The Pensions Regulator has laid the final version of its General Code of Practice (the Code), formerly known as the Single Code of Practice, before Parliament. This marks the end of a long wait from when the consultation on the then Single Code of Practice ended on 26 May 2021. The expectation is that the Code will come into force on 27 March 2024.
The Code consolidates 10 of the Pensions Regulator’s existing 15 Codes of Practice. By bringing 10 existing Codes of Practice together into a single Code, the Pensions Regulator hopes that this will provide trustees will greater clarity around their obligation to establish and operate an Effective System of Governance (ESOG), including internal controls.
The Code is comprised of five sections covering the following areas:
- The governing body
- Funding and investment
- Administration
- Communications and disclosure
- Reporting to the Pensions Regulator
Whilst this might seem daunting at first sight, the Code includes areas that trustees should already be complying with in addition to the introduction of some new requirements. Trustees should now review their current governance structure with their advisers to identify areas where they fall short of the requirements or do not currently meet them at all. It should be noted that not every element of the Code will apply to all schemes. Trustees will need to identify those elements of the Code that apply to their scheme. For example, authorised master trusts will still be subject to separate governance requirements and an Own Risk Assessment (ORA) will only need to be undertaken by schemes with 100 or more members.
What needs to be done and when?
The necessary actions required of trustees can be broken down into three key areas:
- Undertake a gap analysis to identify those areas where current policies and procedures require enhancement or where they do not currently exist when compared to the ESOG expectations set out in the Code. Action should then be taken to make good these shortfalls. We recommend that trustees start work on their gap analysis as soon as possible.
- Once a gap analysis has been completed, trustees will need to establish their ESOG. There is no defined way of doing this, trustees will need to use their judgement as to how they should ensure compliance with the Code for their scheme. We recommend that a proportionate and pragmatic approach reflecting each scheme’s individual circumstances is taken.
- When a gap analysis has been undertaken and an ESOG is in place and has been documented, trustees will need to undertake an ORA. An ORA is an assessment of a scheme’s ESOG and how well it is working in practice. It must be carried out within 12 months after the end of the first scheme year that begins after 27 March 2024. Subsequent ORAs must be undertaken at intervals of not more than three years.
If you would like any further information in relation to the above, please get in touch with your usual Quantum Advisory contact or email info@qallp.co.uk.