COB 12.3 Key Information about the Scheme COB 12.3 Key Information about the Scheme
Information for prospective members
COB 12.3.1 COB 12.3.1
An Operator of a Scheme must ensure that before a person becomes a Member of the Scheme, that person is provided with the following information:(a) the name of the Scheme;(b) the name and address of the Operator and Administrator of the Scheme and how they can be contacted;(c) how the person can obtain up-to-date information about the Participating Employer’s contributions in respect of the Member;(d) a short description of:(i) the type of investment options offered on the Investment Platform;(ii) the investment objectives of each investment option, the strategy for achieving those objectives and any associated risks;(iii) how detailed information relating to each investment option can be obtained, and who is responsible for providing that information; and(iv) the comparative risk rating for each investment option, if available;(e) how and when a Member can switch their investments;(f) costs for which Members are responsible, with costs and charges associated with the administration of the Scheme, and the management fees and charges of the investment options offered on the Investment Platform, shown separately;(g) whether voluntary contributions can be:(i) made by a Member and, if so, how such contributions will be managed, including fees and charges; and(ii) withdrawn before the mandatory contributions, and if so, any limits on the frequency and amount of withdrawals that can be made, and the fees and charges associated with withdrawals;(h) the events upon which Member benefits are payable, and the method of calculating such benefits;(i) details relating to how Member inquiries and complaints will be handled and the contact details for inquiries and complaints; and(j) that the investment managers of the investment options offered on the Investment Platform are responsible for the information provided to Members relating to those investment options.
COB 12.3.1 Guidance1. An Operator in providing the information under COB Rule 12.3.1 must not offer investment selection assistance tools to Members, as such tools may be construed as Advising on Financial Products. However, if such a tool is offered by an investment manager of an investment option, the Operator may let Members know how the tool may be accessed and the investment manager responsible for the tool.2. A human resources department may provide information and conduct information sessions for Members and prospective Members about the Employee Money Purchase Scheme to which contributions will be made in respect of the Members. However, a human resource department should not give advice to Members on matters such as selecting investment options, or the merits of making voluntary contributions. Such advice should be given by a firm authorised to give advice on financial products.
Notification of any material change
An Operator of a Scheme must ensure that a person to whom information is provided under COB Rule 12.3.1 is notified promptly if there is any material change to information referred to in that Rule, whether the change occurs before or after the person becomes a Member of the Scheme.
Segregation of Scheme Property
An Operator of a Scheme must ensure that property of the Scheme is:
(a) held by an Eligible Custodian;
(b) clearly identified as the property of the Scheme; and
(b) held separately from the property of the Operator or Administrator of a Scheme or any Third Party Service Provider.
Valuation of Scheme Property
The Operator of a Scheme must ensure that:(a) the property of the Scheme is valued, at least annually, for the purposes of the annual report of the Scheme; and(b) a valuation of the property of the Scheme specific to each Member’s benefits is carried out for each valuation period set out in the Constitution of the Scheme, and the valuation is made available to the respective Member as soon as possible after the valuation.
Fees and charges
COB 12.3.5 COB 12.3.5The Operator of a Scheme must ensure that fees or charges payable by Members of the Scheme:(a) represent good value for the Members of the Scheme;(b) can be demonstrated by the Operator to be reasonable, taking into account the fees and charges of similar schemes in comparable jurisdictions;(c) do not exceed any ceiling specified in the Constitution or any applicable laws;(d) are expressly permitted under the terms of the Constitution or applicable laws or agreements;(e) are communicated clearly to the Members of the Scheme at the time of joining the scheme and in the event of any subsequent change; and(f) are not materially increased, unless the DFSA has given its prior written consent to such an increase.
COB 12.3.5 Guidance1. In considering if fees and charges represent good value for the Members of the Scheme, the Operator should take into account established principles, such as guidance issued by the UK Pension Regulator on what constitutes good value for members.2. In ensuring that the fees and charges of a Scheme are reasonable and represent value for money for Members, an Operator should take into account any reduction in costs that should be achievable due to economies of scale as assets under management increase, and due to efficiencies gained from market and technological advances.
COB 12.3.6 COB 12.3.6(1) A Participating Employer may make a payment to meet, in whole or in part, the administration costs of the Scheme.(2) Where a Participating Employermakes a payment under (1), the Operator must use that payment to defray the costs the administrative costs of the Scheme on Member contributions.
COB 12.3.6 Guidance
The payments referred to in COB Rule 12.3.6(1) are voluntary payments a Participating Employer may make, over and above Member contributions in respect of its Employees’ gratuity. If such payments are made, the Operator needs to ensure that they are used for defraying costs borne by Members, rather than treated as additional contributions available for investment.
COB 12.3.6A COB 12.3.6A
The Operator of a Scheme may accept a Member’s voluntary contributions to the Scheme, on the following conditions:(a) the voluntary contributions must be made by Salary Sacrifice by the Member and paid by the Member’s Participating Employer to the Scheme;(b) the voluntary contributions must be managed in the same manner as the mandatory contributions made in respect of that Member; and(c) if the voluntary contributions, or any part of them, are permitted to be withdrawn, the withdrawal must:(i) under the Constitution of the Scheme not be permitted to:(A) be made more than twice yearly; and(B) exceed, for any withdrawal, 30% of the amount that represents the Member’s voluntary contributions and earnings on those contributions, except on the grounds of extreme financial hardship as defined in the Constitution; and(ii) not adversely affect the rights and interests of:(A) the Member’s Core Benefits;(B) the Core Benefits of the other Members of the Scheme; or(C) the Scheme itself.Derived from DFSA RMI302/2021 (Made 30th June 2021). [VER38/09-21]
COB 12.3.6A Guidance1. An Operator may accept voluntary contributions under COB Rule 12.3.6A to a DIFC Scheme or Non-DIFC Scheme only if the Constitution of the Scheme permits it and, subject to the requirements applicable to voluntary contributions.2. A Member will only be able to make voluntary contributions as long as the contributions are made by the employer who is also making mandatory contributions. If the Member decides to retain the accrued benefit beyond the termination of employment with that employer, no further contributions to the Scheme can be made by the Member.3. The Authorised Firm is required to have adequate systems and controls in place to be able to clearly distinguish between mandatory contributions and voluntary contributions in respect of a Member, including the assets in which those contributions are invested.4. The defininition of extreme financial hardship in the Constitution of the Scheme (see COB Rule 12.3.6A(c)(i)) should be consistent with industry practice and may include, for example, circumstances such as the ill health of a Member or immediate family, death of a family member or other justifiable grounds.5. See Guidance items 2, 3 and 4 under COB Rule 12.2.1 relating to AML screening if a Member makes voluntary contributions.Derived from DFSA RMI302/2021 (Made 30th June 2021). [VER38/09-21]
COB 12.3.7The Operator of a Scheme must ensure that a Payment Schedule is prepared setting out in respect of each Participating Employer:(a) the rates, including the due dates, of all contributions payable to the Scheme by the Participating Employer;(b) each Member’s name, address and nominated Beneficiary; and(c) the amounts likely to be payable by each Member by way of fees or charges for the relevant year.
COB 12.3.8(1) The Operator of a Scheme must ensure that the Administrator notifies a Member of the Scheme in respect of whom a payment is due:(a) if payment under the Payment Schedule is not paid on the due date; and(b) if the amount is not recovered, of the consequences of the nonpayment to the Member.(2) The Administrator of the Scheme must notify the Operator:(a) if any payment under the Payment Schedule is not paid on the due date; and(b) if the amount is not recovered, of the consequences of the nonpayment for the Members of the Scheme.
COB 12.3.9(1) The Operator of a Scheme must:(a) establish a range of investment options offered on the Investment Platform, which are suitable for the investment objectives and risk profile of the different classes of Members of the Scheme;(b) ensure that the investment options include investments that are suitable for Members who are:(i) highly risk averse, and therefore, for whom capital preservation is paramount; or(ii) seeking Shari’a compliant options;(c) take appropriate action to remove any investment option that is found to not be meeting the applicable criteria; and(d) implement adequate measures to protect the interests of Members when an investment option is to be removed from the Investment Platform.(2) The Operator of a Scheme must consult with a Professional Adviser before carrying out its functions under (1).(3) Where the Operator of a Scheme does not act on a recommendation provided by the Professional Adviser, the Operator must do so on reasonable grounds which are clearly documented.(4) The Professional Adviser referred to in (2) must be a person who:(a) is either:(i) authorised under its Licence for Advising on Financial Products; or(ii) regulated and supervised for that activity by a Financial Services Regulator;(b) has appropriate skills and expertise relating to the type of investment options that are to be offered on the Investment Platform; and(c) is independent of the Operator and Administrator of the Scheme.
The Operator of a Scheme must:(a) enter into an agreement with each person who is responsible for an investment option (investment manager) to be offered on the Investment Platform, that sets out:(i) the criteria to be met by the investment manager;(ii) a requirement for the investment manager to ensure that its fees and charges are reasonable, taking into account the fees and charges of similar investments;(iii) the obligation of the investment manager to provide information relating to the investment options which Members are to use when making their investment options;(iv) the circumstances in which an investment option is to be removed from the Investment Platform and the procedures that apply to the removal; and(v) the measures to protect the interests of Members on the removal of an investment option from the Investment Platform;(b) make available to Members and prospective members of the Scheme, information relating to each investment option offered on the Investment Platform; and(c) provide Members with a facility to switch, free of charge at specified intervals, between investment options offered on the Investment Platform.
Register of Members
COB 12.3.11The Operator of the Scheme must ensure that the Administrator:(a) maintains a register of the Members of the Scheme and the Participating Employer in respect of each Member;(b) keeps the register at the principal place of business of the Administrator in the DIFC;(c) includes in the register the name of each Member and the date on which contributions commenced in respect of the Member; and(d) permits a Member and Participating Employer to access the relevant part of the register that contains information relevant to the Member or the Participating Employer during normal working hours and free of charge.
COB 12.3.12 COB 12.3.12
The Operator of a Scheme must ensure that the Administrator has in place adequate arrangements to deal efficiently and effectively with enquiries from Members and Participating Employers.