More support for trustees as regulator publishes new draft DC code for consultation
Tuesday 24 November 2015
The Pensions Regulator is today going further to raise standards of governance and administration in defined contribution (DC) schemes, and to help trustees and their advisers, by publishing a draft revised code of practice for consultation.
The new draft DC code is shorter and simpler, and sets out the standards of conduct and practice the regulator expects trustee boards to meet in complying with their legal duties, and to deliver better long term outcomes for retirement savers.
The new code will overhaul the existing DC code first published in 2013 to better support trustee boards and managers of schemes offering money purchase benefits as they adapt to major reforms introduced earlier this year.
To view the new draft code go to our new draft DC code of practice consultation.
The consultation begins today and will run until the end of January before the DC code is laid in Parliament next May, and comes into force in July. The 2013 code remains in force until then.
Andrew Warwick-Thompson, Executive Director at The Pensions Regulator said: “The reforms introduced this year have led to unprecedented change in pensions and we know that trustees of DC schemes and any scheme offering money purchase benefits need to adapt to ensure member outcomes remain strong.
“In this context, the draft revised DC code seeks to make the standards we expect from trustees as clear as possible. The guides that will support the new DC code will provide practical guidance to help trustees understand the different measures they can put in place to meet the standards in the code.
“During the development of the new DC code, we have engaged extensively with stakeholders, including trustees, scheme managers and advisers that form the core audience for this regulatory document.
“I now call on this audience to respond to the consultation to help ensure the code is as useful as it can be in assisting delivery of the high standards of governance and administration required to safeguard members’ retirement savings.”
The revised DC code is divided into sections and sets out expected conduct and practice in relation to the following:
- The trustee board – including appointing a chair of trustees, member-nominated trustees, and master trusts.
- Scheme management skills – such as managing risk, trustee knowledge and understanding, and conflicts of interest.
- Administration – including core financial transactions and record-keeping.
- Investment governance – including documenting investment matters, monitoring and reviewing investment strategies, and security and liquidity of assets.
- Value for members – such as restrictions on costs and charges, and the adjustment measure.
- Communicating and reporting – for example at-retirement communications, scams, and the annual chair’s statement.
The draft revised DC code assumes that those reading it have good knowledge of the legislation which applies to their scheme, and where that is not the case we urge those trustees to undertake appropriate training, including completing the Trustee toolkit, and to take professional advice.
The regulator recognises that different approaches may be appropriate for different schemes, so the code is not prescriptive about all the specific actions trustee boards should take to meet their duties. Trustee boards will often need to make judgement calls as to what is a reasonable and proportionate method of ensuring compliance for their scheme.
The regulator intends to consult separately on a series of 'how to' guides to support the new DC code in the Spring.
- The draft code of practice (the DC code) is issued by The Pensions Regulator, the body that regulates occupational pension schemes. The code has been produced under the power given to the regulator in section 90 of the Pensions Act 2004, and has been developed in light of the statutory objectives which were introduced by the Pensions Act 2004.
- The Pensions Regulator is the regulator of work-based pension schemes in the UK.
- The statutory objectives of the regulator are to:
- protect the benefits of pension scheme members
- reduce the risks of calls on the Pension Protection Fund
- promote, and improve understanding of, the good administration of work-based pension schemes
- maximise compliance with the duties and safeguards of the Pensions Act 2008
- minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 (scheme funding) only)
- We have developed this code to meet the objectives relevant to schemes offering money purchase benefits but recognise trustee objectives to comply with their fiduciary duties and ensure that scheme benefits can be paid as they fall due.
- Codes of practice are not statements of the law and there is no direct penalty for failing to comply with them. Any alternative approach to that appearing in the code of practice will nevertheless have to meet the underlying legal requirements, and a penalty may be imposed if those requirements are not met. When determining whether the legal requirements have been met, a court or tribunal must take any relevant provisions of a code of practice into account.
Tim Marks 01273 662092