Following a consultation which closed on 26 May 2021 (no, that is not a typo), TPR has now published its response and the final version of the Code was laid before Parliament on 10 January. TPR expects it to come into force on 27 March 2024.
Background
TPR has been issuing codes of practice since 2005 and currently, there are 16 of them. Compliance with the codes is not mandatory but non-compliance may be taken into account in legal proceedings. The General Code replaces 10 of the existing ones. TPR plans, eventually, to consolidate all the current codes but the initial focus is on governance and administration.
The new code is shorter than the combined length of the codes it intends to replace but still, at 171 pages, a daunting read. However, it is designed to be accessed online, in 51 modules, so should be easier to navigate than the current codes. TPR will also be reviewing its associated guidance.
The 10 codes being consolidated in this stage are those covering:
- reporting breaches of the law and late payment of contributions,
- early leavers,
- trustee knowledge and understanding,
- member-nominated trustee arrangements,
- internal controls,
- dispute resolution and
- the governance and administration of defined contribution schemes and of public service schemes.
This is more than just a consolidation of existing material though. The new code has new content in modules on:
- remuneration policy,
- own-risk assessment,
- scheme governance,
- implementation report,
- stewardship,
- climate change,
- maintenance of IT systems,
- cyber controls and
- audit requirements.
The first two of these have generated the most engagement in the consultation, as many respondents have objected to the proposed content. TPR has listened to the feedback and relaxed the proposed requirements.
Own-risk assessment (ORA)
The Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 introduce the requirement for trustees of schemes with more than 99 members to conduct an ORA. This will require trustees to review their Effective System of Governance and assess how well it is working and the way that potential risks are managed.
The draft Code required trustees to produce their first ORA within 12 months of the Code coming into force – and to review it every 12 months thereafter. However, the final version of the Code reflects the timescale set out in the Regulations – trustees will have at least 12 months from the last day of the first scheme year beginning after the code takes effect to produce their first ORA – and the whole ORA will have to be reviewed within each three years thereafter.
The Regulator acknowledges that trustees will already be undertaking certain aspects that would make up an ORA and they will not be expected to duplicate this work. Therefore, the ORA may be a collection of documents, rather than one single bespoke document.
Remuneration policy
This module requires that trustees establish a remuneration policy, covering remuneration paid to service providers, and keep a written record of it.
The draft code suggested that “levels” of remuneration be specified but the final version clarifies that the policy should cover the principles for determining pay (rather than absolute levels) and the decision-making process for payment levels. The policy should cover only remuneration for which trustees are directly responsible (so not any costs paid by the sponsoring employer).
The final Code has also dropped the requirement for the policy to be published on a scheme website or otherwise be made available to scheme members.
Other relaxations
Other elements that have been relaxed since the consultation are:
- a suggested requirement to review advisers every two years has been relaxed to every three years and
- a suggested requirement to publish minutes of trustee meetings has been removed.
Comment
Many schemes have deferred taking any action in relation to their ORA pending clarification of the requirements. Now that those requirements are clearer – and the timescale more realistic – we expect schemes to progress work first on their Effective System of Governance (ESOG), then on their first ORA.