The new Single Code of Practice…

Ahead of the introduction of the Pension Regulator’s new Single Code of Practice, Trustee Director Clare Kember sets out some of the biggest challenges facing trustees and provides her insights on what they need to prepare for:

Long-awaited for by pension trustees, the new Single Code of Practice streamlines what was once ten separate codes dealing with scheme administration into a single unilateral guide, definitively setting out what a well-governed scheme should look like.

We are excited by the important role the Single Code of Practice will play in ensuring good pensions management, though it is to be expected that some of these updates to the Code will bring about considerable change to existing governance for many schemes. Indeed, some may find themselves needing additional support to close any shortcomings in their current policies, processes and procedures.

We are well versed in helping schemes identify such gaps, supporting The Pension Regulator’s initiative and putting in place best practice processes and drawing on our practical expertise and knowledge of the Code to do so.

Strong schemes are underpinned by strong governance, which should be proportionate to the size and complexity of the scheme. Our methodology is informed by our critical understanding of exactly what makes a strong scheme; our practical and extensive knowledge of the Code and governance best practice have enabled us to implement the Effective System of Governance (ESoG) review for schemes with relative ease.

The challenges ahead lie in establishing what is ‘proportionate’ in the Code. Some may ultimately adopt a belt-and-braces approach, setting them up well for the future as regulatory requirements are likely to evolve. However, trustees should be mindful that the introduction of such policies, processes and procedures should not simply be adopted as a tick box compliance approach; they must be living, breathing documents, to be followed to support and drive good governance.

In anticipating the Code’s introduction, trustees should take the time to understand what it entails and should first prioritise undertaking a gap analysis of their existing governance documents in line with the requirements of the Code.

Schemes will have just 12 months in which to complete their Own Risk Assessment (ORA) and submit this to the Regulator. Acting early means they will have ample time to identify areas which may be below standard, update their risk register and take any necessary mitigating steps. This is something professional trustees, especially those who have clients where the sole trustee model is applied, have a great deal of experience streamlining and facilitating.

Most well-run schemes shouldn’t see much difference following the Code’s introduction, but it’s essential that Trustees are aware of it nonetheless. Clarification and rationalisation of standards are always welcome, and we should grab the opportunity to achieve better outcomes for scheme members, wherever possible.

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