Identifying and notifying triggering events

This guidance applies only in respect of triggering events occurring on or after 1 October 2018. For triggering events that began before 1 October 2018, please contact your case manager.

Published: November 2018

Introduction

The Pension Schemes Act 2017 (the Act) places duties on the trustees, scheme strategist(s) and scheme funder(s) to notify triggering events to us. The Occupational Pension Schemes (Master Trusts) Regulations 2018 (the Regulations) and our Code of Practice no.15: Authorisation and supervision of master trusts (the code) contain further requirements around notifying us about triggering events. In this guidance, we refer to triggering events by the number given in the Item column in s21(6) of the Act.

Triggering events are incidents that potentially threaten the existence of a master trust. Triggering events broadly fall into two categories: those relating directly to the scheme’s authorisation status (triggering events 1 to 3), and events that are linked to decisions and actions taken by those involved in running the master trust (triggering events 4 to 10). Both sets of triggering events have implications for master trusts and those involved in running them.

A triggering event period starts on the date the triggering event occurs and finishes on scheme wind-up, when the event is resolved or when it becomes clear following a notice to withdraw authorisation that authorisation will not be withdrawn.

Requirements during a triggering event period

The following requirements apply during a triggering event period:

1. A prohibition on new employers joining the scheme (or an agreement to that effect)^[1].
2. A prohibition on introducing new charges or increasing charges above the fixed charge levels^[2] in the implementation strategy^[3].
3. Compliance with any pause orders that we may make.

Actions to be taken following a triggering event

In addition to notifying us when a triggering event occurs, the following actions should be taken following a triggering event:

1. In the case of triggering events 4 to 10^[4], we must be notified before the end of seven days starting with the date the triggering event occurred^[5] (or where relevant, becoming aware of the trigger event having occurred^[6]). Further information regarding notification duties can be found below.
2. Trustees must notify employers that a triggering event has occurred and give certain information about the implementation strategy (there is a 14 day time limit beginning with the date of the event)^[7]. Further information about notifications to employers can be found below.
3. Trustees should start preparing the section of the implementation strategy setting out the levels of administration charges that applied in relation to members of the scheme for the year the triggering event occurred, as well as the previous year^[8].
4. Trustees must also submit an implementation strategy to us (there is a 28 day time limit beginning with the date of the event, or for triggering events 1, 2 or 2A, from the date the decision becomes final).

In addition to the requirements and actions outlined above, where the trustees are either required or choose to pursue continuity option 1, they should commence work to identify the trustee default scheme for transfers and ongoing contributions.

Notifying us of a triggering event

The following notification duties arise when a triggering event occurs:

1. Trustees must notify us about:
   
   1. triggering event 10 (there is a 7 day time limit beginning with the date of the event)
   2. triggering event 8 if they are the decision makers (there is a 7 day time limit beginning with the date of the event)
   3. triggering events 4 to 9 (there is a 7 day time limit beginning with the date of awareness)
2. Scheme funders must notify us about:
   
   1. triggering events 4 to 7 (there is a 7 day time limit beginning with the date of the event)
   2. triggering event 8 if they are the decision maker (there is a 7 day time limit beginning with the date of the event)
   3. triggering events 8 to 10 (there is a 7 day time limit beginning with the date of awareness)
3. Scheme strategists must notify us about:
   
   1. triggering event 8 if they are the decision-maker (there is a 7 day time limit beginning with the date of the event)
   2. triggering events 4 to 10 (there is a 7 day time limit beginning with the date of awareness)

While the legal duty to notify falls on each of the relevant persons noted above, we would expect the scheme to have systems and processes in place to facilitate compliance and manage the notification process.

In particular, we would encourage one single notification on behalf of all scheme funders who are also participating employers. This is particularly important where there are a large number of scheme funders. This does not mean that the scheme can notify on behalf of someone who is unaware of either the event or the notification. It should also not prevent a person submitting an individual notification if they consider they have additional or confidential information to share.

We would also expect the trustee board to collectively submit a notification to us where they are each under a duty to notify. A person under a duty to notify in respect of more than one role need only notify us once.

Trustees’ notification to us

When trustees notify us of the occurrence of a triggering event, we expect a notification to include the following:

1. Details of the person submitting the notification.
2. Details of the master trust in relation to which the triggering event occurred.
3. What triggering event has occurred.
4. The date on which the triggering event occurred.
5. A description of the triggering event that has occurred, including the trustees’ assessment of the materiality of the event in relation to the scheme, and (if known) the impact of the triggering event on members of the master trust, and the running of the scheme.
6. The continuity option the trustees plan to pursue (if known).

Following receipt of your implementation strategy, including your section relating to administration charges, we may ask to see copies of any planned or issued communications to employers and members regarding next steps, and to ensure the information we retain about your scheme is up to date.

Trustees’ notifications to employers

Before the end of 14 days (which starts with the date the triggering event occurred), the trustees of the master trust must notify the employers^[9] of:

1. the occurrence of the triggering event
2. the nature of the triggering event
3. when the trustees will submit an implementation strategy (or the date on which they submitted an implementation strategy)
4. that the trustees will make the implementation strategy available to the employers after it has been approved by us, and
5. the timetable for future communications with the employers.

Trustees should explain to employers the extent of the risk posed by the triggering event to members’ interests and the future running of the scheme, and their next steps.

Pause orders

The Determinations Panel can make a pause order in relation to a scheme if it is in a triggering event period. A pause order can be made:

• if we are satisfied that doing so will help the trustees to carry out their implementation strategy, or
• if we are satisfied that there is, or is likely to be, an immediate risk to the interests of members or scheme assets, and that it is necessary to make a pause order to protect the interests of the generality of the members.

Pause order periods cannot exceed three months, but we can extend pause orders by three months on more than one occasion. Pause orders cease to have effect at the end of the period stated in the order (or any extension), or if earlier, when a triggering event period ends.

Any action taken in contravention of a pause order is void unless we make an order validating it.

If a pause order directs that no contributions are to be paid to a scheme, the contributions are treated as if they are not due and any obligation to pay them falls away to that extent.

A pause order overrides any scheme rule or other legal requirement that would otherwise:

1. prevent the order being made
2. require a particular procedure to be followed, or
3. require consent to be obtained.

TPR powers of direction

We have the following powers of direction where provisions are not complied with:

1. We may direct trustees to submit an implementation strategy^[10].
2. We may direct trustees to pursue the continuity option identified in the strategy or take any other steps identified in the strategy to carry it out^[11].
3. We may direct trustees to do anything permitted or required in Schedule 5 to the Regulations (Continuity option 1: Transfer and winding up) with regards to pursuing continuity option 1^[12].

Footnotes for this section

• [1] Section 32 of the Pension Schemes Act 2017
• [2]The fixed charge levels are the lower of the two sets of charges statements set out in the implementation strategy — see further regulation 18 of the Occupational Pension Schemes (Master Trusts) Regulations 2018
• [3] Section 33 of the Pension Schemes Act 2017
• [4] In this guidance, we refer to triggering events by the number given in the Item column in s21(6) of Pension Schemes Act 2017
• [5] Pension Schemes Act 2017 section 22(3)
• [6] Pension Schemes Act 2017 section 22(5)
• [7] See section 21(6) of the Pension Schemes Act and regulation 16 of the Occupational Pension Schemes (Master Trusts) Regulations 2018
• [8] See regulation 18 of the Occupational Pension Schemes (Master Trusts) Regulations 2018
• [9] Regulation 16(1) of the Occupational Pension Schemes (Master Trusts) Regulations 2018
• [10] Section 26(7) of the Pension Schemes Act 2017
• [11] Section 28(4) of the Pension Schemes Act 2017
• [12] Regulation 20 and paragraph 17 of Schedule 5 to the Occupational Pension Schemes (Master Trusts) Regulations 2018

List of triggering events

Withdrawal of the scheme’s authorisation

Triggering event 1

Where we are not satisfied that a master trust is continuing to meet the authorisation criteria, we may issue a Warning Notice under the standard procedure in respect of a decision to withdraw the scheme’s authorisation. This triggering event occurs on the date we issue the Warning Notice.

An implementation strategy must be submitted to us before the end of 28 days starting with the date of the decision to withdraw a scheme’s authorisation becoming fnial. The decision to withdraw a scheme’s authorisation becomes final either on the date of the determination (where there is no referral to the Tribunal), or if following referral to the Tribunal or on appeal from the Tribunal’s decision the withdrawal of authorisation is confirmed, when all appeals have been exhausted.

The triggering event period ends when it is clear that authorisation is not to be withdrawn, or when the master trust has wound up. This implementation strategy must include certain matters required by legislation, including information which in broad terms set out how the trustees of the master trust will pursue continuity option 1.

Triggering event 2

Where we are not satisfied that a master trust is continuing to meet the authorisation criteria and there is an immediate risk to the interests of members or the assets of the scheme, we may issue a notice under the special procedure^[13] in respect of a decision to withdraw the scheme’s authorisation. This triggering event occurs on the date we issue the notice.

An implementation strategy must be submitted to us before the end of 28 days, starting with the date of the decision to withdraw a scheme’s authorisation becoming final. This implementation strategy must include certain matters required by legislation, including information which in broad terms set out how the trustees of the master trust will pursue
continuity option 1.

The decision to withdraw a scheme’s authorisation becomes final following the compulsory review, either on the date of the determination (where there is no referral to the Tribunal), or if following referral to the Tribunal or on appeal from the Tribunal’s decision the withdrawal of authorisation is confirmed, when all appeals have been exhausted.

The triggering event period ends when it is clear that authorisation is not to be withdrawn, or when the master trust has wound up.

Triggering events 1, 2, 2A and 3 differ from other triggering events in that they may occur within an existing triggering event period^[14]. Where we are not satisfied with the actions of a master trust during a triggering event period, or where we consider there is a risk to the interests of members or the scheme assets, we may decide to pursue action to withdraw authorisation in order to protect member interests or assets. We may therefore issue a Warning Notice or a Determination Notice as set out above, bringing about the occurrence of triggering event 1 or triggering event 2.

Refusal to authorise

Triggering event 2A

This triggering event only applies to existing master trust schemes (those in operation as at 1 October 2018).

Where we are not satisfied that an existing master trust meets the authorisation criteria, we will notify the trustees of the master trust of our decision to refuse to grant the scheme authorisation. The triggering event occurs on the date on which the notification is given.

An implementation strategy must be submitted to us before the end of 28 days, starting with the date of the notification of decision to refuse to grant a scheme authorisation becoming final. The implementation strategy must set out how the trustees of the master trust will pursue continuity option 1.

The decision to refuse to grant the scheme authorisation becomes final, either on the date of the determination or when all appeals have been exhausted.

The triggering event period ends when it is clear authorisation is to be granted, or when the master trust has wound up.

Triggering event 3: Operating without authorisation

Where we find that a master trust scheme is operating without authorisation, we will notify the trustees of the scheme that the scheme is not authorised^[15]. We may also issue a penalty under section 10 of the Pensions Act 1995^[16]. A master trust^[17] is operating where any person in relation to the scheme:

1. accepts money from members or employers (or prospective members or employers) in respect of fees, charges, contributions or otherwise, or
2. enters into an agreement with an employer that relates to the provision of pension savings for employees or other workers

This triggering event occurs on the date on which the notification is given. An implementation strategy must be submitted to us before the end of 28 days starting with the date on which we issue the notification.

We will expect any new master trust, or existing pension scheme that is seeking to become a master trust, or is taking action that may lead it to become a master trust, to contact us prior to seeking authorisation to operate as a master trust. The triggering event period ends when the master trust has wound up.

Triggering event 4: A scheme funder experiences an insolvency event

Insolvency event in this context is taken to be those set out in s121 of the Pensions Act 2004^[18] (www.legislation.gov.uk/ukpga/2004/35/section/121). This triggering event occurs on the date on which the insolvency event occurs. The scheme funder must notify us that an insolvency event has occurred in relation to it before the end of 7 days starting with the date the event occurred^[19]. The scheme strategist and the trustees must notify us of the occurrence of this event before the end of 7 days, starting with the date they became aware the event had occurred^[20].

The trustees must submit an implementation strategy to us before the end of 28 days starting with the date the of the insolvency event occurring. We expect there to be systems and processes in place to ensure scheme funders notify the trustees at the earliest possible opportunity of the occurrence of this event. This triggering event ends when either the master trust has wound up, or when we are satisfied that the triggering event has been resolved.

Triggering event 5: A scheme funder becomes unlikely to continue as a going concern

This triggering event applies to a scheme funder that:

• is an EEA insurer or EEA credit institution^[21]
• where the centre of the employer’s main interests is in an EU member state^[22], the employer has had insolvency proceedings opened against it in an EU member state^[23], and does not have an establishment in the UK^[24]
• in broad terms, cannot suffer an insolvency event^[25]

In relation to this triggering event, being unlikely to continue as a going concern may include where, without additional third party financial support or a compromise with existing creditors (or other financial restructuring), the scheme funder would be unlikely to continue as a going concern basis. This triggering event can manifest in two ways:

1. Where the scheme funder notifies us that it is unlikely to continue as a going concern, the date of this notification is the date on which this triggering event occurs. All implications of a triggering event begin from this date and the trustees must submit an implementation strategy before the end of 28 days, starting with this date.
2. Where the trustees or scheme strategist become aware that the scheme funder is unlikely to continue as a going concern, and the scheme funder is yet to notify us that they are unlikely to continue, the date they become aware of the fact is regarded as the date on which the triggering event occurs. All implications of a triggering event begin from this date, the trustees or scheme strategist must notify us before the end of seven days, starting from this date, and the trustees must submit an implementation strategy before the end of 28 days, starting with this date.

We expect there to be systems and processes in place to ensure scheme funders inform the trustees and scheme strategist(s), at the earliest possible opportunity, of the occurrence of the triggering event, and that they have notified us about this event.

This triggering event ends when either the master trust has wound up, or when we are satisfied that the triggering event has been resolved.

Triggering event 6: A scheme funder decides to end the relationship or arrangement with their master trust.

Our expectation is that where clear steps have been taken around ending the relationship or arrangement with the master trust, this is a triggering event and as such the scheme funder must notify us of its occurrence. The date of the triggering event would therefore be the date of the decision to take these steps.

The scheme strategist and the trustees must notify us of the occurrence of this event before the end of seven days, starting with the date they became aware of it. The trustees must submit an implementation strategy before the end of 28 days, starting with the date of the decision. We expect there to be systems and processes in place to ensure scheme funders inform the trustees at the earliest possible opportunity of the occurrence of this event.

This triggering event ends when either the master trust has wound up, or when we are satisfied that the triggering event has been resolved.

Triggering event 7: A scheme funder ends its relationship with the master trust by virtue of which it is a scheme funder

This triggering event occurs on the date on which the scheme funder notifies us that it has ended its relationship with their master trust, or, if earlier, the date the trustees or scheme strategist became aware of the fact. The scheme strategist and the trustees must notify us of the occurrence of this event before the end of seven days, starting with them becoming aware that the scheme funder has ended its relationship with the master trust.

In the majority of cases, we expect to have been notified of a scheme funder’s decision to end its relationship with a master trust, meaning triggering event 6 would have already occurred, so this event would not be notifable^[26].

Where the scheme funder ends its relationship with the master trust because it experiences an insolvency event or it is no longer a going concern, we expect to have been notified under triggering events 4 or 5 respectively, and not under this triggering event.

The trustees must submit an implementation strategy before the end of 28 days, starting with date on which the scheme funder notifies us that it has ended its relationship with the master trust, or, if earlier, the date on which the trustees or scheme strategist became aware of this fact. This triggering event ends when either the master trust has wound up, or when we are satisfied that the triggering event has been resolved.

Triggering event 8: A scheme funder, scheme strategist or the trustees has/have the power to wind up and decide(s) that the master trust should be wound up

This event occurs when a decision is taken to wind up the master trust. Where clear steps have been taken around winding up the master trust, this can constitute a decision for the purpose of this triggering event. The date of the triggering event would therefore be the date of the decision to take these steps.

Where a scheme funder, scheme strategist or the trustees are considering whether to wind up the master trust, we advise that they contact their assigned supervisor as soon as possible as part of their open, honest and transparent supervisory relationship.

An implementation strategy must be submitted before the end of 28 days, starting with the date on which the decision to wind up was taken, or, if earlier, the date on which the scheme funder, scheme strategist or trustees became aware such a decision had been taken.

This triggering event ends when either the master trust has wound up, or when we are satisfied that the triggering event has been resolved.

Triggering event 9: An event occurs that is required or permitted by the scheme or the rules of the scheme to result in the winding up of the master trust

This triggering event is intended to alert us to the occurrence of an event that may result in the master trust winding up, and to satisfy ourselves as to the course of action the trustees are proposing to take in relation to either winding up the master trust or, if the event does not require the master trust to be wound up, resolving the issue that has occurred. This triggering event occurs when:

• an event occurs that is required by the scheme or its rules to result in the winding up of the master trust, or
• an event occurs that is permitted by the scheme or its rules to result in the winding up of the master trust

These events may be situations such as the scheme becoming subject to a freezing order, or the scheme funder experiencing an insolvency event. We expect trustees to understand what events the scheme rules or the scheme may require or permit the master trust to be wound up.

When the scheme funder, scheme strategist or trustees become aware that such an event has occurred, they must notify us before the end of seven days, starting with the date they became aware.

An implementation strategy must be submitted to us before the end of 28 days, starting with the date of the event requiring or permitting the wind up of the master trust, or, if earlier, the date on which the scheme funder, scheme strategist or trustees became aware that such an event had occurred.

Where the scheme or the rules of the scheme permit the master trust to be wound up in the normal course of business, the decision to do so should be reported as triggering event 8. We expect there to be systems and processes in place to alert the trustees of the occurrence of such events that require or permit (either by the scheme or the rules of the scheme) the winding up of the master trust at the earliest possible opportunity.

This triggering event ends when either the master trust has transferred out and wound up, or when we are satisfied that the triggering event has been resolved.

Triggering event 10: The trustees decide the master trust is at risk of failure and so it is necessary for one of the continuity options to be pursued

There are various circumstances where the trustees might decide that a master trust is at risk of failure and one of the continuity options should be pursued. These may include:

• where the trustees, scheme strategist or scheme funder cannot reach agreement on for example, the approval of a business plan or continuity strategy, to such an extent that it would indicate a fundamental failure in the continuing ability to run the master trust, or
• where the trustees believe that the finances of the master trust are insufficient.

This event occurs when the trustees decide the master trust is at risk of failure. If the trustees are unsure, or wish to consider whether the master trust is at risk of failure, they should contact their assigned supervisor as soon as possible.

When notifying us about this event, we will require the details of the trustees’ decision, including how they reached this conclusion and the evidence it was based on and, if known, the continuity option they are proposing to pursue.

When making this decision, it may be necessary for the trustees to seek advice from other individuals, such as the scheme funder, scheme strategist or others involved in running or advising the master trust.

The scheme strategist or scheme funder must notify us before the end of seven days of becoming aware of the trustees’ decision that the master trust is at risk of failure. An implementation strategy must be submitted to us before the end of 28 days, starting with the date of the trustees’ decision that the master trust is at risk of failure, or if earlier, the date on which the scheme strategist or scheme funder became aware of the trustee’s decision.

This triggering event ends when either the master trust has wound up, or when we are satisfied that the triggering event has been resolved.

Footnotes for this section

• [13] See section 97 Pensions Act 2004 .
• [14] See section 21(2) of the Pension Schemes Act 2017 (as modified by section 37 and paragraph 10 of Schedule 2 to the Act).
• [15] See section 3(4) Pension Schemes Act 2017 (as modified by paragraph 8 of Schedule 2 to the Act) for notifications to existing schemes and section 3(3) of the Act otherwise.
• [16] Section 3(2) Pension Schemes Act 2017.
• [17] Section 3(5) Pension Schemes Act 2017.
• [18] See section 39(1) Pension Schemes Act 2017.
• [19] Section 22(3) Pension Schemes Act 2017.
• [20] Section 22(5) Pension Schemes Act 2017.
• [21] Regulation 7(4) of the Pension Protection Fund (Entry Rules) Regulations 2005.
• [22] Excluding Denmark.
• [23] Excluding Denmark, and in accordance with Article 3 of the Insolvency Regulation.
• [24] Regulation 7(5) of the Pension Protection Fund (Entry Rules) Regulations 2005.
• [25] Regulation 7(2) of the Pension Protection Fund (Entry Rules) Regulations 2005.
• [26] See section 21(1)(b) Pension Schemes Act 2017.

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