Pensions Regulator publishes General Code of Practice

The Pensions Regulator's long-awaited General Code of Practice was laid before Parliament on 10 January 2024 and is expected to come into force on 27 March 2024.

The Code consolidates and replaces 10 of TPR's existing codes of practice on the governance and administration of pension schemes. Central to the Code are the Regulator's expectations as to the features of a well-run scheme and how governing bodies (that is, trustees or managers of an occupational pension scheme, or the scheme manager of a public service pension scheme) should comply with their legal duties.

Governing bodies will need to have in place an effective system of governance (ESOG), which is a collection of internal controls and procedures in relation to running a pension scheme. Whilst TPR has broadly the same expectations in relation to the ESOG for each type of scheme, it recognises that the systems and controls put in place by a scheme should be in proportion to its size, nature, scale and complexity.

Schemes with 100 or more members will be required to carry out and document an own risk assessment (ORA). The ORA should address how well the ESOG is working, and the way potential risks are managed. Governing bodies will need to prepare their first ORA within 12 months of the end of the first scheme year that begins after the Code comes into force. The ORA will need to be reviewed at least every three years, and new assessments should be carried out where elements of the ESOG or risk management processes are new or updated and whenever there is a material change in the ESOG or the risks facing the scheme.

Much of the Code reflects existing best practice. Well-run schemes will already be doing most of what is set out in the Code. Compliance with the Code will for well-run schemes involve comparing their existing practice with the Code and filling any gaps.

The Code confirms that a remuneration policy is required and that such a policy should only cover costs for which the governing body is responsible. TPR has confirmed that the policy does not have to disclose the levels of remuneration paid and that there is no expectation to publish the policy.

The Code is not prescriptive about the methods used to meet TPR's expectations and TPR has confirmed that governing bodies need to use their judgement as to what is a reasonable and suitable method of ensuring compliance for their scheme. Trustees and managers of pension schemes should be looking to carry out a review of their scheme's policies and processes to ensure their scheme is compliant with the Code.