The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016
| Year | 2016 |
2016 No. 946
Public Service Pensions, England And Wales
The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016
Made 21th September 2016
Laid before Parliament 23th September 2016
Coming into force 1st November 2016
The Secretary of State makes these Regulations in exercise of the powers conferred by sections 1(1) and 3(1) to (4) of, and Schedule 3 to, the Public Service Pensions Act 20131.
In accordance with section 21(1) of that Act, the Secretary of State has consulted such persons and the representatives of such persons as appeared to the Secretary of State to be likely to be affected by these Regulations.
In accordance with section 3(5) of that Act, these Regulations are made with the consent of the Treasury.
Citation, commencement and extent
1.—(1) These Regulations may be cited as the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016.
(2) These Regulations come into force on 1st November 2016.
(3) These Regulations extend to England and Wales.
Interpretation
2.—(1) In these Regulations—
“the 2000 Act” means the Financial Services and Markets Act 20002;
“the 2013 Regulations” means the Local Government Pension Scheme Regulations 20133;
“the Transitional Regulations” means the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 20144;
“authority” means an administering authority listed in Part 1 of Schedule 3 to the 2013 Regulations;
“fund money” means money that is or should be in a pension fund maintained by an authority;
“proper advice” means the advice of a person whom the authority reasonably considers to be qualified by their ability in and practical experience of financial matters;
“the Scheme” means the scheme established by the 2013 Regulations.
(2) Any restrictions imposed by these Regulations apply to authorities which have the power within section 1 of the Localism Act 20115(local authority’s general power of competence) or section 5A(1) of the Fire and Rescue Services Act 20046in the exercise of those powers.
(3) Any authority which does not have the powers mentioned in paragraph (2) has, by virtue of these Regulations the power to do anything authorised or required by these Regulations.
Investment
3.—(1) In these Regulations “investment” includes—
(a)
(a) a contract entered into in the course of dealing in financial futures, traded options or derivatives;
(b)
(b) a contribution to a limited partnership in an unquoted securities investment;
(c)
(c) a contract of insurance if it is a contract of a relevant class, and is entered into with a person within paragraph (2) for whom entering into the contract constitutes the carrying on of a regulated activity within the meaning of section 22 of the 2000 Act7.
(2) The persons within this paragraph are—
(a)
(a) a person who has permission under Part 4A of the 2000 Act (permission to carry on regulated activities)8to effect or carry out contracts of insurance of a relevant class;
(b)
(b) an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the 2000 Act (EEA passport rights), which has permission under paragraph 15 of that Schedule9to effect or carry out contracts of insurance of a relevant class; and
(c)
(c) a person who does not fall within sub-paragraph (a) or (b) whose head office is in an EEA state other than the United Kingdom, and who is permitted by the law of that state to effect or carry out contracts of insurance of a relevant class.
(3) A contract of insurance is of a relevant class for the purposes of paragraphs (1)(c) and (2) if it is—
(a)
(a) a contract of insurance on human life or a contract to pay an annuity on human life where the benefits are wholly or partly to be determined by reference to the value of, or income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or an index of, the value of property of any description (whether or not so specified); or
(b)
(b) a contract to manage the investments of pension funds, whether or not combined with a contract of insurance covering either conservation of capital or payment of minimum interest.
(4) For the purposes of this regulation—
“limited partnership” has the meaning given in the Limited Partnerships Act 190710;
“recognised stock exchange” has the same meaning as in section 1005 of the Income Tax Act 200711;
“traded option” means an option quoted on a recognised stock exchange; and
“unquoted securities investment partnership” means a partnership for investing in securities which are not quoted on a recognised stock exchange when the partnership buys them.
Management of a pension fund
4.—(1) An authority must credit to its pension fund12, in addition to any sum otherwise required to be credited by virtue of the 2013 Regulations or the Transitional Regulations—
(a)
(a) the amounts payable by it or payable to it under regulations 15(3)(b), 67 and 68 of the 2013 Regulations (employer’s contributions and further payments);
(b)
(b) all amounts received under regulation 69(1)(a) of the 2013 Regulations (member contributions);
(c)
(c) all income arising from investment of the fund; and
(d)
(d) all capital money deriving from such investment.
(2) In the case of an authority which maintains more than one pension fund, as respects sums which relate to specific members, the references in this regulation to the authority’s pension fund is to the fund which is the appropriate fund13for the member in question in accordance with the 2013 Regulations.
(3) Interest under regulation 71 of the 2013 Regulations (interest on late payments by Scheme employers) must be credited to the pension fund to which the overdue payment is due.
(4) An authority must pay any benefits to which any person is entitled by virtue of the 2013 Regulations or the Transitional Regulations from its pension fund.
(5) Any costs, charges and expenses incurred administering a pension fund may be paid from it except for charges prescribed by regulations made under sections 23, 24 or 41 of the Welfare Reform and Pensions Act 199914(charges in relation to pension sharing costs).
Restriction on power to borrow
5.—(1) Except as provided in this regulation, an authority must not borrow money where the borrowing is liable to be repaid out of its pension fund.
(2) Subject to paragraph (3), an authority may borrow by way of temporary loan or overdraft which is liable to be repaid out of its pension fund, any sums which it may require for the purpose of—
(a)
(a) paying benefits due under the Scheme; or
(b)
(b) to meet investment commitments arising from the implementation of a decision by it to change the balance between different types of investment.
(3) An authority may only borrow money under paragraph (2) if, at the time of the borrowing, the authority reasonably believes that the sum borrowed and interest charged in respect of that sum can be repaid out of its pension fund within 90 days of the borrowing.
Separate bank account
6.—(1) An authority must hold in a separate account kept by it with a deposit-taker all fund money.
(2) “Deposit-taker” for the purposes of paragraph (1) means—
(a)
(a) a person who has permission under Part 4A of the 2000 Act (permission to carry on regulated activities) to carry on the activities specified by article 5 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (accepting deposits)15;
(b)
(b) an EEA firm of the kind mentioned in paragraph 5(b)16of Schedule 3 to the 2000 Act (EEA passport rights) which has permission under paragraph 15 of that Schedule17to accept deposits;
(c)
(c) the Bank of England or the central bank of an EEA state other than the United Kingdom; or
(d)
(d) the National Savings Bank.
(3) An authority must secure that the deposit-taker may not exercise a right of set-off in relation to the account referred to in paragraph (1) in respect of any other account held by the authority or any party connected to the authority.
Investment strategy statement
7.—(1) An authority must, after taking proper advice, formulate an investment strategy which must be in accordance with guidance issued from time to time by the Secretary of State.
(2) The authority’s investment strategy must include—
(a)
(a) a requirement to invest fund money in a wide variety of investments;
(b)
(b) the authority’s assessment of the suitability of particular investments and types of investments;
(c)
(c) the authority’s approach to risk, including the ways in which risks are to be assessed and managed;
(d)
(d) the authority’s approach to pooling investments, including the use of collective...
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