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Significant events

CDC code in force: 1 August 2022

Significant events are circumstances arising during the operation of a CDC scheme that must be reported to us so we can assess whether we remain satisfied that the scheme meets the authorisation criteria.

The duty to notify us falls on most parties involved in supporting the management of the scheme. These include most of those required to be assessed for fitness and propriety, but also advisers and administratorsSI1.

Notifications must be made as soon as reasonably practicable, which normally means within five working days of becoming aware of the significant event (where this is different, this is noted in the events below).

Those required to notify significant events should consider reporting even if they are unsure about whether to notify.

Schemes should have systems and processes to monitor and address significant events, and to help those with reporting duties to fulfil their obligations.

We will use the information you provide to assess whether we remain satisfied the scheme continues to meet the authorisation criteria. Where we are not satisfied with the scheme’s response to the event, and therefore we are not satisfied that the scheme continues to meet the criteria, we may take further action, including de-authorising the scheme.

Individual significant events

We expect certain significant events to be reported as follows.

A proposal to change or add to the persons involved in the scheme who fall within the fit and proper assessmentSI2

We expect all changes to persons who are requiredSI3 to be assessed as fit and proper to be reported to us before the individual commences their role. The exception is if an individual is providing temporary cover for up to six months: in these circumstances we do not expect a report to be made and will not complete an assessment

A significant change to the scheme’s investment strategySI4

We expect changes to the character of the strategy to be reported as a significant event. These could include changes to:

  • the trustees’ investment philosophy and the style of investment management being pursued
  • the investment objectives, benchmarks and estimated target returns for the strategy
  • the range of permissible asset classes, markets, and instruments together with the process for adding new or additional investments
  • the asset allocation framework detailing the parameters for tactical and strategic asset allocation discretion
  • the size and nature of the risk budget or the risk factors permitted under the agreed investment arrangements

A proposal to change the design of the scheme, including, but not limited to, a proposal to close the scheme and a proposal to add a section to a scheme that was previously unsectionalisedSI5

In addition to a proposal to close the scheme to new accruals or new members, this event also includes proposals to narrow the eligible membership. Changes to the prescribed characteristics of the scheme can only be achieved through the closure of the existing scheme and the addition of a new section to provide benefits with the new prescribed characteristics.

An event which, in the opinion of a person with the duty to report, undermines, or is likely to undermine, the soundness of the scheme designSI6

This could include events outside the running of the scheme such as an external economic or market event, or a decision taken by the employer. We expect most events of this type to have been identified as part of the modelling and testing supporting the trustee’s considerations of whether the scheme’s design is sound or in the monitoring of investments.

Significant events relating to the ability of the scheme to meet its running costs or maintain the required reserves in appropriate proportionsSI7

This should be reported to us within two working days of the event occurring, or the person mentioned in those events forming their opinion.

An event that has resulted or, in the opinion of the person with the duty to report, is likely to result in the scheme being unable to meet the specified requirements in relation to its financingSI8

This includes where the assets being held to meet the financial sustainability requirements are not of the classes or in the proportions set out in this code, are not available to be used when the relevant costs fall due, and where the trustees do not have first call on the assets.

A failure of the systems and processes used in running the scheme, which has a significant adverse effect on the security or quality of data or on service deliverySI9

This includes an adverse effect on security or quality of data or on service delivery brought about by a series of events or failures, as well as single significant events. This may include errors in the actuarial valuation. Where the key objectives and tasks in the function holder governance statements are not met, and this failure increases the key risks identified, we expect this to be reported as a significant event. This will include where investment management arrangements have not been followed.

In general, notifications of this event should look at divergence from the objectives set for the scheme and tolerance of risk as set out in the risk register. This is important in considering the balance of probabilities that the failure has, or will have, an adverse effect that a scheme’s existing systems and processes cannot rectify without impacting on the security or quality of data, or on service delivery.

Where the failure has had, or will have, an adverse effect on the scheme’s data security we expect you to report to us when a report is made to the Information Commissioner.

A failure of the systems and processes for communicating with relevant persons, which has a significant adverse effect on communication with relevant personsSI10

This includes an adverse effect on communications with relevant persons brought about by a series of events or failures as well as single significant events. Notifications of this event should look at the balance of probabilities that the failure has, or will have, an adverse effect that a scheme’s existing systems and processes cannot rectify without impacting on communications with relevant persons.

A proposal to make a significant change to the systems and process used in running the scheme (including the systems and processes for communicating with relevant persons)SI11

This is not intended to capture the general upkeep or maintenance of systems. We expect notifications of proposals such as:

  • changing the scheme’s administrator
  • changing the system being used to run the scheme
  • changing the persons responsible for delivering key services to the scheme such as investment advisers or managers, or the scheme payroll provider if different from the administrator

There is an investigation of the scheme, or a person involved in a scheme, by a regulator or other competent authority including those outside the United KingdomSI12

We consider notification of this event as soon as reasonably practicable to mean notifying us immediately after becoming aware of the investigation. A competent authority is a person or organisation with powers to carry out an investigation and take regulatory action. This includes the FCA, PRA and investigative agencies such as the Police and SFO.

Legal references

SI1 Section 28(2) of the Act

SI2 Regulation 23(1)(a) of the Regulations

SI3 Section 11(2) of the Act

SI4 Regulation 23(1)(c) of the Regulations

SI5 Regulation 23(1)(d) of the Regulations

SI6 Regulation 23(1)(g) of the Regulations

SI7 Regulations 23(1)(h) and (i) of the Regulations

SI8 Regulation 23(1)(j) of the Regulations

SI9 Regulation 23(1)(k) of the Regulations

SI10 Regulation 23(1)(l) of the Regulations

SI11 Regulation 23(1)(m) of the Regulations

S12 Regulation 23(1)(n) of the Regulations