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TPR publishes new defined contribution (DC) code of practice and guidance on legislative compliance

The Pensions Regulator’s new code of practice for defined contribution (DC) pension schemes has taken effect.


4 AUGUST 2016 | MARK SMULIAN

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It sets out the standards that pension trustees must meet to comply with legislation, and applies to all schemes offering money purchase benefits.

Executive director for regulatory policy Andrew Warwick-Thompson said: “Millions of people are being auto-enrolled into defined contribution pensions, so it’s essential that schemes are being managed to a high standard.

“In revising the code, we have responded to calls from the pensions industry to shorten and simplify it, with an increased focus on legislative requirements.” 

An updated compliance and enforcement policy for occupational DC schemes has also been published, which describes TPR’s expectations for legislative compliance and how it will proceed to enforce the law.

Mr Warwick-Thompson added: “We will act where trustees demonstrate that they are not meeting even the basic 'hygiene' duties of preparing their chair’s statement or completing a scheme return, as this is often an indicator of more serious stewardship failings.”

The new code has six sections: the trustee board, scheme management skills, administration. investment governance, value for members, communicating and reporting.

Hymans Robertson partner Rona Train said: “At the moment, assessment of value for members will be mostly qualitative and it’s probably fair to say this won’t be perfect in its first year. One of the reasons is a lack of industry-wide data. How to achieve cross-industry benchmarking is something we’re looking at.

“The regulator has called on large schemes to use information sharing through their consultants and professional trustees as one way of assessing value.”

Julian Rowe, senior technical consultant at JLT Employee Benefits, said: “The new code is better aligned to constituent elements of good DC practice addressing different aspects of governance. The ‘how to’ guides, in particular, are evidence of an effective consultation with the industry.

“The code does assume that those reading it have a good knowledge of the legislation which applies to their scheme, as it does not set out in detail these requirements.”

He said trustee training in the legislative requirements should be undertaken where appropriate and where the Code is not prescriptive, trustee boards would need to judge what is a ‘reasonable and proportionate’ method of ensuring compliance.