Important
Early draft of the code of practice
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Published: 17 March 2021
Governing bodies often appoint professional advisers and service providers to their scheme. In some cases,MA1 governing bodies are required to make these appointments. Advisers and service providers may be appointed to carry out specific tasks such as administration. They also provide advice, and supplement the skills and knowledge of the governing body.
Where governing bodies appoint advisers and service providers, they retain ultimate accountability. Governing bodies should be able to demonstrate that they can manage commercial relationships.
Schemes with 100 or more members that are required to maintain an effective system of governanceMA2 should follow our expectations for processes in place for the selection, appointment, management and replacement below. Other schemes may wish to consider them as good practice.
Selection
- Establish agreed and documented policies for making appointments to the scheme. These should be reviewed at least every two years.
- Consider running a tender process when appointing advisers and service providers, and commit sufficient time and resources.
- Carefully consider any proposed degree of delegation, as well as the experience and skill-set of the chosen service provider.
- Be familiar with and understand the impact of the terms and conditions of contracts with service providers. Learn more in our scheme management guidance.
- Review relevant independent frameworks, such as ISO certification, or accreditation frameworks for specialist functions like administration.
- Assess service providers before appointment, including access to due diligence carried out as part of the appointment process.
- Fully understand the scope of the roles and responsibilities performed by service providers and advisers.
Appointing
- Agree appropriate delegations and procedures for referral.
- Agree performance indicators on appointment and secure accountability within the service provider.
- Include a process for managing advisers, recording decisions taken as well as escalation points.
- Ensure the flow of communication with the service provider or adviser so all parties have the necessary information to make key decisions and to fufil their assigned roles.
- Take steps to identify and manage conflicts of interest. See Conflicts of interest.
- Understand the implications of Data Protection legislationMA3 for any information that will be shared with or handled by service providers.
Managing
- Be aware of any obligations, professional conduct rules and whistleblowing requirements that may be placed on some advisers.
- Ensure service providers are able to demonstrate that they are fulfilling the requirements of any legal obligation that has been delegated to them.
- Regularly assess performance against agreed key performance indicators (KPIs) and service level agreements (SLAs). Record outcomes and ensure all actions are allocated for remedy and progress is tracked.
- Review the performance of providers of investment consultancy services against the objectives set for them. Learn more in our objective setting guidance.
- Periodically review the market of service providers and consider if the scheme continues to receive quality of service and value for money.
- Have the breadth of knowledge and understanding sufficient to enable them to fully understand any advice or information they receive.
- Understand how any advice or information they receive affects decisions or activities for which they are legally responsible.
- Have a process to ensure that improvements are made where poor service is identified.
- Work with service providers to understand and secure any necessary resources to deal with forthcoming legislative or scheme changes.
- Have clearly documented procedures in place to enable a continuous and consistent service in the event of a change of service provider, or provider failure. See Continuity planning.
There may be circumstances where it is necessary for a governing body to replace an adviser or service provider. This may include cases where service has been consistently poor or no longer demonstrates good value, or where a contract is not, or cannot be renewed. In such circumstances, it would be appropriate for the governing body to act to ensure that there is no member detriment from their actions.
Replacing
- Consider the interests of the scheme members when replacing the adviser or service provider.
- Understand the impact of the terms and conditions of contracts, including any fees or penalties, and procedures for releasing relevant information to governing bodies and new advisers.
- Understand the risks associated with transitioning to a new provider and put plans in place to mitigate them.
- Plan effectively for the transition to a new adviser or service provider, setting out the key steps, actions, decisions, owners and timescales, including how costs will be met.
Glossary and legal references
Advisers
In the context of the code of practice advisers is a broad reaching term and may refer to one or more of the following: actuary, benefit consultant, lawyer, independent financial adviser, investment consultant, insurance broker, professional trustee, fund manager, fiduciary manager
Key performance indicator
A quantifiable measure which can be used to evaluate success
Service level agreements
An agreement between a service provider and governing body setting legally binding service levels that must be met by the service provider in providing the service
Service providers
Any person or body providing services to a pension scheme, including advisers. Examples include insurer, administrator, accountant and auditor
MA1Section 47 Pensions Act 1995
[Article 47 Pensions (Northern Ireland) Order 1995]
MA2Section 249A Pensions Act 2004
[Articles 226A of The Pensions (Northern Ireland) Order 2005]
MA3Data Protection Act 2018 and UK GDPR