Background
The Pensions Regulator (TPR) has launched a consultation on its plans to streamline its codes of practice from the current set of 15 to a single “clear, more accessible” code. The new code will be easier to navigate and will reduce the duplication of material. It is designed to be web-based and easier to keep up-to-date (although all future changes to the code will still require consultation and parliamentary approval).
TPR has chosen to phase the transition to the new code to allow the required website redesign as well as a full evaluation of the current codes and associated guidance. This consultation covers the first phase of the transition and, at present, TPR does not have an end date for completing all of the work required to fully transition all of the current codes to one single code.
Ultimately TPR believes this new approach has the potential to allow it to fully integrate all of its codes of practice and guidance as well as the Trustee Toolkit. However, this will take time as there are over 200 pieces of existing guidance which need to be reviewed.
First phase consultation
The consultation runs for 10 weeks until 26 May 2021. This phase of the work aims to bring together ten of the current codes into a single code comprising 51 shorter, topic-based modules. The ten codes that are to be replaced by the new code are:
- 01: Reporting breaches of the law
- 04: Early leavers
- 05: Reporting late payment of contributions to occupational pension schemes
- 06: Reporting of late payment of contributions to personal pension schemes
- 07: Trustee knowledge and understanding (TKU)
- 08: Member-nominated trustees/member-nominated directors – putting arrangements in place
- 09: Internal controls
- 11: Dispute resolution – reasonable periods
- 13: Governance and administration of the occupational trust-based schemes providing money purchase benefits
- 14: Governance and administration of public service pension schemes
The main consultation document can be found here.
For consistency and inclusivity, TPR uses the term “governing body” to refer to the trustees, managers or boards of the schemes they regulate throughout the new code.
In addition to updating existing content, the revised code features new content on topics such as remuneration policies, cyber security and the environmental, social and governance (ESG) requirements applicable when stewarding schemes’ investments. The new code also incorporates changes introduced by the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 which relate to:
- Effective systems of governance, which must be put in place by trustees, alongside appropriate internal controls, but be proportionate to the size, nature, scale and complexity of their scheme.
- Own Risk Assessment (ORA), whereby governing bodies of private sector schemes with more than 100 members will be required to carry out an own risk assessment on the risks facing their schemes. Schemes will have 12 months to carry out and document their ORA and it is expected that these will be updated at least annually. However, there is no requirement to submit these to TPR or make them publicly available.
In the consultation document, TPR has included an appendix which directs users to the content that may be most relevant to them (categorised between DB, DC and public sector) and indicates whether the content in each module is new or based on existing content. TPR has also provided a useful guide which shows how the existing codes transpose into the new code which can be found here.
Future changes to the code of practice
Remaining codes of practice
Modules covering the content of the remaining five codes of practice will be added in future phases. As you may be aware, revisions to code of practice 03 “Funding defined benefits” have already being consulted on (see our article here which covers TPR’s interim response). TPR hopes that the modules relating to this will be ready for consultation at the end of 2021.
Recent trusteeship consultation
TPR will not be adopting any of its findings from the recent consultation on the future of trusteeship into the new code at this time due to delays caused by events over the past year.
Legislative changes
Content relating to the Pension Schemes Act 2021 and other forthcoming legislation will be added as it becomes ready – this will be through additional or updated modules. As mentioned earlier, all updates to the new code will be consulted on.
Next steps
TPR has provided an online demonstration version of the new code of practice which can be accessed here.
If you wish to respond to the consultation, TPR has provided six separate response forms, one for each section of the new code. TPR has said it does not expect respondents to answer every question and the forms can be found on the main consultation page here. These forms can be completed and sent to newcodeofpractice@tpr.gov.uk
If you would like to discuss this note, please feel free to speak to your usual Quantum Advisory contact.
Michael Welford
Consultant and Actuary
25 March 2021