Preparing for Own Risk Assessment

Trustees of an occupational pension scheme with 100 or more members must carry out and document an Own Risk Assessment (ORA). The Pensions Regulator (TPR) describes an ORA as an assessment of how well a scheme’s “effective system of governance” (ESOG) is working and how potential risks are managed.

TPR’s General Code, which came into force on 28 March 2024, includes its expectations for an ORA. A scheme’s first ORA must be prepared within 12 months of the last day of the first scheme year, beginning after TPR issued a Code of Practice on the ORA. Therefore a vast majority of Schemes will have their first ORA due by Spring 2026.

As we and the pensions industry readies itself in preparation for the ORA, detailed work needs to be done to address the “so what” questions:

• We have got the policy, but are we checking that we are actually doing what it says?
• What’s the point of the policy?
• Is it working?
• Are we adhering to it?
• One size generally doesn’t fit all, so how can we adapt the process to meet our scheme requirements?

These questions are all pre-cursers to the ORA in terms of assessing the effectiveness and usefulness of the current documented policies.

Currently, most schemes are in the strategy phase – so far, IGG has provided clients with training to aid understanding of the “What, When, and Why” aspects of the ORA.

What are we going to do?

What are we going to do, who is going to do it, and who is going to be responsible for the Risk Management Function?

When is the deadline?

It is crucial to identify and work backwards from the deadline date to ensure sufficient time is allocated to not only undertake the assessment, but also to discuss the findings as a Trustee Board. Furthermore, if the assessment identifies areas for additional work, plans need to be made for that work to happen.

Why are we doing this?

This is the ideal opportunity to take a step back and think about how you currently operate. We all know that governing bodies are busier than ever, and it can be difficult to make time for governance activities amongst all the other business of managing a scheme. However, the foundations of good governance must be central to scheme management. We know that in the long term, good governance supports better decision-making and will lead to better outcomes for members, so giving governance sufficient focus is vital.

It is important to recognise that putting policies in place is not a ‘one-off/job done’ effort – testing that those policies work, not only on paper but also in practice, is essential. Do they need to be adapted to meet those requirements – and are they actually being used? Often, there is a danger that policies can be put in place without then being reviewed or renewed regularly. Over time, key contacts will likely change, as will systems, processes or documentation, potentially rendering them unfit for purpose. There should be rigour around regular reviews to ensure a policy continues to remain up to date.

Some of the fundamental ways you can review and evaluate a policy is to ask some key questions:

• Could a newly appointed Trustee use the policy to correctly follow the process?
• Does the policy enable the process it details to be carried out efficiently and effectively?
• Does the policy reflect the current circumstances of the scheme?
• Is the aim of the policy clear without reading the full document?
• Does the policy reference the most recent and relevant legislation?

At IGG, we take a proportionate and pragmatic approach to the ORA, with a clear focus on adding value for both Trustees and members, while ensuring practical implementation that aligns with the specific needs of each Scheme.

It is important to maintain good filing systems and audit trails. Once gaps are addressed, keeping comprehensive records and evidence of progress is key. This not only supports ongoing governance reviews but also ensures that Schemes are well-prepared for the ORA and any future regulatory requirements. Being organised and forward thinking in these areas will make the journey easier.

IGG recognises the juggle for in-house Pensions Managers in terms of managing additional governance requirements against their already extremely busy day jobs. We are here to help, whether this be through providing training, or supporting you with undertaking the ORA. So, if you do require any support in preparing for, or carrying out your ORA, do get in touch.

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