The Code

The Pensions Regulator's new general (formerly 'Single') code of practice (the 'Code') was published on 10 January 2024, and is expected to come into force with effect from 27 March 2024.

Moving to a 'more modern, flexible and user-friendly design', TPR has converted the content of 10 (of its 15) existing codes into a series of interlinked online modules.

The Code is designed to show pension schemes 'how to approach governance and administration', and to provide 'consistent expectations' across different types of pension scheme at the level TPR considers appropriate for 'well-run schemes.' The Code asks that schemes have in place an 'effective system of governance, including internal controls' (or ESOG), which they will then assess via an 'Own Risk Assessment' (the ORA – see below).

The ESOG

Trustees already had to establish and operate an ESOG. However, the Code sets out how trustees should discharge this duty. In practice, the ESOG will stem largely from the trustee's governance policies and procedures, which need to meet statutory requirements as well as those in the Code.

A scheme's ESOG should be proportionate to the complexity, scale and organisational structure of the scheme, and to the nature of the risks that the scheme is exposed to.

The ORA

What

The ORA examines how well a scheme's governance systems are working, and the way potential risks are managed.

Failure to complete an ORA may be considered an indicator of poor governance.

Who

Mandatory for schemes with 100 members or more; good practice for others.

When

With some exceptions, within 12 months of the end of the first scheme year after the Code comes into force, and at least every three years after that. It should also be reviewed where elements of the ESOG or risk management processes are changed or updated, and whenever there is a material change in the risks facing the scheme.

How
  • In writing, signed by the chair, and circulated to all trustees.
  • No template: the ORA should be tailored to the circumstances of your scheme.
  • It can reuse material from the scheme's existing risk assessment processes – but only if that material was produced within the relevant timeframes.
  • Record keeping: schemes should record the date the ORA is prepared or revised, the next due date, and any interim actions.
  • The work undertaken should be proportionate to the size, nature and complexity of scheme.


What's new?

The Code has an increased focus, among other changes, on:

  • Environmental, Social and Governance (ESG) concerns (including climate change and stewardship considerations)
  • Cyber risk (where schemes will also have to have an eye to TPR's updated Cyber security guidance)
  • Equality, diversity and inclusion, and
  • Being proportionate and practical.

What do you need to do?

We are aware that schemes will be at different points in their governance journeys, but most will need to undertake work, and are likely to need assistance along the way.

We can:

  • Help you reflect on, organise and improve your governance using TLT's Governance Hub;
  • Draft and update your policy documents;
  • Train you on both the new Code and trustee requirements.

Now is the time to start taking action:

  • Ensure you understand what the new Code and underlying requirements ask of you. Take advice, seek training;
  • Identify the gaps in your scheme's compliance and take action to fill them;
  • Project plan, breaking the requirements down into a manageable process; prioritise key areas, and ensure your approach is proportionate;
  • Involve the necessary third parties, and consider establishing a sub-committee; diarise governance as a standing agenda item and keep up to date with developments on an ongoing basis.

Let us help you take action now to ensure your scheme is compliant – now, and into the future. Speak to us about TLT's Governance Hub: our online self-service solution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.