We are reviewing our codes of practice to reflect the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018. We expect that this will involve combining the content of our 15 current codes of practice to form a single, shorter code. In doing so, we intend to make our codes of practice quicker to find, use and update, so that trustees and managers of all types of scheme can be more responsive to changes in regulation. Our current intention is to develop the new code in phases.
Our early focus will be on the codes most affected by the regulations. We will review Code of Practice 9 (internal controls) and 13 (defined contribution code) first, including content from Codes of Practice 14 (public service schemes) and 15 (master trusts), as we set out the features of effective governance that will apply to all types of pension scheme. Trustees will need to be able to demonstrate that they have an effective system of governance within 12 months of publication of the updated code.
We are planning to launch a formal consultation in late 2020 or early 2021, but before that we will engage with stakeholders for feedback on the proposed design and content.
The new regulations
New requirements for pension scheme governance came into force on 13 January 2019 as part of the transcription of the IORP II Directive into UK law.
The regulations place new requirements on certain occupational pension schemes, the most far-reaching of which is the requirement to establish an effective system of governance. This builds on the previous requirement for trustees to maintain adequate internal controls. While these regulations may prompt significant changes to the governance of some schemes, we believe that well-run schemes will already be meeting many of the new requirements.
Under the new regulations, trustees are expected to have an effective system of governance that is proportionate to the size, nature, scale and complexity of their scheme. This system will need to include a documented risk assessment, and the single code will reflect our expectations of this work.
The majority of the requirements introduced by the regulations apply to schemes with 100 or more members. However, schemes with fewer than 100 members must still have an effective system of governance that is proportionate to their size, nature, scale and complexity of activities. We also believe that trustees of schemes that are exempt from the requirements should, as good practice, meet our expectations wherever it is proportionate to do so. To help make sure they are suitably prepared, we suggest that trustees familiarise themselves with the expectations for scheme governance in our recent 21st Century Trustee campaign and our most recent codes of practice.