S.I. No 185 of 2007.


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S.I. 185 of 2007

TRUST RACS (INVESTMENT) REGULATIONS 2007

 

EXPLANATORY NOTE

(This note is not part of the Instrument and does not purport to be a legal interpretation.)

Article 18 of Directive 2003/41/EC on the activities and supervision of Institutions for Occupational Retirement Provision (IORPs) requires that the resources of a trust RAC or an occupational pension scheme must be invested in accordance with the prudent person rule and in particular in accordance with certain investment rules.

Article 18(2) of the Directive also prohibits trust RACs and occupational pension schemes from borrowing for investment purposes other than in certain prescribed circumstances. Section 61B of the Pensions Act 1990 (inserted by section 36 of the Social Welfare and Pensions Act 2005 and amended by section 37 of the Social Welfare and Pensions Act 2007) prohibits such borrowing other than in circumstances which may be provided for by way of regulations.

Article 3 of these regulations provides that the trustees of a trust RAC may borrow money for liquidity purposes and only on a temporary basis.

Article 3 also provides that the trustees of a trust RAC which is a one member arrangement may borrow money.

Article 12 of the Directive provides that every IORP should have and keep up to date a statement of investment policy principles. Section 59(1B) of the Pensions Act (inserted by section 33 of the Social Welfare and Pensions Act 2005 and amended by section 37 of the Social Welfare and Pensions Act 2007) provides that trustees of a trust RAC, other than a small trust RAC, shall prepare and maintain the statement and that it shall include such matters as may be prescribed. Article 4 of these regulations sets out those matters.

Article 18(1) of the Directive sets out the rules which comprise the prudent person principle with regard to the investment of the resources of a trust RAC. Section 59(1A) of the Pensions Act (inserted by section 33 of the Social Welfare and Pensions Act 2005 and amended by section 37 of the Social Welfare and Pensions Act 2007) provides that these rules will be set out in regulations. Article 5 of these regulations sets out those rules.

Article 5(7) provides that in relation to a collective investment undertaking and a unit linked insurance policy the rules will be applied on "look through" basis. Article 5(7)(c) and (d) provide that investment in an insurance policy which guarantees at maturity a return at least equal to the investment over the term of the policy, or in an annuity, shall be regarded as an investment on a regulated market and as diversified. Article 5(7)(e) provides that investment in Government Bonds will be regarded as diversified.

These regulations apply only to trust RACs. Similar regulations have already been made in relation to occupational pension schemes.


Last modified:25/09/2008
 

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