For Trustees of pensions schemes, not exactly the “gap year” you had hoped for, rather a “gap few weeks…”

The Pensions Regulator’s (TPR) new General Code of Practice (previously called the single code) is expected to come into force on 27 March 2024, some three years after consultation began in 2021. 

The General Code brings together 10 of the 15 current Codes of Practice to provide one set of expectations on scheme governance, with the remaining 5 expected to be incorporated at a later date. TPR expects trustees to ensure their governance practices meet TPR’s expectations.  TPR is expecting trustees to identify where their current policies do not meet TPR’s expectations under the General Code and “fill in the gaps”.   

What actions should Trustees be taking?

• Trustees will need to carry out a review or “gap analysis” of the existing policies and procedures they have in place and determine exactly what new policies or upgraded policies are required.
• Trustees should put in place an action plan to ensure they fill the gaps around establishing and operating an effective system of governance (ESOG). The ESOG applies to all schemes.
• Trustees of schemes with more than 100 members also need to carry out regular Own Risk Assessment (ORA) within the timeframes set out by the General Code of Practice.
• Trustees should consider any shortcomings in their knowledge and skill sets and seek relevant training if required.

Why is it important to comply?

A code of practice sets out regulatory expectations for how trustees and pension scheme managers should meet their pension scheme legal requirements.  Codes of practice are not law, but non-compliance with a Code will be taken into account when determining if legal requirements have been met.  Therefore, a tribunal or court must take into account the relevant code of practice and compliance or non-compliance of it by the trustees when reaching a decision.   

Codes of practice apply to trustees and pension scheme managers of all occupational defined benefit and defined contribution schemes as well as personal and public sector schemes.

The Code sets out in detail, in separate modules, procedures and process requirements under the effective system of governance (ESOG):

• Risk management, including identifying actual and potential risks, managing risks, having in place an effective risk management policy
• Trustees and Chair of Trustee roles, including decision making and meetings
• Conflicts of interest – internal policies and managing conflicts
• Investments – governance of investments, decision making, ESG compliance
• Managing advisers and service providers – questioning advisers, monitoring
• Remuneration policy
• Trustee knowledge and understanding to include identifying gaps and trustee training
• Dispute resolution procedures – practical, robust, fair, proportionate, clear, timely
• Member communications – effective, clear, precise, jargon-free

This is not an exhaustive list and thankfully, TPR has applied a proportionate approach to assist trustees in meeting their ESOG obligations.  Trustees are able to take into account the size and complexity of their schemes to determine the “right” ESOG for their schemes.  We recommend Trustees take legal advice to ensure the right approach is taken for their schemes.

When to take action?

Where trustees have made limited or no progress in identifying the gaps in their governance policies and updating their policies, they should take pensions legal advice and take action now. 

Schemes are expected to complete an ORA every three years, and the first ORA does not need to be completed until 2026 in most cases, (there are some exceptions). However, the focus is on trustees having in place an ESOG which then feeds into an ORA, so it is important to ensure your scheme governance framework and policies meet TPR’s ESOG expectations.

How can the Pensions team at gunnercooke help?

This is not an easy exercise, at gunnercooke, our Pensions team is working with a number of our clients to ensure they meet their compliance obligations under the General Code. 

We can carry out a review of your existing policies and carry out a bespoke “gap analysis”, and advise and produce new or updated policies, ensuring trustees are compliant with their requirements under the new General Code of Practice.

If you would like to discuss this matter further, or require further information, please get in touch with Parminder Latimer, Pensions Partner at gunnercooke here.