Notes Accompanying the Template Statement of Investment Principles for Wholly-Insured Money Purchase Schemes 

1. Regulations published in December 2005 require trustees of certain wholly insured money purchase schemes to produce a Statement of Investment Principles (SIP) – schemes where there are 100 or more members.

2. Schemes with fewer than 100 members do not need to complete a SIP. But the Regulations do not define ’members’ for this purpose. So the safest option is to take into account all members, including:-

   • paid-up members where contributions have stopped
   • any members with a right only to benefits from a divorce/ pensions splitting order and
   • people already getting pensions from the scheme (but not dependant’s pensions)

3. Where trustees are confident that the number of members will not grow to 100 or above, they might consider it unnecessary to complete a SIP. On the other hand, trustees of smaller schemes might prefer to complete a SIP anyway. If the numbers might slip over 100, on the other hand, having a SIP would avoid the risk of inadvertent non-compliance.

4. Where trustees are required to complete a SIP - i.e. the exemptions don’t apply - they have up to two months to produce it. So the first SIP for a wholly insured money purchase scheme (which isn’t exempt from the SIP requirements) should have been completed by the end of February 2006.

Failure to produce a SIP within the 2 months’ deadline will be a breach of the legislation, potentially reportable to the Pensions Regulator if the trustees judge this failure to be a material breach of legislation. As such, if trustees (who should complete a SIP) miss the 2 months’ deadline, they will need to decide if this is a “material breach” – has this resulted in an adverse impact on any member's benefits or rights? In the unlikely event that there has been material disadvantage around delay in producing a SIP for a wholly insured money purchase scheme, the delay needs to the reported to the Pensions Regulator’s attention.

5. Trustees must consult with the employer(s) and take written advice from a suitably qualified and experienced adviser before producing a SIP.

6. The SPC Money Purchase Committee has prepared a template statement of investment principles to assist trustees of wholly insured money purchase schemes in preparing their own statement. It is not intended to be a model or a standard. Trustees will need to consider whether it is appropriate in full or in part for their specific scheme. For instance, the reasons stated for choosing a wholly insured approach in part 2 of the template might not all be relevant and the final sentence of section 3 of the template should be deleted where the scheme investments are limited to with-profits contract(s) which are not unitised contracts (i.e. where conventional with-profits contracts apply).

7. Where a SIP is required, trustees will also need to review their SIP at least every three years and immediately after any change in investment decisions.

8. Completed SIPs should be kept with the other formal documents for the scheme. Members can ask to see a copy of the SIP.

TO ACCESS THE TEMPLATE STATEMENT OF INVESTMENT PRINCIPLES FOR WHOLLY-INSURED MONEY PURCHASE SCHEMES, PLEASE CLICKE HERE.