In January the new Financial Services (Occupational Pensions Institutions) Act came into force. This Act, which brought into effect,
in Gibraltar, the EU Pensions Fund Directive, provides important new safeguards for people here in occupational pension schemes.   

Whilst the new Act generally only applies to private schemes with more than one hundred
members many schemes here will be covered.   

As the regulator appointed under the Act, we have been tasked with licensing those who manage these pension schemes, we are tasked with putting in place a new regulatory regime to ensure that such things as; Monies are appropriately invested; Members are provided with enough information to make appropriate decisions; and The schemes are properly administered. The new legislation provides members of schemes with a statutory right to a considerable amount of information. This includes the scheme’s annual accounts and the annual reports together with the target level of the retiremen benefits.   

Members must also receive, annually, brief particulars of the
financial situation of the scheme as well as the current level of financing
of their accrued individual entitlements.   

The scheme must also prepare and, at least every three years, review a written statement of investment policy principles. These principles, which are available for members, must contain details of:
(a) The investment risk measurement
methods;
(b) The risk management processes
used; and
(c) The strategic asset allocation with respect to the nature and
duration of pension liabilities.   

The Act also sets out the criteria we must use in deciding whether to issue a licence. We can only do so if we are satisfied that every person who is to be a manager or trustee of the institution is a fit and proper person to hold that position; and in determining whether a
person is “fit and proper” we must have regard to probity, competence
and soundness of judgement for fulfilling the responsibilities of
that position, the diligence with which he is fulfilling or likely to fulfil those responsibilities and previous conduct.   

As regulator we also have a number of powers to ensure the scheme is being managed properly, this includes access to the statement of investment-policy principles, the annual accounts and the annual reports, and other documents necessary for the purposes
of supervision, In extreme cases we can suspend or cancel the licence.   

We can do this, for example, if any conditions of the licence or authorisation are not complied with or the institution does not have sound
administration and accounting procedures. The Act also gives us
the power to apply to the Supreme Court for an order freezing the assets
of a scheme.   

We can also remove a trustee of a scheme or transfer the power of an institution or a trustee to someone where the institution or the trustee fails properly to protect the interests of the members. During market uncertainties a few years ago, many pension schemes fell into deficit.   

The UK pensions regulator for instance has had 1,292 recovery planssubmitted to it. The Act expressly addresses this issue by requiring that whilst, in general, schemes
must have sufficient and appropriate assets to cover the cost of
the pensions they provide; if they don’t (for example they are in the process of bringing it out of deficit), we must require the institution to adopt a recovery plan.   

This plan must require that the institution sets up a concrete and realisable plan to re-establish the required amount of assets to cover fully the cost of pension provision in due time. The plan shall be made available to members or, where applicable, to their representatives and shall be subject to approval by ourselves.   

We have already consulted with our stakeholders on the proposed
reporting rules and internal control guidance. We will also shortly be
consulting on what the investment rules of the licensed schemes
should be. These rules are required by the Act, to ensure, amongst
other things, that the assets are invested in the best interests of
members and beneficiaries and that they are predominantly invested
on regulated markets.   

Not only does this Act help protect the position of those in occupational schemes here, but, for the first time, enables the pan European management of pensions   

.
Article 20 of the Directiveprovides for the opportunity for licensed pension funds to provide cross border services any where in the EU. This could make Gibraltar an attractive hub as the location for the pension funds of international businesses with employees in various
EU countries.   

As with any regulatory structure, nothing can be guaranteed, but the new Act and the supervisory regime it establishes creates a sound basis for protection. Combined with the abilty of Gibraltar to grow yet another area of its financial services industry, the new opportunities are considerable.

by Marcus Killick - Chief Executive Officer, Gibraltar Financial Services Commission