Five new SIs have been laid by the DWP since our last update on 14 December 2005:

1. The Occupational Pension Schemes (Scheme Funding) Regulations 2005 (SI 2005/3377)

The long-awaited replacement for the MFR came into force on 30 December 2005. Following the consultation, the Government responded [PDF] on a number of key issues:

• interpretation of "prudence": the revised TPR Code of Practice now makes it clear that some allowance for equity out-performance relative to bonds will not necessarily be imprudent, that only the key assumptions need to be considered in this context, and that trustees should form a view about the overall level of adequacy of the technical provisions.
• the balance of power where the trustees or the scheme actuary are responsible under a scheme’s rules for setting the contribution rate: the Regulations have been modified as far as possible within the new funding framework (which gives trustees the ultimate responsibility for funding decisions) in order to take account of the concerns raised. For example, where the power to set the contribution rate currently rests with the scheme actuary, the trustees will be required to seek the employer's agreement and also to take account of the actuary's recommendations.
• the definition of the actuary’s estimate of the solvency of the scheme: this required an estimate (for disclosure and awareness purposes) of the cost of buying annuities and deferred annuities from an insurance company, and it was pointed out that this would present difficulties for large schemes, because sufficient annuities would not be available for purchase. The Regulations have been amended to allow flexibility for actuaries to provide an alternative estimate of solvency in such cases.
• guidance on the preparation of recovery plans: the revised code now says that trustees should aim for any shortfall to be eliminated as quickly as the employer can reasonably afford, whilst taking into account the likely effect of any recovery plan on the employer’s future viability and its business plans.
• the weight to be given to the strength of the employer’s covenant: the revised code explains that there is a range of sources from which the trustees might seek information and advice about the employer's financial situation.
• how to deal with conflicts of interest (for instance where a Finance Director is also a trustee): the revised code stresses that trustees should set aside their other duties and interests when making decisions as trustees, and that they should consider in advance how they will recognise and deal with any conflicts, and may need to take legal advice.
• how to make the annual funding statement clear to scheme members: TPR will issue a revised sample document, which will now be called a summary funding statement.
• the length and layout of the code: all the appropriate guidance is now to be contained in the code, dispensing with the proposed accompanying guidance. In addition, specimen documents (for example a specimen summary funding statement) will be available on the Pensions Regulator's website.

2. The Occupational Pension Schemes (Internal Controls) Regulations 2005 (SI 2005/3379)

These Regulations, in force from 30 December 2005, amend the Pensions Act 2004 by adding s.249A (requirement for internal controls). This implements the requirement in Article 14(1) of the IORP Directive 2003/41/EC that the trustees or managers of an occupational pension scheme must have adequate internal control mechanisms.

3. The Occupational Pension Schemes (Regulatory Own Funds) Regulations 2005 (SI 2005/3380)

These Regulations implement Article 17 of the IORP Directive 2003/41/EC. There are probably no UK schemes which would currently be caught by the requirements of Article 17; certainly the Government has stated [PDF] it is still not aware of any specific schemes to which the Regulations will apply.

The Government's legal advice indicates that it is expected that the Regulations will normally only apply to schemes set up to underwrite defined benefits themselves. Specifically, Regulation 3 requires that where an occupational pension scheme itself, rather than an employer, covers any liability for risks linked to death, disability or longevity, guarantees any investment performance, or guarantees to provide defined benefits, the scheme must have additional assets above its technical provisions. The Regs came into force on 30 December 2005.

4. The Occupational Pension Schemes (Consultation by Employers) (Modification for Multi-employer Schemes) Regulations 2006 (SI 2006/16)

This very short SI modifies ss.259 and 261 of the Pensions Act 2004 (consultation by employers) so that regs made under those sections extend to any other person besides trustees or managers who has power to make a decision in relation to the scheme. These Regs were laid on 12 January and come into force on 2 February 2006.

5. The Occupational Pension Schemes (Early Leavers: Cash Transfer Sums and Contribution Refunds) Regulations 2006 (SI 2006/33)

These Regs are consequential upon the new provisions inserted into the Pension Schemes Act 1993 by s264 of the Pensions Act 2004, which entitle a member who leaves after 3 months pensionable service (terminating on or after 6 April 2006) to a cash transfer sum as an alternative to a refund of his or her own contributions. The regs specify how the cash transfer sum or refund are to be calculated and the member’s rights in relation to their options. They come into force on 6 April 2006.

In addition the following draft regulations, made following a consultation last year, were laid before Parliament on 12 January:

The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 [PDF]

These regs prohibit the making of certain changes to occupational or personal pension schemes unless consultation about the change is carried out beforehand. They also make a minor amendment to the Financial Assistance Scheme (Internal Review) Regulations 2005 (SI 2005/1994) to correct a typo. They come into force on 6 April 2006.

Meanwhile two new consultations have been launched on draft regulations:

1. The Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc) (Amendment) Regulations 2006 [PDF]

This is short in both senses, closing on 23 January. The draft regs amend SI 1997/785 to add to the list of circumstances when pension rights under an occupational pension scheme may be commuted, covering new situations created by the Finance Act 2004.

2. The Occupational Pension Schemes (Payments to Employer) Regulations 2006 [PDF]

Open from 5 January to 1 February 2006, this consultation concerns regulations to replace the 1996 regs, intended to come into force on 6 April 2006 to coincide with the date FA 2004 commences. The regulations provide that a payment cannot be made unless the assets of the scheme are more than the cost of 'full buy-out'. Given the rarity of pension scheme surpluses these days, it seems unlikely the regs will often be referred to in practice.