The Pensions Regulator

Consultation on Pensions Act 2004 code of practice: trustee knowledge and understanding

Ref: PN05-01
17 March 2005

The consultation paper for the Pensions Regulator’s draft code of practice on trustee knowledge and understanding was published today.

Under the Pensions Act 2004, pension scheme trustees must have sufficient knowledge and understanding of the pensions and trust law, and of the principles of funding occupational schemes and the investment of scheme assets, to run their schemes properly. They should also be ‘conversant with’ their own scheme’s documents.

This code of practice sets out practical guidance for trustees on how they can comply with these legal requirements. 

Pension scheme trustees, advisers and education providers to trustees are invited to contribute to the consultation. The consultation period ends on 10 June 2005 and the code is due to be issued by the Pensions Regulator in Autumn 2005.

The consultation draft is available on the regulator’s website at: www.thepensionsregulator.gov.uk

 

Editor's notes

1. The pensions industry has worked closely with the regulatory body to develop the scope of trustee knowledge and understanding, which, at a high level is contained in the code of practice.
   
2. The detailed scope documents have already been published and are also available on the regulator’s website. The scope documents provide trustees with a checklist of the topic areas of which they need to have knowledge and understanding.
   
3. Under the Pensions Act 2004 (sections 247-249), pension scheme trustees must:
   
4. • have knowledge and understanding of pensions and trust law;
   • have knowledge and understanding of investment and funding principles; and
   • be conversant with documents relating to their pension scheme.
     
5. Codes of practice are not statements of the law. However they do have evidential value, meaning they will be taken into account by the Determinations Panel, a court or tribunal where relevant.
   
6. Initially, there will be 12 codes of practice. It is planned that the first code, reporting breaches of the law, will be effective from April 2005.
   
7. On 6 April 2005, the Pensions Regulator will be established as the new regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. It will replace Opra which will cease to exist.
   
8. The new powers of the Pensions Regulator will include the ability to:
   
9. • issue improvement notices and third party notices, allowing the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates;
   • prohibit trustees who are judged not fit and proper to carry out their duties;
   • collect more detailed scheme information; and
   • impose a statutory obligation so that ‘whistleblowers’ will report suspected breaches of the legislation to the regulator.