Pensions Citation, commencement, application and interpretation 1 1 These Regulations may be cited as the Occupational Pension Schemes (Administration, Investment and Charges and Governance) (Amendment) Regulations (Northern Ireland) 2021 and shall come into operation on 1st October 2021. 2 The amendments made by regulations 2(2) (except for regulation 2(2)(a)(iii)) and (3)(a), 3(2)(a) and (4), 5(a)(i) and (b) apply to an occupational pension scheme in relation to the first scheme year of that scheme which ends after 1st October 2021. 3 The amendments made by regulations 2(2)(a)(iii), (3)(b) and (c), 3(2)(b) and (3) and 5(a)(ii) and (iii) apply to an occupational pension scheme in relation to the first scheme year of that scheme which ends after 31st December 2021. 4 The amendments made by regulation 4(2) and (3) apply in relation to an occupational pension scheme from whichever date is later of the date— a after the end of 3 months beginning with the last day of the first scheme year of that scheme which ends after 1st October 2021, or b after the end of 6 months beginning with the day on which these Regulations come into operation. 5 The amendments made by regulation 6(2)(c), (6) and (7) apply to an occupational pension scheme in relation to the first charges year of that scheme which ends after 1st October 2021. 6 For the purposes of this regulation— “ charges year ” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015 ; “ scheme year ” has the meaning given in regulation 1(2) of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997 . 7 The Interpretation Act (Northern Ireland) 1954 shall apply to these Regulations as it applies to an Act of the Assembly. Amendment of the Occupational Pension Schemes (Scheme Administration) Regulations 2 1 The Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997 are amended in accordance with paragraphs (2) and (3). 2 In regulation 23 (annual statement regarding governance)— a in paragraph (1)— i after sub-paragraph (a) insert— aa state the return on investments, after deduction of any charges or transaction costs relating to those investments (calculated in accordance with regulation 25(1)(a)), relating to— i each default arrangement; and ii each fund— aa which members are now able to select or were in the past able to select; and bb in which assets relating to members are invested during the scheme year, having regard to guidance issued by the Department under section 109(2A) of the Pension Schemes Act (disclosure of information about schemes to members, etc); ; ii in sub-paragraph (c)— aa for paragraph (ii) substitute— ii state the levels of charges and transaction costs applicable to each fund— aa which members are now able to select or were in the past able to select; and bb in which assets relating to members are invested during the scheme year; ; bb for paragraph (iv) substitute— iv where the trustees or managers are required to assess the extent to which the charges and transaction costs borne by members represent good value for members, explain that assessment and its results; ; iii after sub-paragraph (ca) insert— cb explain the results of any assessment required by virtue of regulation 25(1A); . b after paragraph (1A) insert— 1B Paragraph (1)(cb) does not apply if— a the Pensions Regulator has been notified under Article 57(4) or (5) of the 2005 Order (the register: duties of trustees or managers) that the winding up of the scheme in question has commenced; and b the trustees or managers of the scheme explain why they are not complying with paragraph (1)(cb) in the statement required under paragraph (1)(c)(iv). . 3 In regulation 25 (assessment of charges and transaction costs)— a in paragraph (1)(a)— i in head (i) for “; and” substitute “borne by members of the scheme;” ; ii in head (ii) for “costs,” substitute “costs borne by members of the scheme; and” ; iii after head (ii) add— iii the returns on investments earned by assets in the scheme; and ; iv at the end omit “borne by members of the scheme; and”; b after paragraph (1) insert— 1A As part of the assessment referred to in paragraph (1)(b), the trustees or managers of a specified scheme (see paragraph (5)) must assess— a the charges and transaction costs borne by members of the scheme by comparison with the charges and transaction costs borne by members of at least three schemes (“comparison schemes”)— i each of which satisfies one of the conditions in paragraph (1D)(a); and ii at least one of which satisfies the condition in paragraph (1D)(b); b the return on investments by comparison with the return on investments for each of the three comparison schemes relating to— i the default arrangement; and ii any funds— aa which members are now able to select or were in the past able to select; and bb in which assets relating to members are invested, and in each case the return on investments is to be calculated after deduction of any charges or transaction costs; and c how the administrative and governance criteria set out in paragraph (1C) are met by the scheme. 1B In making the assessment required under paragraph (1)(b), the trustees or managers of the specified scheme must have regard to any guidance issued by the Department by virtue of paragraph 2 of Schedule 18 to the Pensions Act (Northern Ireland) 2015 (power to impose requirements relating to administration or governance) in relation to that assessment. 1C The administration and governance criteria are— a the promptness and accuracy of core financial transactions; b the quality of the records kept by the trustees or managers; c the appropriateness of the default investment strategy followed by the trustees or managers; d the quality of the scheme’s investment governance; e the extent to which— i the requirements of Articles 224 and 225 of the 2005 Order (requirement for knowledge and understanding: individual trustees and corporate trustees) are satisfied; and ii the trustees or managers have the knowledge, understanding and skills to enable them— aa properly to exercise their functions; and bb to operate the scheme effectively; f the quality of communication with the members of the scheme; g the effectiveness of the management of any conflicts of interest that might arise between or among trustees and managers, or between trustees, managers and third parties. 1D The conditions are that— a each comparison scheme is— i an occupational pension scheme which on the relevant date held total assets equal to or greater than £100 million; or ii a personal pension scheme, which is not an investment-regulated pension scheme within the meaning of paragraph 1 of Schedule 29A to the Finance Act 2004 (schemes other than occupational pension schemes); b the trustees or managers have had discussions with the comparison scheme on a transfer of the rights of members of the specified scheme to that scheme if the specified scheme is wound up. 1E Where an occupational pension scheme provides both money purchase benefits within the meaning of section 176(1) of the Pension Schemes Act (general interpretation) and benefits other than money purchase benefits— a the trustees or managers of the scheme are only required to comply with the obligations in paragraphs (1A) and (1B) in relation to the assets held for its money purchase benefits; and b the scheme may only be used as a comparison scheme in relation to the assets held for its money purchase benefits. ; c after paragraph (3) add— 4 Paragraphs (1A) to (1E) do not apply if— a the Pensions Regulator has been notified under Article 57(4) or (5) of the 2005 Order (the register: duties of trustees or managers) before the date on which the trustees or managers of the scheme are required to prepare a statement under regulation 23(1) (“the annual statement”) that the winding up of the scheme in question has commenced; and b the trustees or managers of the scheme explain why they are not complying with paragraph (cb) in the annual statement. 5 In this regulation— “ audited accounts ” means the audited accounts which the trustees are required to obtain in accordance with regulation 2 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations (Northern Ireland) 1997 (requirement of trustees or managers to obtain documents); “ core financial transactions ” has the same meaning as in regulation 24 (requirements for processing financial transactions); “ default arrangement ” has the meaning given in regulation 1(2) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005 ; “ default investment strategy ” means the default strategy referred to in regulation 2A(1)(c) of the Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005 (additional requirements in relation to default arrangement); “ ear-marked scheme ” has the meaning given by regulation 1(2) of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations (Northern Ireland) 1997; “ relevant date ” means the date on which the trustees obtain the audited accounts for the scheme year that ended most recently; “ specified scheme ” means a relevant scheme which, on the relevant date— held total assets worth less than £100 million, and has been operating for 3 or more years. 6 In this regulation, a reference to the “ total assets ” of a scheme means— a in the case of a scheme in respect of which the trustees are required to obtain audited accounts, the total of the amount of the net assets of the scheme recorded in the audited accounts for the scheme year; or b in the case of a scheme which is an ear-marked scheme, the value of the assets of the scheme represented by any policies of insurance or annuity contracts that are specifically allocated to the provision of benefits for individual members or any other person who has a right to benefits under the scheme. . Amendment of the Register of Occupational and Personal Pension Schemes Regulations 3 1 Regulation 3 of the Register of Occupational and Personal Pension Schemes Regulations (Northern Ireland) 2005 (registrable information) is amended in accordance with paragraphs (2) to (5). 2 In paragraph (1)— a after sub-paragraph (da) insert— db the value of the assets held by the scheme for the purpose of providing benefits to members, calculated on the last day of the scheme year which ended most recently; ; b after sub-paragraph (h) insert— ha subject to paragraph (3A), in the case of a specified scheme— i whether, on the basis of the most recent assessment required by virtue of regulation 25(1A) of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997 (assessment of charges and transaction costs), the trustees or managers of the scheme consider that the scheme provides good value for members; ii where a value assessment was carried out for the previous scheme year, whether, on the basis of that value assessment, the trustees or managers of the scheme considered that the scheme provided good value for members; hb subject to paragraph (3A), in the case of a specified scheme where the trustees or managers of the scheme have stated under sub-paragraph (ha)(i) that they do not consider that the scheme provides good value for members— i whether the trustees or managers propose to transfer the money purchase benefits of its members into another scheme, and whether or not they also propose to wind up the scheme, and ii if the trustees or managers do not propose to wind up the scheme— aa their reasons for not doing so, and bb what improvements they propose to make to the scheme to ensure that it does provide good value for members, . 3 After paragraph (3) insert— 3A Paragraph (1)(ha) and (hb) does not apply if the Regulator has been notified under Article 57(4) or (5) of the 2005 Order (the register: duties of trustees or managers) that the winding up of the scheme in question has commenced. . 4 In paragraph (4) after the definition of “recovery period” add— “ specified scheme ” has the meaning given in regulation 25(5) of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997. . Amendment of the Occupational Pension Schemes (Investment) Regulations 4 1 The Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005 are amended in accordance with paragraphs (2) to (4). 2 In regulation 1(2) (interpretation) in the definition of “default arrangement” in paragraph (c) for “(3) and (4)” substitute “(3), (4), (6)(a), (7) and (8)” . 3 In regulation 2A (additional requirements in relation to default arrangement)— a in paragraph (3) after “charges” insert “and transaction costs” ; b after paragraph (5) add— 6 For the purposes of this regulation, “ transaction costs ” has the meaning given in regulation 2(1) of the Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015. . 4 In regulation 8(1)(a) (modification of regulation 2 in respect of wholly-insured schemes) for “(b) and (c)” substitute “(b), (c) and (d)” . Amendment of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 5 In the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2014 — a in regulation 29A(2) (publishing charges and transaction costs and other relevant information)— i after sub-paragraph (a) insert— aa paragraph (1)(aa); ; ii at the end of sub-paragraph (b) omit “and”; iii at the end of sub-paragraph (c) insert— , and d paragraph (1)(cb). ; b in Schedule 3 (information to be given on request) in Part 5 (information that applies to the scheme) in paragraph 30— i the provisions of the paragraph shall become sub-paragraph (1) of the paragraph; ii after sub-paragraph (1) add— 2 Where, on the preparation or revision of an investment report under sub-paragraph (1), a scheme is a wholly-insured scheme and the trustees do not consider that it should cease to be such a scheme, sub-paragraphs (ca) and (d) of sub-paragraph (1) do not apply. . Amendment of the Occupational Pension Schemes (Charges and Governance) Regulations 6 1 The Occupational Pension Schemes (Charges and Governance) Regulations (Northern Ireland) 2015 are amended in accordance with paragraphs (2) to (12). 2 In regulation 2 (interpretation)— a in paragraph (1)— i in the definition of “charges” after paragraph (e) add— f costs solely attributable to holding physical assets; ; ii after the definition of “combination charge structure” insert— “ commodity ” means any goods of a fungible nature that are capable of being delivered, including metals and their ores and alloys, agricultural products and energy such as electricity, but not including cash or financial instruments (within the meaning of Article 3 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ); ; iii after the definition of “jobholder” insert— “ performance fee ” means a fee which— is calculated by reference to the returns from investments held by the scheme, whether in terms of the capital appreciation of those investments, the income produced by those investments or otherwise, and is not calculated by reference to the value of the member’s rights under the scheme; “ physical asset ” means an asset whose value depends on its physical form, including— land; buildings and other structures on land or sea; vehicles, ships, aircraft or rolling stock, and commodities; ; iv in the definition of “service provider” for “specified” substitute “relevant” ; b after paragraph (1) insert— 1A For the purposes of the definition of “charges”, the costs solely attributable to holding a physical asset include— a the costs of managing and maintaining the asset; b fees for valuing the asset; c the cost of insuring the asset; d ground rent charges, rates, taxes and utilities bills incurred in relation to the asset. ; c after paragraph (4) insert— 4A When a charge under a single charge structure is calculated on a pro rata basis under paragraph (3) and paragraph (4B) applies, no account is to be taken of any performance fee charged within the period for which the calculation is made. 4B This paragraph applies if the performance fee in question is calculated and deducted from the value of the investments to which it relates each time the value of those investments is calculated for the purposes of buying or selling units. . 3 Before the heading to regulation 4 insert— CHAPTER 1 Default arrangements, non-contributing members and payments to advisers . 4 In regulation 4 (restrictions on charges)— a in paragraph (1) for “this Part”, in each place where it appears, substitute “this Chapter” ; b in paragraph (2) for “this Part” substitute “this Chapter” ; c in paragraph (4) for “This Part” substitute “this Chapter” . 5 In regulation 6(1) (limits on charges) for “The limits” substitute “Subject to regulation 13C(6), the limits” . 6 In regulation 7 (assessment of charges) after paragraph (8) add— 9 Paragraph (10) applies where the charges imposed on a member include a performance fee payable at the end of the investment period. 10 For the purposes of paragraph (4), the charge imposed annually on the member in relation to the performance fee may be treated as X divided by Y, where— a X is the sum of the performance fees accrued in relation to the return earned by the assets in the default arrangement (“the relevant assets”) during the relevant charges year and each of the preceding charges years, up to a maximum of 4 preceding charges years, and b Y is— i 5, or ii where the investment period is less than 5 charges years, the number of charges years in the relevant period. 11 Where the trustees or managers choose to calculate the charge imposed annually on a member in accordance with paragraph (10), the trustees or managers must, at the end of each charges year during the investment period, calculate— a the return earned by the relevant assets during that charges year; b the performance fee which has accrued in relation to that return. 12 In this regulation, “ investment period ” means the total period for which the assets in the default arrangement are invested in an investment for which a performance fee is payable at the end of the investment period. . 7 In regulation 8 (alternative assessment of charges)— a in paragraph (2) after “paragraph (3)” insert “and, if the trustees or managers so choose, the assumption in paragraph (3A)” ; b after paragraph (3) insert— 3A The assumption which may be made for the purposes of paragraph (2) is that, where the charges include a performance fee to which regulation 7(10) applies, the charge to be imposed on the member in relation to the forthcoming charges year will be X divided by Y, where— a X is the sum of the performance fees accrued in relation to the return earned by the assets in the default arrangement during each of the years preceding the charges year in question, up to a maximum of 5 preceding charges years, and b Y is— i 5, or ii where the investment period is less than 5 charges years, the number of charges years in the relevant period. . 8 In regulation 9 (member agreement for services)— a in paragraph (1)— i after “in relation to” insert “advice or” ; ii after “provision of that” insert “advice or” ; b in paragraph (3) after “does not apply to” insert “advice or” . 9 In regulation 11A (payments to advisers)— a in paragraph (1) omit “on or after 6th April 2016”; b in paragraph (2) after “11B(2)” insert “, 11B(2B)” ; c in paragraph (4) for “This regulation” substitute “The prohibition in paragraph (2)” ; d for paragraph (6) substitute— 6 The prohibition in paragraph (2) does not apply to a charge imposed to reimburse a service provider for any payment made to an adviser for advice or a service referred to in paragraph (3)(a) or (b) where— a the charge is imposed under a relevant contract which— i was entered into before 6th April 2016, and ii has not been varied or renewed on or after that date, and b the payment was made before 1st October 2021. ; e after paragraph (6) add— 7 Where the prohibition in paragraph (2) applies it overrides any term of a relevant contract to the extent that the term conflicts with it. . 10 In regulation 11B (relevant information)— a in paragraph (2) for “paragraph (4)” substitute “paragraphs (2B) and (5)” ; b after paragraph (2) insert— 2A This paragraph applies where the relevant contract— a was entered into before 6th April 2016, and b has not been varied or renewed on or after that date. 2B Subject to paragraph (5), where paragraph (2A) applies regulation 11A does not apply until the expiry of the period of 6 months beginning with 1st October 2021. ; c in paragraph (3) for “The service” substitute “Except in a case to which paragraph (2A) applies, the service” ; d after paragraph (3) insert— 3A In a case to which paragraph (2A) applies, subject to paragraph (5), the service provider must confirm in writing to the trustees or managers of the specified scheme within one month beginning with 1st April 2022 that it is complying with the prohibition in regulation 11A(2) in relation to all members to whom paragraph (2A) applies. ; e in paragraph (5)— i in sub-paragraph (a) for “paragraph (2)” substitute “paragraph (2) or (2B)” ; ii in sub-paragraph (b) for “paragraph (3)” substitute “paragraph (3) or (3A)” ; f in paragraph (6) after “paragraph (3)” insert “or (3A)” . 11 In regulation 11C(3) (member agreement for payments to advisers) after “member agreement for” insert “advice or” . 12 After regulation 13 (amendment of the Occupational and Personal Pension Schemes (Consultation by Employers) Regulations and the Occupational Pension Schemes (Modification of Schemes) Regulations ) insert— CHAPTER 2 RESTRICTIONS ON EARLY EXIT CHARGES Early exit charges 13A 1 For the purposes of this Chapter an early exit charge in relation to a member of a relevant scheme is a charge which— a is imposed under the scheme or a relevant contract when a member who has reached normal minimum pension age takes the action mentioned in paragraph (2), and b is only imposed, or only imposed to that extent, if the member takes that action before the member’s normal pension age. 2 The action is the member taking benefits under the scheme, converting benefits under the scheme into different benefits or transferring benefits to another pension scheme. 3 For the purposes of this regulation— a “ normal minimum pension age ” has the meaning given in section 279(1) of the Finance Act 2004 ; b “ normal pension age ” means the earliest age at which, or the earliest occasion on which, the member is entitled to receive the benefit without adjustment for taking it early or late (disregarding any special provision as to early payment on the grounds of ill-health or otherwise and any administration charges), and c a reference to “ benefits ” includes any part or all of those benefits. Prohibition of early exit charges 13B 1 This regulation applies to a member of a relevant scheme who joined that scheme on or after 1st October 2021. 2 Service providers and trustees and managers of a relevant scheme must not impose an early exit charge, or permit such a charge to be imposed, on a member of the scheme to whom this regulation applies. Limits on early exit charges 13C 1 This regulation applies to a member of a relevant scheme who joined that scheme before 1st October 2021. 2 Service providers and trustees and managers of a relevant scheme must not impose, or permit to be imposed, on a member of the scheme to whom this regulation applies an early exit charge that exceeds the lower of— a 1% of the value of the member’s benefits being taken, converted or transferred, or b such amount as was provided for under the scheme rules or a relevant contract as at 1st October 2021. 3 Where no provision for an early exit charge was made under the scheme rules or a relevant contract as at 1st October 2021, service providers and trustees and managers of a relevant scheme must not impose an early exit charge, or permit such a charge to be imposed, on a member of the scheme to whom this regulation applies. 4 Trustees and managers of a relevant scheme must not— a include provision in a relevant scheme for an early exit charge, where such provision did not exist on 1st October 2021, or b vary provision for an early exit charge in such a scheme to increase or potentially increase the charge. 5 Nothing in this regulation permits an early exit charge to be imposed— a that is higher than the limits prescribed by regulation 6 where that regulation applies, or b where section 33 of the Pension Schemes Act (Northern Ireland) 2021 (prohibition on increasing charges etc during triggering event period) applies. 6 Nothing in regulation 6 permits— a an early exit charge which is lower than 0.75% of the value of the member’s benefits being taken, converted or transferred, to be increased, or b an early exit charge to be imposed where one did not exist. 7 The value of a member’s benefits in paragraphs (2)(a) and (6)(a)— a means the value calculated at the point when the trustee or manager of the scheme receives confirmation from the member of the instruction to take the action giving rise to the early exit charge, and b is to be calculated in accordance with guidance issued from time to time by the Department. Conflicting contract terms 13D Regulations 13B and 13C override any term of a relevant contract to the extent that the term conflicts with those regulations. Relevant information 13E 1 A service provider must confirm in writing to the trustees or managers of a relevant scheme that it is complying with the restrictions in regulations 13B and 13C within one month beginning with whichever is the later of— a 1st October 2021, or b the date on which the service provider becomes a service provider in relation to the relevant scheme. 2 The service provider must inform the trustees or managers of the relevant scheme in writing if the confirmation that it has given in compliance with paragraph (1) is no longer accurate as soon as practicable, and in any event within one month, beginning with the date on which that confirmation is no longer accurate. . Sealed with the Official Seal of the Department for Communities on 29th September 2021 (L.S.) Anne McCleary A senior officer of the Department for Communities