Memorandum by the Department of Social
Stakeholder Pension Schemes (Amendment) (No.
2) Regulations 2001 (S.I. 2001/934)
1. The Committee has requested a memorandum in relation
to the above instrument on the following points:
Regulation 11(7) of the principal Regulations
(as amended by regulation 7(7) provides that it is to be a condition
of the appointment of the reporting accountant that he agrees,
in the event of his resignation (including where he resigns solely
or partly because he is required to do so by paragraph (7A)),
to serve on the trustees or manager a written notice of resignation.
Explain the need for the words "solely or partly" and
the relevance of the reference to "partly".
2. The phrase "solely or partly" is to
cover situations where for instance the reporting accountant had
been planning to resign due to circumstances which in his opinion
significantly affect the interests of members of the scheme; especially
where those interests are or may be adversely affected. Where
he then has to resign in any event, under paragraph (7A), "partly"
is used to make clear that he is still to view himself as having
resigned "because he is required to do so by paragraph
7A2 even though he would have resigned in any event.
3. The intention behind the insertion of the entire
phrase "(including where he resigns solely or partly because
he is required to do so by paragraph (7A))" is to make clear
that having to give notice under paragraph (7A)(c) does not relieve
the reporting accountant of the requirement to give notice under
paragraph (7). The amended regulation should thereby ensure that,
if the reporting accountant had reason to resign other than simply
because he had become ineligible, that reason would still come
(c) he shall resign (with immediate effect)
by notice in writing immediately he is or becomes aware, or, as
the case may be, should reasonably be or become aware,
that he is or has become ineligible;
(d) he shall state in that notice
(i) that he is resigning by reason of his
(ii) the ground on which he is or has become
(e) notwithstanding subparagraph (c), if he
is still in place when the trustees or manager are or become aware,
or should reasonably be or become aware, that
he is or has become so ineligible, the trustees or managers shall
remove him immediately.
In relation to subparagraph (c), explain the effect
of the underlined words, and how that subparagraph (and subparagraph
(d)) are intended to operate in a case where the accountant is
unaware, but should reasonably have been or become aware, that
he is ineligible.
In relation to subparagraph (e), explain the intended
sense of the opening words ("notwithstanding subparagraph
(c))", the effect of the underlined words, and how that provision
is intended to operate in a case where the trustees or manager
are unaware, but should reasonably have been or become aware,
of the accountant's ineligibility.
Ought not the reference to "paragraph (11)"
to have read "paragraph (10)"?
4. The phrase "should reasonably be or become
aware" is intended to encourage the reporting accountant
to be especially vigilant to any possibility that he may be or
have become ineligible; it is intended to discourage him from
turning a blind eye to facts or circumstances which suggest that
he is ineligible, or from not following up a line of enquiry which
would lead to the discovery that he is ineligible.
5. Sub-paragraph (c) is intended to operate so as
to render the reporting accountant, and so the scheme, in breach
of the regulations as soon as he should be aware that he is ineligible.
The overall intention is that the reporting accountant should
cease to be such as soon as possible after he becomes ineligible.
(This is especially important given that his acts are to be taken
not to have been done, not simply from the moment when he should
know that he is ineligible, but from the moment he is actually
ineligible (new paragraph (7A)(b).)
6. The approach here is similar to that adopted in
section 28(5) of the Companies Act 1989, where an auditor avoids
committing an offence if
"he did not know and
had no reason to believe that he was, or had become, ineligible
7. Sub-paragraph (d) is intended to operate so as
to require that a notice under sub-paragraph (c), whenever given,
must contain certain information.
8. The phrase "notwithstanding sub-paragraph
(c)" is intended to avoid any conflict between sub-paragraphs
(e) and (c) of regulation 11(7A). Doubt might otherwise arise
where the time at which the trustees become aware that the accountant
is ineligible is later than the time at which the accountant first
becomes aware that he is ineligible. The phrase makes clear that,
where the trustees or manager become aware that the accountant
is ineligible, they do not, before they remove him, first have
to give him the opportunity to discharge his continuing obligation
9. As to the rest of this part of the question, the
intended effect is similar to that outlined in relation to regulation
11(7A)(c). Essentially, given a) that trustees and managers are
subject to sanctions for non-compliance with the regulations,
and b) that the scheme risks losing its registration as a stakeholder
scheme for non-compliance, the provision is intended to encourage
vigilance and early action on the part of the trustees or manager.
Ought not the reference to "paragraph (11)"
to have read "paragraph (10)"?
10. No. The reference to paragraph (11) was included
to make clear that paragraph (7A) is to apply equally in circumstances
where, for instance, a body corporate becomes unincorporated,
as in circumstances where one of the paragraph (4)(a) to (d) conditions
ceases to be satisfied. When the next opportunity for amendment
arises however, the Department will consider whether, in view
of paragraph (4), the reference to paragraph (11) should be retained.
11. There is no need to refer to paragraph (10) as
well as to paragraph (11) because paragraph (10) is not freestanding;
it informs the interpretation of the eligibility condition contained
in paragraph (4)(c). The reference in paragraph (7A) to paragraph
(4) will suffice therefore to catch any ineligibility resulting
from the operation of paragraph (10).
New paragraph (9) of regulation
11 (inserted by regulation 7(10) provides that, where under paragraph
(7A) the reporting accountant resigns with immediate effect or
is removed, the trustees or manager shall appoint another reporting
(a) within one month of the date of that resignation
(b) if earlier, as soon as is required in
order not to prevent compliance with regulation 12(5) and (6).
Explain what is meant by "if earlier"
in subparagraph (b), the intended effect of that subparagraph,
and why it is needed, given subparagraph (a).
Corresponding question in relation to regulation
11(8) of the principal Regulations, as amended by regulation 7(9).
New paragraph (9) of regulation 11
12. "If earlier" means "if the time
described 'as soon as required in order not to prevent compliance
with regulation 12(5) and (6)' occurs earlier than the time of
expiry of the period of one month mentioned in sub-paragraph (a)".
Sub-paragraph (b) as a whole means therefore that "if the
time so described occurs earlier than the time of expiry of that
one-month period, another reporting accountant must be appointed
sooner than the time of expiry of that one-month period, and in
particular, must be appointed as soon as is required in order
not to prevent compliance with regulation 12(5) and (6)".
The phrase "if earlier" was used in one limb, rather
than saying "whichever is the earlier" in relation to
both, to avoid confusion in cases where both times occur simultaneously.
13. The intended effect of sub-paragraph (b) is thisto
ensure that there is a reporting accountant in place at the time
when one is needed in order for the trustees or manager to obtain
from him statements under regulation 12(5) and for the trustees
or manager then, in compliance with regulation 12(6), to annex
those statements to the declaration made under regulation 12(2).
14. Sub-paragraph (b) is an alternative to sub-paragraph
(a) and is needed not despite sub-paragraph (a) but because of
it. Sub-paragraph (a) allows a month's gap between reporting accountants.
Without sub-paragraph (b), the scheme could risk in that month
being without a reporting accountant at the very time when one
is needed for compliance with regulation 12(5) and (6). The question
would then arise as to whether the provision allowing that month's
gap vitiated the time limits for compliance with regulation 12(5)
and (6). Sub-paragraph (b) not only ensures that the scheme is
not without a reporting accountant at the relevant time, but also
makes clear that there is no conflict with regulation 12, and
therefore that there is no vitiation of the time limits in regulation
Amended regulation 11(8)
15. With the exception that the time limit in amended
regulation 11(8)(a) is three months not one, the Department refers
the Committee, in relation to the amended regulation 11(8), to
the Department's answer given above in relation to the amended
1 May 2001