Pension Schemes Bill (HC Bill 140)

A

BILL

[AS AMENDED IN PUBLIC BILL COMMITTEE]

TO

Make provision about pension schemes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

Part 1 Master Trusts

Definition of a Master Trust scheme

1 Master Trust schemes: definition

(1) 5In this Act, “Master Trust scheme” means an occupational pension scheme
which—

(a) provides money purchase benefits (whether alone or in conjunction
with other benefits),

(b) is used, or intended to be used, by two or more employers,

(c) 10is not used, or intended to be used, only by employers which are
connected with each other, and

(d) is not a relevant public service pension scheme.

(2) Where a Master Trust scheme provides money purchase benefits in
conjunction with other benefits, references in the following provisions of this
15Act to a Master Trust scheme are to a Master Trust scheme only to the extent
that it provides money purchase benefits, except as provided in section 39(2) to
(4).

(3) For the purposes of this section, an employer (“A”) is connected with another
employer (“B”)—

(a) 20where A is, or has been, a group undertaking in relation to B within the
meaning of section 1161(5) of the Companies Act 2006, or

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(b) in circumstances specified in regulations made by the Secretary of
State.

(4) In this section—

  • “employer”, in relation to an occupational pension scheme, means a
    5person who employs or engages persons who are, or are entitled to
    become, members of the scheme;

  • “money purchase benefits” has the same meaning as in the Pension
    Schemes Act 1993 (see section 181 of that Act);

  • “occupational pension scheme” has the same meaning as in the Pension
    10Schemes Act 1993 (see section 1(1) of that Act);

  • “relevant public service pension scheme” has the meaning given in
    section 2.

(5) Regulations under this section are subject to affirmative resolution procedure.

2 Relevant public service pension schemes

(1) 15For the purposes of section 1, a pension scheme is a relevant public service
pension scheme if it falls within subsection (2) or (3).

(2) A scheme falls within this subsection if it is a public service pension scheme
within the meaning of the Pension Schemes Act 1993 (see section 1(1) of that
Act).

(3) 20A scheme falls within this subsection if it is—

(a) a scheme under section 1 of the Public Service Pensions Act 2013 (new
public service schemes),

(b) a new public body pension scheme (as defined in section 30 of that Act),
or

(c) 25a statutory pension scheme which is connected with a scheme referred
to in paragraph (a) or (b) (and for this purpose “statutory pension
scheme” and “connected” have the meanings given in that Act; see
sections 37 and 4(6) of that Act).

(4) But a scheme does not fall within subsection (3) if it is a scheme specified in an
30order made under section 318(6)(b) of the Pensions Act 2004 (schemes
excluded from definition of “public service pension scheme”).

Authorisation: applications etc

3 Prohibition on operating a scheme unless authorised

(1) A person may not operate a Master Trust scheme unless the scheme is
35authorised.

(2) Section 10 of the Pensions Act 1995 (civil penalties) applies to a person who
breaches subsection (1).

(3) If the Pensions Regulator becomes aware that a Master Trust scheme is
operating without authorisation, it must notify the trustees of the scheme that
40the scheme is not authorised.

(4) The notification must include an explanation that it is a triggering event for the
purposes of sections 20 to 33 and of the trustees’ duties under those sections.

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(5) For the purposes of this Part, a person “operates” a Master Trust scheme if the
person—

(a) accepts money from members or employers (or prospective members
or employers), in respect of fees, charges, contributions or otherwise, in
5relation to the scheme, or

(b) enters into an agreement with an employer that relates to the provision
of pension savings for employees or other workers,

and references to a scheme that is “operating” or “in operation” are to be
construed accordingly.

4 10Application for authorisation

(1) The trustees of a Master Trust scheme may apply to the Pensions Regulator for
authorisation.

(2) The application must include the following—

(a) the scheme’s latest accounts;

(b) 15the latest accounts of each scheme funder;

(c) the scheme’s business plan (see section 9);

(d) the scheme’s continuity strategy (see section 12).

(3) In considering an application, the Pensions Regulator may take into account
any matters it considers appropriate, including—

(a) 20additional information provided by the applicant, and

(b) subsequent changes to the application or to any information provided
by the applicant.

(4) The application must be made in the manner and form specified by the
Pensions Regulator.

(5) 25The Secretary of State may make regulations setting out—

(a) other information to be included in an application, and

(b) the application fee payable to the Pensions Regulator.

(6) Regulations under this section are subject to negative resolution procedure.

5 Decision on application

(1) 30Where an application is made for authorisation of a Master Trust scheme under
section 4, the Pensions Regulator must decide whether it is satisfied that the
scheme meets the authorisation criteria.

(2) The Pensions Regulator must make that decision within the period of six
months beginning with the day on which it received the application.

(3) 35The authorisation criteria are—

(a) that the persons involved in the scheme are fit and proper persons (see
section 7),

(b) that the scheme is financially sustainable (see section 8),

(c) that each scheme funder meets the requirements set out in section 10,

(d) 40that the systems and processes used in running the scheme are
sufficient to ensure that it is run effectively (see section 11), and

(e) that the scheme has an adequate continuity strategy (see section 12).

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(4) If the Pensions Regulator is satisfied that the Master Trust scheme meets the
authorisation criteria, it must—

(a) grant the authorisation,

(b) notify the applicant of its decision, and

(c) 5add the scheme to its list of authorised Master Trust schemes (see
section 13).

(5) If the Pensions Regulator is not satisfied that the Master Trust scheme meets
the authorisation criteria, it must—

(a) refuse to grant the authorisation, and

(b) 10notify the applicant of its decision.

(6) A notification under subsection (5) must also include—

(a) the reasons for the decision, and

(b) details of the right of referral to the First-tier Tribunal or Upper
Tribunal (see section 6).

6 15Referral to Tribunal of refusal to grant authorisation

(1) If the Pensions Regulator refuses to grant authorisation to a Master Trust
scheme, the decision may be referred to the Tribunal by—

(a) the trustees, or

(b) any other person who appears to the Tribunal to be directly affected by
20the decision.

(2) In this section “the Tribunal”, in relation to a referral under subsection (1),
means—

(a) the First-tier Tribunal, in any case where it is determined by or under
Tribunal Procedure Rules that the First-tier Tribunal is to hear the
25reference;

(b) the Upper Tribunal, in any other case.

Authorisation criteria

7 Fit and proper persons requirement

(1) This section applies for the purposes of enabling the Pensions Regulator to
30decide whether it is satisfied that the persons involved in a Master Trust
scheme are fit and proper persons (see section 5(3)(a)).

(2) The Pensions Regulator must assess whether each of the following is a fit and
proper person to act in relation to the scheme in the capacity mentioned—

(a) a person who establishes the scheme;

(b) 35a trustee;

(c) a person who (alone or with others) has power to appoint or remove a
trustee;

(d) a person who (alone or with others) has power to vary the terms of the
trust under which the scheme is established (where the scheme is
40established under a trust);

(e) a person who (alone or with others) has power to vary the scheme
(where the scheme is not established under a trust);

(f) a scheme funder;

(g) a scheme strategist;

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(h) a person acting in a capacity specified in regulations made by the
Secretary of State.

(3) The Pensions Regulator may also assess whether each of the following is a fit
and proper person to act in relation to the scheme in the capacity mentioned—

(a) 5a person who promotes or markets the scheme;

(b) a person acting in a capacity specified in regulations made by the
Secretary of State.

(4) In assessing whether a person is a fit and proper person to act in a particular
capacity, the Pensions Regulator—

(a) 10must take into account any matters specified in regulations made by the
Secretary of State, and

(b) may take into account such other matters as it considers appropriate
(including, in particular, matters relating to a person connected with
that person).

(5) 15For the purposes of this section a person (“A”) is connected with another
person (“B”) if—

(a) A is an associate of B;

(b) where B is a company, A is a director or shadow director of B or an
associate of a director or shadow director of B;

(c) 20A is a trustee of an occupational pension scheme established under a
trust and—

(i) the beneficiaries of the trust include B or an associate of B, or

(ii) the terms of the trust confer a power that may be exercised for
the benefit of B or an associate of B.

(6) 25In this section—

  • “associate” has the meaning given by section 435 of the Insolvency Act
    1986;

  • “director” and “shadow director” have the meanings given by section 251
    of that Act.

(7) 30The first regulations that are made under subsection (4) are subject to
affirmative resolution procedure.

(8) Any subsequent regulations under subsection (4), and regulations under
subsections (2) and (3), are subject to negative resolution procedure.

8 Financial sustainability requirement

(1) 35This section applies for the purposes of enabling the Pensions Regulator to
decide whether it is satisfied that a Master Trust scheme is financially
sustainable (see section 5(3)(b)).

(2) In order to be satisfied that a Master Trust scheme is financially sustainable, the
Regulator must be satisfied—

(a) 40that the business strategy relating to the scheme is sound, and

(b) that the scheme has sufficient financial resources to meet the costs
mentioned in subsection (3).

(3) The costs are—

(a) the costs of setting up and running the scheme, and

(b) 45in the event of a triggering event occurring—

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(i) the costs of complying with the duties in sections 20 to 33, and

(ii) the costs of continuing to run the scheme for such period (which
must be at least six months and no more than two years) as the
Regulator thinks appropriate for the scheme.

(4) 5In deciding whether it is satisfied about the matters mentioned in subsection
(2)(a) and (b), the Pensions Regulator must take into account any matters
specified in regulations made by the Secretary of State.

(5) The regulations may include provision specifying—

(a) the information that the Regulator must take into account, such as—

(i) 10the scheme’s business plan and supporting documents and
information (see section 9);

(ii) the scheme’s accounts and the accounts of a scheme funder;

(b) requirements to be met by the scheme or by a scheme funder relating to
its financing, such as requirements relating to assets, capital or
15liquidity.

(6) The first regulations that are made under this section are subject to affirmative
resolution procedure.

(7) Any subsequent regulations under this section are subject to negative
resolution procedure.

9 20Financial sustainability requirement: business plan

(1) A scheme strategist of a Master Trust scheme must prepare a business plan for
the scheme.

(2) The Secretary of State may make regulations setting out—

(a) information that must be included in a business plan, and

(b) 25any other requirements with which a business plan must comply.

(3) The scheme strategist must review the business plan at least once a year, and
revise it if appropriate.

(4) The scheme strategist must revise the business plan at any time if there is any
significant change to the information included in it.

(5) 30The business plan, and any revisions to it, must be approved by each scheme
funder, any other scheme strategist and the trustees.

(6) The scheme strategist or the trustees must provide the Pensions Regulator with
the most recent business plan, and any supporting information or documents
required by the Regulator—

(a) 35on application for authorisation (see section 4);

(b) within three months of the plan being revised;

(c) at any other time, on request from the Regulator.

(7) The first regulations that are made under this section are subject to affirmative
resolution procedure.

(8) 40Any subsequent regulations under this section are subject to negative
resolution procedure.

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10 Scheme funder requirements

(1) This section makes provision about the requirements that a scheme funder
must meet in order for the scheme to meet the authorisation criterion
mentioned in section 5(3)(c).

(2) 5The first requirement is that the scheme funder is a body corporate or a
partnership that is a legal person under the law by which it governed.

(3) The second requirement is that the scheme funder only carries out activities
that relate directly to Master Trust schemes in relation to which it is a scheme
funder or prospective scheme funder.

(4) 10The Secretary of State may make regulations providing for exceptions from the
second requirement.

(5) The regulations may include provision excepting a scheme funder from the
second requirement—

(a) where the scheme funder meets additional requirements specified in
15the regulations (such as requirements relating to a scheme funder’s
financial position, its financial arrangements with the Master Trust
scheme in question or its business activities);

(b) where the scheme funder applies to the Regulator and provides the
Regulator with information specified in the regulations, or such other
20information as the Regulator may require in order to satisfy the
Regulator that the Master Trust scheme is financially sustainable.

(6) The Secretary of State may make regulations setting out requirements relating
to a scheme funder’s accounts.

(7) The regulations may include provision—

(a) 25setting out requirements relating to the audit of accounts;

(b) applying some or all of the provisions of Parts 15 and 16 of the
Companies Act 2006 (accounts and report; audit), with or without
modifications.

(8) The first regulations that are made under subsection (4) are subject to
30affirmative resolution procedure.

(9) Any subsequent regulations under subsection (4), and regulations under
subsection (6), are subject to negative resolution procedure.

11 Systems and processes requirements

(1) This section applies for the purposes of enabling the Pensions Regulator to
35decide whether it is satisfied that the systems and processes used in running
the scheme are sufficient to ensure that it is run effectively (see section 5(3)(d)).

(2) In deciding whether it is satisfied that the systems and processes used in
running the scheme are sufficient for those purposes, the Pensions Regulator
must take into account any matters specified in regulations made by the
40Secretary of State.

(3) Regulations about the systems used in running a scheme may include
provision about—

(a) the features and functionality required of the IT systems used in
running the scheme;

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(b) standards that those IT systems must meet (for example, in relation to
quality and security of data);

(c) the maintenance of those IT systems.

(4) Regulations about the processes used in running a scheme may include
5provision about—

(a) records management;

(b) risk management;

(c) resource planning;

(d) processes relating to transactions and investment decisions;

(e) 10processes relating to the appointment and removal of trustees, and
their professional development;

(f) processes relating to the roles and responsibilities of a scheme strategist
and a scheme funder;

(g) processes relating to the appointment, removal, roles and
15responsibilities of—

(i) persons (other than those mentioned in paragraphs (e) and (f))
involved in running the scheme, and

(ii) persons providing services in relation to the scheme.

(5) The first regulations that are made under this section are subject to affirmative
20resolution procedure.

(6) Any subsequent regulations under this section are subject to negative
resolution procedure.

12 Continuity strategy requirement

(1) This section applies for the purposes of enabling the Pensions Regulator to
25decide whether it is satisfied that a Master Trust scheme has an adequate
continuity strategy (see section 5(3)(e)).

(2) A continuity strategy is a document addressing how the interests of members
of the scheme are to be protected if a triggering event occurs in relation to the
scheme (see section 21).

(3) 30A continuity strategy must be prepared by a scheme strategist.

(4) A continuity strategy must include a section setting out the levels of
administration charges that apply in relation to members of the scheme

(5) The strategy must set out those levels of charges in the manner specified in
regulations made by the Secretary of State.

(6) 35A continuity strategy must—

(a) contain such other information as may be specified in regulations made
by the Secretary of State, and

(b) be prepared in accordance with regulations made by the Secretary of
State.

(7) 40A scheme strategist must keep the continuity strategy under review and revise
it if appropriate.

(8) The continuity strategy, and any revisions to it, must be approved by each
scheme funder, any other scheme strategist and the trustees.

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(9) A scheme strategist or the trustees must provide the continuity strategy to the
Pensions Regulator—

(a) on application for authorisation (see section 4),

(b) within three months of the strategy being revised, and

(c) 5at any other time, on request from the Regulator.

(10) The first regulations that are made under this section are subject to affirmative
resolution procedure.

(11) Any subsequent regulations under this section are subject to negative
resolution procedure.

10Ongoing supervision of Master Trust schemes

13 List of authorised schemes

(1) The Pensions Regulator must maintain and publish a list of authorised Master
Trust schemes.

(2) The list—

(a) 15must identify each authorised Master Trust scheme by name, and

(b) may include any other information that the Pensions Regulator
considers appropriate.

14 Requirement to submit annual accounts

(1) The trustees of an authorised Master Trust scheme must send the scheme’s
20accounts to the Pensions Regulator.

(2) The accounts must be sent to the Regulator no later than two months after they
are obtained by the trustees.

(3) A scheme funder of a Master Trust scheme must send its accounts to the
Pensions Regulator.

(4) 25The scheme funder’s accounts must be sent to the Regulator—

(a) no later than nine months after the end of the financial year to which
they relate, or

(b) within such other period as may be specified in regulations made by
the Secretary of State.

(5) 30Section 10 of the Pensions Act 1995 (civil penalties) applies to a person who
fails to comply with a requirement imposed by this section.

(6) Regulations under this section are subject to negative resolution procedure.

15 Requirement to submit supervisory return

(1) The Pensions Regulator may by notice in writing require the trustees of an
35authorised Master Trust scheme to submit a supervisory return.

(2) The Secretary of State may make regulations setting out the information that
the Regulator may require in a supervisory return.

(3) The notice must specify—

(a) the information required to be included in the return,