Audit pension scheme services.
We provide trusted audit and assurance services to Retirement Scheme Administrators in Malta.
Pension scheme auditing is a niche area that requires expertise and an understanding of the sector. If you are a pension administrator, trustee or adviser, and you want to make sure everything is running smoothly and your scheme is fully compliant, that means you need a pension schemes audit.
Griffiths + Associates, approved by MFSA to audit retirement schemes, has experts with a full range of specialist in-house expertise in all pension-related fields such as risk management and governance, internal audit, investment valuation services, de-risking solutions, and the full range of tax services.
Our services include ensuring the audit is delivered to time and budget, providing an opinion on the accuracy of the scheme’s financial statements and assessing the robustness of the internal control and reporting environment:
- Pension scheme Compliance statutory audit,
- Pension scheme internal audit.
- After the pension scheme auditing we will make sure you are kept in the loop about any pension legislation changes, and we will be on hand to answer any queries you may have.
Benefit schemes and Legislative Framework.
The Retirement Pensions Act (Cap. 514 of the Laws of Malta) regulates Malta retirement schemes, retirement funds and service providers related thereto. The Retirement Pensions Act came into force on the 1st January of 2015 as did the new Regulations and Pension Rules.
Act V of 2020 amends the Retirement Pensions Act primarily to transpose Directive (EU) 2016/2341 (the “IORP II Directive”). The majority of the Retirement Pension Regulations have also been amended in order to transpose provisions from the IORP II Directive. Furthermore, three new regulations have also been issued:
- Retirement Pensions (Cross-Border Activities and Cross-Border Transfers) Regulations, 2020
- Retirement Pensions (General Provisions of Supervision) Regulations, 2020
- Retirement Pensions (Transitional Provisions on Back-Office Administrators) Regulations, 2020
The MFSA, which is the competent Authority emanating from the Retirement Pension Act, 2015, issued Pension Rules which can be categorised as follows:
- Glossary to the Pension Rules;
- Pension Rules for Occupational Retirement Schemes;
- Pension Rules for Personal Retirement Schemes;
- Pension Rules for Retirement Funds;
- Pension Rules for Service Providers.
Qualifying Recognised Overseas Pension Scheme (QROPS).
A Qualifying Recognised Overseas Pension Scheme (QROPS) is an international pension scheme that is based in a jurisdiction other than the United Kingdom, but which is registered with Her Majesty’s Revenue and Customs (HMRC). The QROPS programme was part of UK legislation launched on 6th April 2006 as a direct result of EU human rights requirements of the freedom of capital movement.
Retirement Schemes set up in Malta and regulated by the MFSA may be recognised by HMRC as QROPS.
Audited annual financial statements prepared in accordance with International Financial Reporting Standards, together with a copy of the auditors’ management letter and the auditors’ report shall be submitted to the MFSA within four months of the Accounting Reference Date.
The disclosure requirements emanating from the International Financial Reporting Standards typically require the financial instruments to be disclosed according to class and according to a fair value hierarchy.
Interim Financial Returns (IFRs) And Annual Financial Return (AFR).
On a quarterly basis, Malta Retirement Scheme Administrator is to prepare an IFR at dates three, six and nine months after the Accounting Reference Date. The unaudited IFR and the AFR shall be submitted to the MFSA within one month of the date up to which it has been prepared.
Where the AFR has been submitted before the relevant audited annual financial statements have been produced it shall be updated to reflect the information in the audited financial statements and submitted to the MFSA together with the audited annual financial statements.
The IFR and AFR should also disclose the financial resources requirements as detailed below.
Financial Resources Requirements.
Malta Retirement Scheme Administrators shall be required to satisfy the following financial resources requirements:
(i) Net Tangible Asset Requirement and (ii) Expenditure Based Requirement.
The Net Tangible Asset Requirement should exceed a minimum amount set by the Pension Rules.
With respect to the Expenditure Based Requirement, liquid capital should exceed the higher of €11,650 and 25% of the Expenditure Based Requirement.
The Expenditure Based Requirement is determined by reference to the Annual Expenditure.
The retirement scheme is to produce a half-yearly report and is to be submitted to the MFSA within three months of the end of the period concerned.
The half-yearly report is to be prepared in conformity with International Financial Reporting Standards and should, amongst other things, include a report on the activities of the financial period, a statement of net assets and a statement of changes in net assets.
Taxation at the level of the Malta Retirement Scheme Administrator.
The income derived by the retirement scheme administrator is taxable at the income tax rate of 35%. Upon the distribution of a dividend to the shareholders, a refund of tax is due to the shareholders amounting to six sevenths of the tax paid in Malta.
Taxation Of The Malta Retirement Fund Or Scheme.
In accordance with the provisions of article 12(1)(d) of the Income Tax Act, the income of any retirement fund or retirement scheme that is licensed, registered or otherwise authorised under the Special Funds (Regulation) Act or any Act replacing the said Act is exempt from income tax provided that this income is not derived from immovable property situated in Malta.
Taxation Of Benefits Derived From Malta Retirement Fund Or Scheme.
Given that under the provisions of the Special Funds (Regulation) Act, the principal purpose of any such funds or schemes is to provide retirement benefits, these retirement benefits are to be characterised as a pension for the purposes of Article 4(1)(d) of the Income Tax Act.
Any capital sum received by way of commutation of a pension remains exempt in accordance with the provisions of Article 12(1)(h) of the Income Tax Act.
These benefits are considered to be arising in Malta and taxable accordingly. In determining the tax treatment of such benefits, due consideration needs to be given to any relevant provisions found in any applicable double tax treaty.
A Global Tax Report for the relevant fiscal year is to be submitted by the Retirement Fund or Scheme to the Commissioner for Revenue by the 31st July of the following year.
Author: Jason Stivala
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Circular issued by the MFSA establishing details of annual information to be provided by the RSA to its Members.
The MFSA has issued a Circular on the 31st August 2020 to clarify the requirements identified in Standard Licence Condition 5.1.4 and Standard Licence Condition 9.5(e) of the Pension Rules for Personal Retirement Schemes issued in terms of the Retirement Pensions Act, 2011. The MFSA also sets its expectations as regards to the content that a Retirement Scheme Administrator (“RSA”) is expected to include.
Standard Licence Condition 5.1.4 of the Pension Rules.
Standard Licence Condition 5.1.4 of the Pension Rules establishes information which a Retirement Scheme Administrator administering a Non-Member Directed Scheme is required to provide to its Members, annually and upon ad hoc request.
More specifically, S.L.C. 5.1.4 of the Pension Rules stipulates that the Retirement Scheme Administrator shall provide a statement to the Member, on an annual basis and upon ad-hoc request of the Member, noting his individual entitlements, and also provide the Member with brief particulars of the situation of the Scheme. The statement shall contain, as a minimum, the following information:
- any contributions into the Scheme, if applicable;
- any retirement benefits paid, if applicable; and
- all applicable charges incurred
Standard Licence Condition 9.5(e) of the Pension Rules.
Standard Licence Condition 9.5(e) of the Pension Rules establishes the information which a Retirement Scheme Administrator administering a Member Directed Scheme is required to provide to its Members annually and upon ad hoc request during the relevant reporting period.
More specifically, S.L.C. 9.5(e) of the Pension Rules stipulates that the Retirement Scheme Administrator shall as a minimum, provide the Member with the following information in relation to the member’s account on an annual basis, and upon ad-hoc request of the member, during the relevant reporting period:
- the underlying investments and their respective value;
- any contributions into the Scheme, if applicable;
- any retirement benefits paid, if applicable;
- the name of the investment manager and/or investment advisor, if applicable;
- all applicable charges, commissions and fees incurred by the member;
- in addition to points (a) and (e), the Member is to be informed of the availability of online access, which provides real time information of the investments held in the member account
Adequate and appropriate information
In the interest of ensuring that Members are provided with adequate and appropriate information, the MFSA expects that the RSA provides the member with the information referred to above:
- in a clear, accurate and comprehensible manner;
- in a manner so as not to be misleading in any way;
- in a way that is easy to read and is easily understood even by a Member having limited financial expertise or knowledge to interpret or understand the information provided. The use of jargon and technical terms should therefore be avoided, and everyday terms should be utilised instead;
- on a durable medium that is easily and readily accessible to a Member. Such medium is also expected to remain accessible in its original form for future reference;
- on one document or one source with the scope of facilitating the review of information by the Member without the individual having to access various documents or sources to obtain the information
Applicable charges, commissions and fees
The MFSA clarifies the requirement of the RSA to disclose all the applicable charges, commissions and fees to Members. In this regard, the MFSA expects that:
- charges, commissions and fees show a quantitative value;
- the applicable charges, commissions and fees for the relevant period are to include:
- the RSA’s initial and ongoing fees, as well as any ad-hoc charges;
- any amounts charged by the investment advisor;
- charges, commissions and fees imposed by the Investment Manager;
- any amounts levied by the investment providers and/or brokers;
- any other charges, commissions and fees incurred by Member, not listed above
Provision of information annually and upon ad hoc request
The MFSA expects that the RSA either circulates the respective information upon the anniversary of the Member’s introduction to the Scheme or else annually, on a date selected by the RSA to all the Members. The RSA is also required to ensure that the exact date to which the information in the statement refers is stated prominently on the document.
RSA’s are expected to update their systems, processes and procedures in order to comply with the MFSA expectations provided in the Circular which was issued on the 31st August 2020 and ensure that any information or member statements covering periods ending on or after the 31st December 2020 are fully in line with the contents of the aforementioned Circular.