The formation, management or administration of pension schemes and gratuity schemes and the provision of advice in relation to the same is a regulated activity in the Bailiwick of Guernsey under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020.
When did the Pension Scheme and Gratuity Scheme Rules and Guidance come into force?
The Pension Scheme and Gratuity Scheme Rules and Guidance, 2021 ("the Rules") came into force on 1 November 2021.
Who needs to comply with the Pension Scheme and Gratuity Scheme Rules and Guidance 2021: Acting with Integrity (the “Rules”)?
The Rules apply to those who are forming, managing or administering pension schemes or gratuity schemes, or providing advice in relation to the same, in or from within the Bailiwick.
Regulated pension scheme business or gratuity scheme business carried on by way of business in or from within the Bailiwick of Guernsey, or by a company incorporated in the Bailiwick, may therefore only be carried out with a fiduciary licence.
What schemes are in scope?
Pension schemes and gratuity schemes as defined in section 59 of the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 are bound by the Pension Scheme and Gratuity Scheme Rules and Guidance 2021: Acting with Integrity. However, the extension of the Fiduciaries regime to make the formation, administration and management of pension and gratuity schemes and the provision of advice in relation to the same a regulated activity, includes a definition of gratuity scheme that is broader than intended and the applied scope of gratuity schemes is as per the FAQ immediately below.
What is the scope of “gratuity schemes” under the Pension Scheme and Gratuity Scheme Rules and Guidance 2021: Acting with Integrity (the “Rules”)?
The extension of the Fiduciaries regime to make the formation, administration and management of pension and gratuity schemes and the provision of advice in relation to the same a regulated activity, includes a definition of gratuity scheme that is broader than intended. Dialogue is underway with the States of Guernsey to revise this.
Until any amendment is made, as per Rule 1.1(1) of the Rules, the Commission will apply the Rules, including notification and reporting requirements, to gratuity schemes established in connection with the carrying on of business or the exercise of functions and which has, for its sole or main purpose, the purpose of the provision of retirement benefits by means of the provision of a lump sum or other payments for persons employed in or in connection with the business or the exercise of the functions (or their spouses, children, dependants or other persons in respect of them), at a time or occasion (including, without limitation, the expiration of their term of service), or on the occurrence of an event or circumstance, or on compliance with requirements or conditions, specified in the rules of the scheme. For example, as is understood by the Commission to be custom and practice in jurisdictions in the Middle East and Asia.
I am an Insurance Intermediary operating in or from within the Bailiwick of Guernsey, do the Pension Scheme and Gratuity Scheme Rules 2021: Acting with Integrity (the “Rules”) apply to me?
Whether the Rules apply to a licensed Insurance Intermediary will depend upon the nature of the activities carried on by that intermediary.
Section 3(1)(ab) of the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 (“the Law”) exempts licensed Insurance Intermediaries from the need for a fiduciary licence for the formation of, and the provision of advice in relation to the formation of, retirement annuity schemes or retirement annuity trust schemes approved by the Director of Income Tax, pension schemes or gratuity schemes within the meaning of section 59 of the Law or trusts of life assurance policies.
If the Insurance Intermediary is providing regulated activity by way of business beyond this exemption (for example is managing or administering pension schemes or gratuity schemes) it will need to apply for a fiduciary licence and comply with the Rules.
I am acting as a lay trustee in respect of a pension scheme, how will the Pension Scheme and Gratuity Scheme Rules 2021: Acting with Integrity (the “Rules”) affect me?”
If you are acting as a trustee of a pension scheme or a gratuity scheme in a lay capacity and not receiving any income, fee, emolument or other consideration in money or money’s worth for doing so, then you are unlikely to be carrying on a regulated activity “by way of business”. In those circumstances you would not be required to hold a fiduciary licence, and the Rules would not apply.
Are there obligations placed on employers offering pensions to their employees under the Pension Scheme and Gratuity Scheme Rules 2021: Acting with Integrity (the “Rules”)?
Unless the employer is carrying on the regulated activities by way of business, i.e. pension scheme business or gratuity scheme business, the provisions of the Rules will not be directly applicable to them. Employers will not, however, be absolved of any of their respective obligations towards employees under any other existing legislation on account of the enactment of the Rules.
What do the Pension Scheme and Gratuity Scheme Rules 2021: Acting with Integrity (the “Rules”) mean for those carrying on pension scheme business or gratuity scheme business?
The Rules set out in detail the regulatory requirements of those carrying on pension scheme business or gratuity scheme business, which include, amongst other requirements, obligations to:
Provide key details of the scheme to the Commission within 2 months of its establishment;
Assess on appointment, and periodically thereafter review, the suitability and competence of any service provider appointed by it in relation to the pension scheme to ensure that they are qualified and competent to carry out the services in relation to the scheme;
Where a new member joins a pension scheme, provide a summary to the member describing the key features and provisions of the scheme;
Provide details of its complaints resolution procedure, including where applicable contact details for the Channel Islands Financial Ombudsman (“CIFO”) and also a statement that the CIFO may be available to consider any complaints not resolved through its complaints resolution procedure;
Consider all member borne charges and their basis of calculation to ensure that all such charges levied are reasonable in the circumstances;
In relation to member directed investment, satisfy itself in advance that the beneficiary is reasonably likely to be able to understand their investment power and the obligations and responsibilities in relation to such exercise, and inform the beneficiary of the respective parties’ responsibilities;
Where applicable, prepare and maintain a written statement of principles governing decisions about investments; and
Ensure that they are acting in compliance with the Rules.
What do the Pension Scheme and Gratuity Scheme Rules: Acting with Integrity (the “Rules”) mean for all members of a pension scheme or a gratuity scheme?
The Rules include a number of rights and responsibilities of all scheme members, including:
- Scheme Members will be entitled upon joining a pension scheme or a gratuity scheme (“the Scheme”), to details of each and every member borne charge payable now or in the future, or where these are not known, the basis of its calculation. Where this is not possible for any reason, the member should be provided with a description of what these charges or deductions are, and the reasons why it is not possible to provide information on these;
- Any member borne charges levied in respect of the Scheme should be reasonable and transparent;
- Transfer requests and information about transfer values should be processed promptly and accurately and should not be unreasonably delayed or subject to unreasonable conditions;
- Prior to a Scheme Members joining a Scheme they must receive an explanation of the investment approach applicable, the implications of the investment approach and who is responsible for reviewing and making investment decisions;
- If a member directed investment approach is adopted the Scheme Member themselves will be responsible for ensuring that investments are appropriate in the circumstances;
- Members of personal Schemes where the member directed investment approach is adopted will also have to sign a certificate confirming, among other things, that they acknowledge the specific investment approach that is to apply in respect of their membership of the Scheme;
- Members and beneficiaries have a right to be treated fairly by licensees carrying on pension scheme business or gratuity scheme business; and
- Members will be entitled to receive clear information relating to the Scheme on an annual basis.
What is the Commission’s supervisory approach in respect of pension schemes and gratuity schemes?
With respect to the supervision of the providers of services for pension schemes and gratuity schemes the Commission will adopt the same risk-based approach as is currently in place for all those under its supervision, using its PRISM methodology.
Can disputes concerning pension schemes or gratuity schemes still be referred to the Channel Islands Financial Ombudsman (“CIFO”)?
The entitlement of certain individuals, micro-enterprises and charities to refer pension disputes to the CIFO will not be affected by the commencement of the Pension Scheme and Gratuity Scheme Rules and Guidance, 2021: Acting with Integrity.
The CIFO is empowered to investigate complaints in respect of pension providers, pension intermediaries and pension managers where the complaint relates to relevant pension business falling within its remit. However it should be noted that the CIFO does not have the power to investigate complaints in respect of any act or omission that occurred before 2 July 2013.
We are a licensee involved in the operation of a multi-member scheme with no defined scheme year end, what will the reporting requirements be in respect of such a scheme?
In a scenario such as this, a licensee should choose a specific point within a year and notify the Commission that this will be its reporting date for the entire scheme. That date will become known as the ‘agreed reporting date’.
The Commission anticipates that the date chosen would be appropriate based on the individual members’ respective reporting dates and would only be changed in exceptional circumstances. This agreed reporting date would then be used by the licensee on a yearly basis in order to comply with its reporting requirements under the Pension Scheme and Gratuity Scheme Rules and Guidance 2021: Acting with Integrity.
How does the Statement of Investment Principles apply to multi-member schemes?
In a scenario where a multi-member scheme has more than one investment direction, more than one set of principles is required. There should be one set of principles for each type of approach within the scheme.
I was appointed as an administrator of a Scheme after it was established. Am I obliged to comply with Rule 2.2.2(1) of the Pension Scheme and Gratuity Scheme Rules and Guidance 2021: Acting with Integrity regarding the Governing Documentation?
A licensee 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.
Where a Scheme is established by an interim instrument a licensee, either acting as trustee or administrator, must ensure that any interim instrument, 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.
We provide services to a very small number of Members of Pension Schemes or Gratuity Schemes. Can we apply for a discretionary exemption in respect of the formation, management or administration of a Pension Scheme or Gratuity Scheme?
The Guernsey Financial Services Commission (“the Commission”) will consider in certain circumstances, an application from the holder of a primary and secondary fiduciary licence for a discretionary exemption in respect of the regulated activities in section 2(1)(e) of the Fiduciaries Law regarding the formation, management or administration of Pension Scheme(s) or Gratuity Scheme(s). Such an exemption would be appropriate where the full fiduciary licensee is providing services to Pension Scheme(s) or Gratuity Scheme(s) in extremely small numbers i.e. where the total number of members does not exceed six. This may comprise of one scheme with up to six members, or up to six schemes with one member per scheme, or any combination of schemes where the total number of members does not exceed six. Details of how to apply for a discretionary exemption for a Pension Scheme or Gratuity Scheme are set out in the Discretionary Exemptions page of this website.
Any exemption granted will be for a time limited basis of three years (if not surrendered before) from the date of issue and will require a renewal application after three years if necessary.
An exemption will only be granted where the members have confirmed, in writing, that they understand the impact this application will have on their scheme.
NB: The full fiduciary licensees utilising this exemption will not be listed as a regulated entity for pension provision on the Commission’s website.
Does the Code of Good Practice on Combating Pension Scams issued by the Pension Scams Industry Group apply to Guernsey licensees?
The Code of Good Practice is voluntary and sets an industry standard for dealing with requests by members for transfers from a UK registered pension scheme to another UK registered pension scheme or Qualifying Recognised Overseas Pension Scheme (QROPS). While it is intended to provide guidance from the perspective of UK pensions legislation it contains a lot of helpful information with the pension sector and consumer in mind.