The Pensions Regulator (TPR) has today opened a consultation on plans to create a single code of practice that is clearer and more accessible than existing guidelines.
The proposals would see TPR's 15 existing codes of practice transformed into a new online code, providing one up-to-date and consistent source of information on pension scheme governance and management.
Phase one of this work – which the regulator is now consulting on – will bring 10 of the current 15 codes together as one, reducing the number of pages by nearly half.
“The new code of practice represents TPR's ambition to create a single point of consistent and up-to-date information for all pension scheme governing bodies,” said David Fairs, TPR's executive director for regulatory policy, analysis and advice.
"It will determine how governing bodies should approach governance and administration and provide consistent expectations across different types of scheme, set at a level we consider appropriate for any well-run scheme.”
He continued: “This user-friendly new code should make it easier for governing bodies, and those providing them with professional services, to distinguish between legal duties they must meet and what we expect should be done to comply with those duties.”
The 10-week consultation, which will run until 26 May, offers governing bodies and pensions professionals the chance to engage with and respond to the proposed new code.
It also incorporates changes introduced by the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018, which relate to 'effective systems of governance' and the 'own risk assessment'.
Under new regulations, trustees must have an effective system of governance proportionate to the size, nature, scale and complexity of their scheme.
In addition, private sector schemes with 100 or more members will now need to carry out an own risk assessment, which TPR expects governing bodies to use to assess how well their policies and procedures address various risks, both financial and operational.
Sara Cook, principal at Barnett Waddingham, said that the new code of practice consultation gives trustees their first glimpse of the “governance wake-up call” that is coming their way.
“Is this the biggest change to pension scheme governance in the last 15 years? We’ll have to wait and see. The new code of practice does make it clear that trustees may need to expand their risk assessments to meet TPR's expectations.
“With new sections on stewardship and climate change we can see an increased focus on trustees’ effective investment governance as the UK economy transitions to net zero by 2050.
“Better informed trustees can better manage their scheme’s exposure to climate change risks, and be in a better position to take advantage of investment opportunities that emerge during the transition to a low-carbon economy.
“The implementation of these requirements will see a number of benefits for trustees, especially in terms of supporting trustee decision-making and better member outcomes.”
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Author: Chris Seekings