The Financial Markets Authority (FMA) has opened a consultation on using its exemption power to exempt restricted schemes from certain disclosure and reporting obligations under the Financial Markets Conduct Regulations 2014 (FMC Regulations).
The review will enable the FMA to get feedback on the exemption proposals, including the proposed conditions for the exemptions requiring alternate disclosure and reporting.
The proposed exemptions cover relief for defined benefit restricted schemes in respect of annual fund updates and confirmation information, and for all restricted schemes in respect of quarterly reporting requirements for limit breaks and related party transactions.
Click here for the FMA’s consultation page and here for the consultation paper.
Who needs to read it? Why?
Trustees and sponsors of restricted schemes should review the consultation paper, in particular the proposed conditions for the exemptions, to identify whether there may be any unforeseen issues with those conditions.
What does it cover?
The consultation seeks feedback on the following:
Annual fund updates
- Issue: Some defined benefit restricted schemes are required to provide annual fund updates under regulation 56 of the FMC Regulations with respect to very few members and for a largely technical reason. Given that fund updates are less relevant for members of a defined benefit restricted scheme, this creates an unnecessary compliance burden.
- Exemption and conditions: Relief from preparing and distributing annual fund updates for defined benefit restricted schemes where there are very few remaining members entitled to receive an interest-based withdrawal benefit or payments from a voluntary contribution account. However, a proposed condition is that any defined benefit restricted scheme relying on the exemption must include certain key statistical information found in fund updates (e.g. annual net return and investment strategy outline) in its annual report.
- Issue: Regulations 95 and 100 of the FMC Regulations require schemes to provide quarterly reports about limit breaks and related party transaction certificates to the FMA. These requirements impose significant compliance costs on restricted schemes when many of these reports are nil reports.
- Exemption and conditions: Relief for all restricted schemes from quarterly reporting of limit breaks and related party transactions, by moving to positive quarterly reporting obligations only (i.e. no requirement to make “nil reports”) as well as an annual reporting obligation (which would include any “nil reports”).
Annual confirmation information
- Issue: The annual confirmation information required under regulation 70B of the FMC Regulations for superannuation schemes and workplace savings schemes is based on defined contributions and is not relevant information to members of a defined benefit scheme.
- Exemption: Relief to allow defined benefit restricted schemes to provide confirmation information that is benefits-based (and focused on current entitlements). The consultation paper sets out alternative information that could be required as a condition, including:
- current expected pension assuming no salary increase;
- resignation benefit calculation;
- disablement benefit; and
- death benefit calculation.
This is a welcome move by the FMA to address compliance costs that may be unnecessary given the particular characteristics of restricted and defined benefit schemes. The proposed change to annual confirmation information requirements for defined benefit schemes may also provide more useful information for members of those schemes, although trustees should consider whether there are any practical considerations in respect of those conditions they may wish to submit on.
Submissions for the consultation close on Wednesday 21 April 2021 at 5pm. If you have any questions on the consultation, or would like assistance with submissions, please contact one of our experts.