place as so mentioned, and controls so designed and so in place, were overall of a design such that, and used such that, they provide reasonable assurance— (i) in relation to each of those systems and controls, that there has been ensured that particular aspect of the proper administration of the scheme which that system or control was designed to ensure; and (ii) that the statement made under sub-paragraph (e) is true; (e) a statement— (i) that regulations 13 and 14 of these Regulations have been complied with in relation to the scheme; (ii) that transactions for the purposes of the scheme in securities, property or other assets occur at a fair market value; (iii) that the value of members’ rights has been determined in accordance with the provisions in the instruments establishing the scheme; and (iv) that adequate accounts and records have been maintained for the purposes of providing to members the statement required by regulation 18(2) of these Regulations; and (f) a statement that the conditions mentioned in section 1(1) were fulfilled.

• (3) Omit paragraph (4).

• (4) In paragraph (5)—

• (a) for “In the case of a scheme not established under a trust, the manager shall” substitute “ The trustees or manager shall ”; and

• (b) for sub-paragraphs (a) and (b) substitute—

(a) a statement— (i) as to whether, in the opinion of the reporting accountant, it was or was not reasonable for the trustees or manager to make the statements mentioned in paragraph (2)(b) and (d) and contained in the declaration; (ii) so far as the reporting accountant is unable to express such an opinion, explaining why he is unable to do so; and (b) a statement containing a summary— (i) of the tests performed by the reporting accountant for the purposes of his making the statement mentioned in sub-paragraph (a); and (ii) of the results of those tests.

• (5) In each of paragraphs (6) and (7)—

• (a) for “statement” substitute “ statements ”; and

• (b) omit “(4) or”.

• (6) After paragraph (7) insert—

(8) If either or both of the statements to be obtained by the trustees or manager under paragraph (5) are obtained by them or him from the reporting accountant acting as such while ineligible in contravention of regulation 11(7A)(a)— (a) the trustees or manager, as the case may be, shall not be regarded as having complied with paragraph (5); and (b) for the purposes of paragraphs (6) and (7), neither statement shall be regarded as obtained in accordance with paragraph (5).

Amendment of regulation 13

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• (1) Regulation 13 (expenses, commission etc.—principles) shall be amended as follows.

• (2) After paragraph (2) insert—

(2A) Nothing in paragraph (1) shall be taken to prevent that which is permitted by or under any of the provisions mentioned in paragraph (4).

• (3) After paragraph (3) insert—

(4) The provisions referred to in paragraph (2A) are— (a) section 32 of the 1993 Act and regulation 9 of the Personal and Occupational Pension Schemes (Protected Rights) Regulations 1996 (protected rights: suspension and forfeiture); (b) section 159 of the 1993 Act (inalienability of guaranteed minimum pension and protected rights payments); (c) sections 91 to 94 of the 1995 Act and regulations under those sections (inalienability and forfeiture of occupational pensions); and (d) in the case of a pension scheme established under a trust which— (i) is not an occupational pension scheme; but (ii) is or has been registered under section 2; sections 91, 92 and 94 of the 1995 Act and the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc.) Regulations 1997 (inalienability and forfeiture of occupational pensions) as those sections and Regulations have effect by virtue of section 6(3) of, and Schedule 1 to, the Act and of regulation 32.

Amendment of regulation 14

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• (1) Regulation 14 (charges etc.—permitted reductions in members’ rights) shall be amended as follows.

• (2) In paragraph (5)—

• (a) in sub-paragraph (c) for “are incurred” substitute—

(including any dilution levy) are incurred by the trustees or manager

• (b) after sub-paragraph (d) insert “ and ”;

• (c) after sub-paragraph (e) omit “and”; and

• (d) omit sub-paragraph (f).

• (3) In paragraph (8) omit “costs or”.

Amendment of regulation 15

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• (1) Regulation 15 (requirement for trustees or manager to satisfy certain conditions in relation to with-profits funds) shall be amended as follows.