Explanatory note

These Regulations together with Part IV of the Pensions (Northern Ireland) Order 2005 (“the Order”) implement Articles 15 and the funding requirements in Article 16 of European Union Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision (OJ No. L 235, 23.9.03, p.10) (“the Directive”). They replace the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations (Northern Ireland) 1996, which are revoked together with provisions that amend those Regulations.

Article 201 of the Order imposes on every occupational pension scheme a requirement, derived from Article 16 the Directive, to hold sufficient and appropriate assets to cover the scheme’s “technical provisions” - the amount required, on an actuarial calculation, to make provision for its liabilities. Regulation 3 identifies the assets and liabilities to be taken into account in determining whether this requirement (“the statutory funding objective”) is met. Regulation 4 makes provision in respect of the valuation of the assets and the determination of the amount of the liabilities and regulation 5 prescribes matters to be taken into account and principles to be followed in calculating a scheme’s technical provisions.

Article 202 of the Order requires the trustees or managers of a scheme to maintain a statement of their policy for securing that the statutory funding objective is met. Regulation 6 prescribes other matters to be covered in the statement. Articles 203 and 204 of the Order provide for actuarial valuations calculating a scheme’s technical provisions, actuarial reports at intervals between valuations, and for the calculation of technical provisions to be certified by the scheme actuary. Regulation 7 includes provision about the circumstances in which “out-of-cycle” valuations are required, the content of valuations and reports and the form of the actuary’s certification.

Article 205 of the Order and regulation 8 implement provisions in Article 16 of the Directive for schemes to adopt a recovery plan where a valuation indicates that the statutory funding objective was not met. Article 206 of the Order provides for trustees or managers to maintain a schedule of contributions payable towards a scheme. Regulation 9 imposes time limits in respect of the preparation and review of such schedules and regulation 10 requirements as to their content and certification. Regulation 11 requires trustees or managers to keep records of contributions made to a scheme. Regulation 12 sets out exceptions to the requirement in Article 207 of the Order that any failure to pay contributions due which is likely to be of material significance must be reported to the Pensions Regulator (“the Regulator”).

Under Article 208 of the Order trustees or managers are required to obtain the agreement of the employer contributing towards a scheme with regard to the calculation of technical provisions, the statement of funding principles, the recovery plan and the schedule of contributions. Regulation 13 imposes a time limit for this. Article 210 of the Order sets out powers relating to the funding of a scheme which are exercisable by the Regulator in particular circumstances. Regulation 14 provides that, where the contribution rate is set by someone other than the trustees or managers, such as the scheme actuary, the Regulator must take account of that person’s recommendations in determining whether to exercise any of these powers.

Regulation 15 requires scheme actuaries to take account of professional guidance approved for the purposes of these Regulations. Regulation 16 enables the trustees of certain schemes to modify the terms of the scheme where additional contributions are required in order to give effect to a recovery plan. Regulation 17 exempts certain schemes from Part IV of the Order; these are either schemes to which the Directive does not apply or schemes that may be exempted from the requirements of the Directive under Article 5 of the Directive because they are guaranteed statutory schemes or because they have fewer than 100 members. The schemes exempted include schemes in the course of winding up; where the winding up begins after the Regulations come into operation, regulation 18 makes the exemption conditional upon annual estimates of solvency. The remaining regulations give effect to Schedules.

Schedule 1 prescribes the form in which a scheme actuary is required to certify the calculation of technical provisions in respect of the scheme and its schedule of contributions. The terms in which the certification of a schedule of contributions is given, set out in Article 206(6) of the Order, are modified in particular circumstances by paragraphs 6 and 11 of Schedule 2. Schedule 2 contains other modifications of provisions of Part IV of the Order and provisions of these Regulations which apply in relation to particular kinds of scheme.

Schedule 3 to the Regulations makes consequential amendments to other secondary legislation. It also includes, in paragraphs 6 and 7, provisions which supplement the Occupational Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 1997 by requiring that scheme members and beneficiaries receive a summary funding statement following actuarial valuations and reports. The statement must include specified information relating to the funding of the scheme and, where applicable, information about its recovery plan, interventions by the Regulator and the payment of surplus funds to the employer.

Schedule 4 contains transitional provisions, which determine the period within which the trustees or managers of a scheme have to obtain the first actuarial valuation under the Order and to prepare the first schedule of contributions. It also contains savings, which preserve the application of provisions of the Pensions (Northern Ireland) Order 1995 (“the 1995 Order”) and regulations during the transitional period.

Article 64(2), Articles contained in Part IV and Article 287(4) of the Order, are some of the enabling provisions under which these Regulations are made. The Pensions (2005 Order) (Commencement No. 1 and Consequential and Transitional Provisions) Order (Northern Ireland) 2005 (S.R. 2005 No. 48 (C. 5)) provides for the coming into operation of Article 64(2) of the Order to be brought fully into operation on 6th April 2005. The Pensions (2005 Order) (Commencement No. 7) Order (Northern Ireland) 2005 (S.R. 2005 No. 543 (C. 37)) provides for the coming into operation of Articles 200 to 203, 205 to 211 and 287(4) of the Order, for the purpose of authorising the making of regulations, on 6th December 2005, and for all other purposes, on 30th December 2005.

As these Regulations make, in relation to Northern Ireland only provision corresponding to provision contained in regulations made by the Secretary of State for Work and Pensions in relation to Great Britain, the requirement for consultation under Article 117(1) of the 1995 Order does not apply by virtue of paragraph (2)(e) of that Article and the requirement for consultation under Article 289(1) of the Order does not apply by virtue of paragraph (2)(e) of that Article.

The transposition of Articles 15 and 16 of the Directive is detailed in the Transposition Note, a copy of which has been laid in the Business Office and the Library of the Northern Ireland Assembly. Copies of the Note are available from the Department for Social Development, Social Security Policy and Legislation Division, Level 1, James House, 2-4 Cromac Avenue, Gasworks Business Park, Ormeau Road, Belfast, BT7 2JA.