The Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022

Made: 8th March 2022

Coming into force: 1st August 2022

The Secretary of State has exercised her discretion under section 51(6) of the Pension Schemes Act 2021 to make regulations subject to affirmative resolution procedure which would otherwise be subject to negative resolution procedure.

PART 1 — Preliminary provisions

Citation, extent and commencement

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• (1) These Regulations may be cited as the Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022.

• (2) These Regulations extend to England and Wales and Scotland.

• (3) These Regulations come into force on 1st August 2022.

Interpretation and notices

2

• (1) In these Regulations—

• “the 1993 Act” means the Pension Schemes Act 1993[^f00007];

• “the 1995 Act” means the Pensions Act 1995[^f00008];

• “the 2004 Act” means the Pensions Act 2004[^f00009];

• “the Act” means the Pension Schemes Act 2021;

• “active member” has the meaning given in section 124(1) of the 1995 Act;

• “additional charge” means an administration charge for advice, information or a service provided to a member, including where the member requests a transfer to another pension scheme;

• “body corporate” has the meaning given in section 1173(1) of the Companies Act 2006[^f00010];

• “central estimate” means an estimate that is not deliberately either optimistic or pessimistic, does not include any margin for prudence and does not incorporate adjustments to reflect the desired outcome;

• “Code” means a code of practice issued by the Regulator;

• “continuity option” means one of the continuity options listed in section 34(2) of the Act;

• “continuity strategy” has the meaning given in section 17(2) of the Act;

• “deferred member” has the meaning given in section 124(1) of the 1995 Act;

• “discounted level” means a lower level of an administration charge which applies in particular circumstances, including— a lower level which applies to members from a particular employer; or a lower level which applies to a member according to the value of the member’s rights in the scheme;

• “effective date” has the meaning given in section 20(6)(a) of the Act;

• “multi-annual reduction” means an arrangement permitted under the scheme rules under which the trustees apply a reduction to the rate or amount of benefits provided under the scheme over multiple years following an actuarial valuation[^f00011];

• “pensionable service” has the meaning given in section 124(1) of the 1995 Act;

• “pensioner member” has the meaning given in section 124(1) of the 1995 Act[^f00012];

• “relevant person” means a person falling within section 15(3) of the Act;

• “the Regulator” means the Pensions Regulator;

• “scheme year” means— a year specified for the purposes of the scheme in any document comprising the scheme; or if no such year is specified, a period of 12 months beginning on 1st April or on such other date as the trustees select;

• “service provider” means a person providing advisory, administration, investment or other services in respect of the scheme;

• “survivor” has the meaning given in section 67A(10)(a) of the 1995 Act[^f00013];

• “third-party charge” means any administration charge imposed on or in respect of a member by a person other than the trustees;

• “viability certificate” has the meaning given in section 13(1)(b) of the Act;

• “viability report” has the meaning given in section 13(1)(a) of the Act.

• (2) Except where paragraph 1 of Schedule 6 provides otherwise, sections 303 (service of notifications and other documents) and 304 (notification and documents in electronic form) of the 2004 Act are treated as applying to notices and notifications issued in accordance with these Regulations.

Connected employers

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• (1) For the purposes of section 49(2)(b) of the Act (interpretation of Part 1), an employer (“A”) is connected with another employer (“B”), and an employer which is a group undertaking of A is connected with an employer which is a group undertaking of B where A and B have separate legal identities but are structured so that the economic position of the shareholders of each is, as far as practicable, the same as if they held shares in a single company comprising the combined businesses of A and B.

• (2) In paragraph (1) “group undertaking” has the meaning given in section 1161(5) of the Companies Act 2006 (meaning of “undertaking” and related expressions).

PART 2 — Schemes divided into sections

Qualifying schemes

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• (1) For the purposes of section 3(8) of the Act (qualifying schemes), the characteristics prescribed are—

• (a) the rate or amount specified in the rules of the scheme by reference to which qualifying benefits are provided each year under the scheme;

• (b) the rate or amount of contributions paid by the employer;

• (c) the rate or amount of contributions paid by the employee;

• (d) the normal pension age as specified in the rules of the scheme.

• (2) In this regulation, “normal pension age” has the meaning given in section 76(1) of the Pension Schemes Act 2015[^f00014] (interpretation of Part 4).

Schemes divided into sections

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• (1) Where an undivided scheme becomes a collective money purchase scheme that is divided into sections (a “divided scheme”), an authorisation previously granted in respect of the undivided scheme (the “existing authorisation”) applies to a section if—

• (a) that section of the divided scheme is a collective money purchase scheme by reason of section 1(2)(b) of the Act (collective money purchase benefits and schemes); and

• (b) the qualifying benefits provided under that section of the divided scheme have the same characteristics set out in regulation 4(1) as those provided under the undivided scheme.

• (2) Where an undivided scheme becomes a divided scheme and there are two or more sections providing benefits with the same characteristics set out in regulation 4(1), the trustees of the undivided scheme must determine which section within the divided scheme the existing authorisation will apply to.

• (3) Where paragraph (2) applies, the trustees of the undivided scheme must, as soon as reasonably practicable, provide the Regulator with the following information[^f00015]—

• (a) the date from which the existing authorisation will apply to the section within the divided scheme; and

• (b) the name of the section within the divided scheme to which the existing authorisation will apply.

• (4) In this regulation, “undivided scheme” has the meaning given in section 5(2) of the Act (schemes divided into sections).

PART 3 — Authorisation

Authorisation: contents

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• (1) This regulation applies for the purposes of section 8(4)(a) of the Act (application for authorisation).

• (2) The other information to be included in an application, in relation to each person acting in a capacity mentioned in section 11(2) of the Act (fit and proper persons requirement), is—

• (a) in the case of an individual—

• (i) the person’s full name;

• (ii) the person’s date of birth;

• (iii) the title and description of the person’s role in relation to the scheme;

• (iv)

• (aa) the person’s residential address and address for correspondence, if different, and

• (bb) if there has been a change to the person’s residential address at any time in the period of five years before the date of the application for authorisation, their other residential addresses falling within that period;

• (v) a criminal conviction certificate obtained by means of an application in accordance with section 112(1) of the Police Act 1997[^f00016] (criminal conviction certificates) or, in relation to the law of a country outside the United Kingdom, any equivalent document;

• (b) where that person is acting in a capacity mentioned in section 11(2)(a) to (d) and that person is a body corporate—

• (i) the full name of each individual who is performing, or who will be performing, the functions of that person in relation to the scheme in the exercise of a management or executive role in relation to that person;

• (ii) the date of birth of each such individual;

• (iii)

• (aa) the residential address of each such individual and their address for correspondence, if different, and

• (bb) if there has been a change to each such individual’s residential address at any time in the period of five years before the date of the application for authorisation, their other residential addresses falling within that period;

• (c) in the case of any person, responses to a list of questions that may be asked by the Regulator, as part of an application for authorisation, to assess whether the person is a fit and proper person.

• (3) The other information to be included in an application, in relation to whether the scheme is financially sustainable, is the information set out in Part 1 of Schedule 3.

• (4) The other information to be included in an application, in relation to whether the systems and processes used for communicating with members and others are adequate, is details of the systems and processes used, or intended to be used, for the purposes of communicating with relevant persons, including details of the matters set out in Schedule 4.

• (5) The other information to be included in an application, in relation to whether the systems and processes used in running the scheme are sufficient, is—

• (a) details of the systems and processes used, or intended to be used, in the running of the scheme, including details of the matters set out in Schedule 5;

• (b) whether the systems and processes used, or intended to be used, in the running of the scheme have been devised, applied or maintained by the scheme or a service provider.

• (6) The other information to be included in an application is—

• (a) the name of the scheme;

• (b) the name of each employer in relation to the scheme;

• (c) the date on which it is proposed that the scheme will begin operating, subject to the Regulator’s decision under section 9(1) of the Act (decision on application);

• (d) the contact details of the trustees making the application;

• (e) a copy of the rules of the scheme;

• (f) a copy of the scheme’s trust deed.

• (7) For the purposes of paragraph (6), the date on which it is proposed that the scheme will begin operating is the date proposed as the date on which, in relation to the scheme, a person is to first accept money as described in section 7(5)(a) or (b) of the Act.

Application for authorisation: fee

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• (1) Subject to paragraphs (2) and (3), an application for authorisation of a collective money purchase scheme must be accompanied by a fee of £77,000.

• (2) If an application for authorisation is made in respect of a section of a pension scheme and, at the time when the application is made another section of that pension scheme is an authorised collective money purchase scheme, the application must be accompanied by such fee as the Regulator may specify (but see paragraph (4)).

• (3) If applications for authorisation are made in respect of two or more sections of the same pension scheme at the same time and, at the time when the applications are made no other section of that pension scheme is an authorised collective money purchase scheme—

• (a) one of the applications for authorisation must be accompanied by a fee of £77,000; and

• (b) all the other applications for authorisation must each be accompanied by such fee as the Regulator may specify (but see paragraph (4)).

• (4) A fee specified under paragraphs (2) or (3)(b)—

• (a) must not exceed £77,000; and

• (b) must be calculated on a cost recovery basis.

• (5) The Regulator must pay fees received under this regulation to the Secretary of State, unless the Secretary of State with the consent of the Treasury directs otherwise.

Fit and proper persons requirement

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• (1) Schedule 1 sets out the matters that the Regulator must take into account in assessing, for the purposes of section 11 of the Act (fit and proper persons requirement), whether a person is fit and proper to act in a capacity mentioned in section 11(2) of the Act.

• (2) For the purposes of section 11(2)(e) of the Act, where a person in a capacity mentioned in paragraphs (a) to (d) of section 11(2) is a body corporate, the Regulator must assess whether each individual performing the functions of that person in relation to the scheme, in the exercise of a management or executive role, is a fit and proper person to act in relation to the scheme in that capacity.

Scheme design requirement

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Part 1 of Schedule 2 sets out the matters that the Regulator must take into account in deciding, for the purposes of section 12 of the Act (scheme design requirement), whether it is satisfied that the design of a collective money purchase scheme is sound.

Viability report

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• (1) A viability report must include the information specified in Part 2 of Schedule 2.

• (2) A viability report must be submitted—

• (a) in writing;

• (b) in the format set out in a Code.

• (3) The following must be prepared or obtained in connection with a viability report—

• (a) a copy of the rules of the scheme concerning how the rate or amount of benefits provided under the scheme is to be determined;

• (b) a document prepared by the scheme actuary to inform the trustee’s consideration as to whether the design of the scheme is sound for the purposes of preparing or reviewing the viability report;

• (c) a document prepared by the trustees, having taken advice from an authorised person, setting out the strategy for investing the assets that arise or derive from the payments made by or in respect of members of the scheme; and

• (d) any other information or documents as requested by the Regulator.

• (4) The document described at paragraph (3)(b) must include an explanation of—

• (a) the assumptions used by the scheme actuary in carrying out the tests in regulation 11(2)(c) or (d) (as the case may be) and how the use of those assumptions is justified;

• (b) the conclusions reached by the scheme actuary on the matters contained in regulation 11(2); and

• (c) the testing or modelling being considered by the trustees including the results of such testing or modelling.

• (5) A viability report must be prepared—

• (a) in the case of the scheme’s first viability report, by reference to information as at a date, chosen by the trustees, which must not be earlier than ten months before the date when the trustees apply to the Regulator for authorisation;

• (b) in the case of any subsequent viability report, by reference to information as at a date, chosen by the trustees, which must not be earlier than ten months before the date when the trustees provide the report to the Regulator.

• (6) If a revised viability report is submitted in accordance with section 13(6)(b) of the Act (viability report), the viability report must indicate which parts of it have been revised and why.

• (7) In this regulation, “authorised person” means a person who is reasonably believed by the trustees of a collective money purchase scheme to be qualified by their ability in and practical experience of financial matters and to have the appropriate knowledge and experience of the management of the investments of such schemes.

Viability certificate

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• (1) A viability certificate must contain the information specified in Part 3 of Schedule 2.

• (2) The scheme actuary must have regard to the following matters when providing a viability certificate and considering whether the design of the scheme is sound—

• (a) whether the rules of the scheme meet—

• (i) the requirements of section 18 of the Act (calculation of benefits); and

• (ii) the requirements of regulation 17;

• (b) whether, in the opinion of the scheme actuary, the trustees have, in the member booklet, the statement of scheme design and the wording used in the most recent statements of benefits—

• (i) accurately described the methods by which the scheme determines the rate or amount of benefits provided under the scheme;

• (ii) accurately described estimates of the rate or amount of any future pension benefits payable under the design of the scheme;

• (iii) accurately explained that the future pension benefits payable under the scheme are subject to annual adjustment in accordance with the scheme rules;

• (c) in a case where the certificate is being provided in respect of a collective money purchase scheme the trustees of which are applying for authorisation under section 8 of the Act (application for authorisation), whether the scheme actuary is satisfied that—

• (i) the first gateway test is met; and

• (ii) the second gateway test is met;

• (d) in a case where a collective money purchase scheme has begun operating and has at least one active member, whether the scheme actuary is satisfied that—

• (i) the first live running test is met; and

• (ii) the second live running test is met.

• (3) In a case where a final version of the member booklet, the statement of scheme design or the wording to be used in the statements of benefits has not been prepared, the reference to that document or wording, as the case may be, in sub-paragraph (2)(b) is to the latest draft of that document or wording, as the case may be.

• (4) The first gateway test is met if the estimate of the projected average annual increase in the first ten years’ benefits, calculated on a central estimate basis—