Pension Scheme and Gratuity Scheme Rules and Guidance, 2020

THE PENSION SCHEME AND GRATUITY SCHEME RULES AND GUIDANCE, 2020 : ACTING WITH INTEGRITY

The Guernsey Financial Services Commission (“the Commission”), in exercise of the powers conferred on it by sections 29, 31A, 31B and 31C of the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 20001 (“the Law”), makes the following Rules.

This consolidated edition includes the Commission’s guidance notes.

1 Ordres en Conseil No. I of 2001.

CONTENTS

PART 1 - INTRODUCTION .............................................................................................................3 1.1 Commencement..................................................................................................... 3 1.2 Application............................................................................................................. 3

PART 2 – PENSION SCHEMES AND GRATUITY SCHEMES ................................................5 2.1 Fair treatment of Scheme Members.................................................................... 5 2.2 Scheme Governance.............................................................................................. 5 2.3 Notification of Schemes to the Commission ..................................................... 8 2.4 Reporting to the Commission.............................................................................. 9 2.5 Self assessment .................................................................................................... 10 2.6 Documentation relating to the Scheme............................................................ 10 2.7 Service Providers................................................................................................. 13 2.8 Information for new joiners to Schemes .......................................................... 15 2.9 Contributions....................................................................................................... 18 2.10 Charges .................................................................................................................20 2.11 Provision of information about benefits .......................................................... 20 2.12 Transfers ............................................................................................................... 27 2.13 Statement of Investment Principles.................................................................. 30 2.14 Investment Direction .......................................................................................... 31

PART 3 – GENERAL PROVISIONS .............................................................................................40 3.1 Interpretation....................................................................................................... 40

PART 4 – TRANSITIONAL ARRANGEMENTS, REVOCATIONS, CITATION AND COMMENCEMENT.........................................................................................................................46 4.1 Transitional Arrangements................................................................................ 46 4.2 Revocations .......................................................................................................... 46 4.3 Citation and commencement............................................................................. 47

PART 1 - INTRODUCTION

1.1 Commencement (1) The Pension Scheme and Gratuity Scheme Rules 2020 (the “Rules”) shall come into force on 31 December 2020.

1.2 Application (1) The formation, management or administration of pension schemes or gratuity schemes (“Schemes”) and the provision of advice in relation to their formation, management or administration is a regulated activity in accordance with section 2(1)(e) of the Law. (2) Except where otherwise provided, the Rules shall apply to all licensees and in respect of all Schemes formed, managed or administered by them. (3) The Commission may in its absolute discretion, by written notice to a licensee, exclude or modify the application of any provision of the Rules.

Guidance Note: This document take a two-level approach – • the Rules set out the standards to be met by the licensed fiduciary; and • guidance notes present suggested ways of showing compliance with the Rules. Licensed fiduciaries may adopt alternative measures to those set out in the guidance so long as it is possible to demonstrate that such measures achieve compliance. The text contained in shaded boxes contains guidance from the Commission and does not form part of the Rules.

PART 2 – PENSION SCHEMES AND GRATUITY SCHEMES

2.1 Fair treatment of Scheme Members (1) Licensees must pay due regard to the interests of Scheme Members and beneficiaries and treat them fairly.

2.2 Scheme Governance (1) Every Scheme must have governance arrangements in place, appropriate to the objectives of the Scheme, to ensure adherence to the terms of the Scheme and to protect the interests of the Scheme Members.

2.2.1 Governance Procedures (1) The licensee must ensure that the persons responsible for the governance of a Scheme are clearly identified. (2) The licensee must ensure it has appropriate internal controls in place in relation to each Scheme. (3) Subject to rule 2.7 the licensee, when acting as a trustee, must undertake appropriate monitoring and oversight of any person it appoints to provide governance for each Scheme.

Guidance Note: Good Governance of Schemes should enable the licensee, where appropriate, to oversee: • safe keeping of assets; • the making of timely and accurate notifications to the Commission; • timely and accurate reporting to the Commission; • administration; • appropriate record keeping; • funding in relation to defined benefit schemes; • payment of contributions; • ongoing investment of assets; • communication with members. Where, in relation to each Scheme, the licensee is satisfied that its own policies, procedures and controls are sufficient to provide oversight and ensure good governance a Governance Committee is not required. Where a Scheme’s size, complexity and the number of Scheme Members is such that the Scheme might benefit from a Governance Committee, the licensee should consider such an appointment. Where a Governance Committee is appointed it should provide oversight of the – (i) formation; (ii) management; (iii)administration; and (iv)internal controls of the Scheme. A Governance Committee should report significant concerns to the licensee, with regards to any of the processes above as soon as is reasonably practicable. A Governance Committee should report to the Commission, licensee, administrator or employer, as appropriate, where major and significant risks arise which have not been communicated to the Scheme Members.

2.2.2 Governing Documentation (1) Subject to rule 2.2.2(3), the licensee when acting as a trustee must ensure that the Scheme is established and is, at all times, constituted by the “Governing Documentation”. The Governing Documentation – (a) may include supplementary or ancillary instruments; and (b) must set out, in detail – (i) the terms of the Scheme; (ii) the obligations and powers of the licensee or any other person responsible for the governance of the Scheme; and (iii)details of the benefits provided for Scheme Members including – (aa) their nature; (bb) method of calculation; and (cc) the circumstances in which they are paid. (2) Subject to rule 2.2.2(3), the licensee when acting as administrator must retain copies of the documentation necessary to fulfil its contracted functions. It must be satisfied that the Scheme is established and is, at all times, constituted by the Governing Documentation.

(3) Where a Scheme is established by an interim instrument, on terms that it is to adopt either full or definitive Governing Documentation at a future date, the requirement under rule 2.2.2(1), above, shall apply from that date. (4) A licensee must ensure that any interim instrument referred to in rule 2.2.2(3), or any other documentation to which the interim instrument refers, contains sufficient detail to enable the Scheme Members to ascertain the nature of the benefits and when they will become payable.

2.3 Notification of Schemes to the Commission (1) Within two months of the – (a) establishment or approval of a Scheme, whichever is later; or (b) completion of the transfer of a Scheme from a person not licensed by the Commission; the licensee must provide notification to the Commission in such form as the Commission may from time to time specify. (2) Within two months of the completion of the transfer of a Scheme to another licensee, the retiring licensee must provide notification to the Commission in such form as the Commission may from time to time specify.

Guidance Note: Where, as described in Rule 2.2.2(3), a Scheme is established by an interim instrument the licensee when acting as a trustee should take steps to ensure that full or definitive Governing Documentation is adopted as soon as is reasonably possible.

(3) Within two months of the completion of the termination of a Scheme or of the transfer of the Scheme to a person not licensed by the Commission, the licensee must provide notification to the Commission in such form as the Commission may from time to time specify. (4) Where more than one licensee undertakes regulated activity for the same Scheme one licensee, with the agreement of the other relevant licensees, may give written notice to the Commission that it shall be the licensee for the purposes of this rule.

2.4 Reporting to the Commission (1) The licensee, in relation to each Scheme, must submit to the Commission – (a) notification of any material changes to the information previously provided to the Commission under rule 2.3, as soon as is reasonably practicable; (b) an annual return, within six months of the Scheme Year End; and (c) a quarterly return, within two months of the end of each quarter within a calendar year in such form and manner as is specified by the Commission. (2) Where more than one licensee undertakes regulated activity for the same Scheme one licensee, with the agreement of the other relevant licensees, may give written notice, to the Commission, that it shall be the licensee for the purpose of this rule.

2.5 Self assessment (1) The licensee should regularly ensure its compliance against these Rules. (2) The licensee should perform an assessment of the effectiveness of its policies, procedures and controls, at least annually and on a more frequent basis if appropriate, to ensure that it is fully compliant in respect of its obligations under these Rules.

2.6 Documentation relating to the Scheme (1) A licensee must ensure that adequate records relating to each Scheme, in respect of which they undertake regulated activities, are kept and preserved. These records must include, but are not limited to - (a) the current and any previous Governing Documentation for the Scheme, including any amendments and ancillary or supplemental documentation; (b) any interim documents in accordance with rule 2.2.2(3); (c) records of any meetings relating to the Scheme;

Guidance Note: The frequency of a periodic self-assessment should take into account the size, nature and complexity of the business including risks identified in any risk assessment in respect of the type of Schemes for which it is acting as Pension Service Provider. The periodic self-assessment might, for example, form part of testing carried out under a compliance monitoring programme or be as a result of a trigger event such as a number of breaches of the Rules or of the Scheme’s Governing Documentation.

(d) financial statements relating to the Scheme and, in the context of a Scheme operated on a defined contribution basis, these should identify the assets referable to each Scheme Member; (e) when acting as a trustee of a Scheme operated on a defined benefit basis actuarial valuations which must be prepared at least every three years; (f) the latest statements of investment principles prepared in accordance with rule 2.13; (g) any Contribution Schedule prepared in accordance with rule 2.9 in relation to the Scheme; (h) correspondence to, or in respect of, any Scheme Member or beneficiary with either an absolute, prospective or contingent entitlement to benefits in relation to the Scheme; (i) any other information the Commission may from time to time specify by way of licence conditions; (j) where the Scheme is an occupational pension scheme, the licensee should keep an up to date record, whether directly or via a third party, of the date and terms on which an employee commenced participation in the scheme and the date on which participation ceased; and (k) the obligations and powers of any other person, including any Service Provider, in relation to the Scheme. (2) Governing Documentation and other Scheme documents must be – (a) maintained securely; (b) readily available; and (c) available in English. (3) The licensee should, in relation to each Scheme, ensure anyone responsible for managing or administering the benefits of that Scheme are conversant with the Governing Documentation, the statements of investment principles prepared in accordance with rule 2.13 and other scheme documents and policies. (4) Where a Scheme Member requests sight of documentation – (a) the licensee must make the following documents available within a reasonable time – (i) the current and previous Governing Documentation for the Scheme, including any amendments and ancillary or supplemental documentation; (ii) any interim documents in accordance with rule 2.2.2(3); (iii)financial statements, where appropriate, relating to the Scheme and to assets referable to the Scheme Member making the request; (iv)in relation to a defined benefit basis scheme only, the latest statement of investment principles prepared in accordance with rule 2.13; and (v) in relation to a defined contribution basis scheme only, the latest statement of investment principles prepared in accordance with rule 2.13 which apply to the Scheme Member making the request; (b) and where the documents are requested to be provided in hard copy, the licensee may require that the requestor first pays the reasonable costs associated with copying and delivery; and (c) any document referred to in rule 2.6(4)(a), which is only relevant to specific Scheme Members, need only be released to those Scheme Members. (5) Where more than one licensee undertakes regulated activity for the same Scheme one licensee, with the agreement of the other relevant licensees, may give written notice to the Commission that it shall be the licensee for the purposes of this rule.

2.7 Service Providers (1) A “Service Provider” is any external person, firm or other entity who, in relation to any one or more of the licensee’s Schemes provides any one or more of the following services - (a) administration of benefits; (b) custodian of Scheme assets; (c) acting as an Appropriate Financial Adviser;

Guidance Note: The Commission would expect a licensee to be able to justify any restriction of the information made available to a Scheme Member. Where information requested by a Scheme Member under Rule 2.6(4) regarding a Scheme is deemed to be commercially sensitive the Commission would expect that a licensee consider redaction or partial disclosure as an alternative to full disclosure, provided that the Scheme Member is given sufficient information to understand the nature of the restriction.