Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.

This week we cover the the publication by the TPR of the final version of General Code of Practice.

TPR publishes final version of General Code of Practice

The new General Code, which replaces ten current codes of practice, has been laid in Parliament and is expected to come into effect on 27 March 2024. The message from the Pensions Regulator (TPR) is that while the new Code looks different, many of the standards set out are not, and that this is ‘an opportunity for governing bodies to make sure their schemes meet the standards of governance we expect, and savers deserve. It means there is no excuse for failing to know what TPR expects of them.’

TPR has also published its final response to the consultation on the draft Code, highlighting significant changes made in response to feedback. Broadly, TPR has responded to schemes’ concerns that some of the wording in the draft version of the Code could have imposed additional obstacles or administrative burdens, and has made its expectations in a number of areas more flexible. The key areas of concern for schemes are the requirements for relevant schemes to have an effective system of governance (ESOG) in place, to carry out an own-risk assessment (ORA) of that system of governance, and to maintain a written remuneration policy.

The effective system of governance

Documenting the policies that form the ESOG is a legal requirement, and many schemes will already have carried out gap analysis to work out what specific actions might be required. TPR comments in its consultation response that ‘the ESOG is predominately a rebadging of things that the governing bodies of well-run schemes should be doing already’ and that ‘our intention is that governing bodies will use our bulleted expectations as questions to start a dialogue on whether and how they meet an expectation, and whether it is operating as intended, or could be improved.’

The ESOG can incorporate existing policies and procedures and should be proportionate to the size, nature, scale, and complexity of the activities of the scheme. The ESOG will be the immediate compliance priority for trustees in the run-up to the Code coming into force.

The own-risk assessment

TPR has previously commented that the ORA would be ‘a significant piece of work’ for trustees, but in its consultation response, TPR now expects that it should be ‘a more straightforward project for any well-run scheme.’ It has no plans to produce guidance on completing the ORA, since this is a scheme-specific matter.

Schemes that are required to operate an ESOG and have 100 members or more must carry out and document an ORA, which is an assessment of how well the ESOG is working and the way potential risks are managed. A scheme’s ORA should be proportionate to the size, nature and complexity of the scheme. It can reuse or cross-refer to appropriate material from existing risk assessment processes and can incorporate assurance reports from service providers. Schemes will be able to complete an ORA on their own timetable, and can carry out the assessment in part or in whole, provided it is carried out in its entirety at least once every three years. Trustees should be familiar with their ORA as part of their trustee knowledge and understanding.

One key change relates to the timing of the first ORA, which has been relaxed compared to the initial draft Code. Schemes must prepare their first ORA:

• within 12 months, beginning with the last day of the first scheme year that begins after TPR has issued a code of practice – so, for schemes with a 31 March year end date, the deadline will be 31 March 2026; or
• if later, (i) within 15 months of the effective date of the next actuarial valuation, or (ii) by the date on which the trustees are next required to prepare a Chair’s statement.

The remuneration policy

TPR has highlighted in its consultation response that the remuneration policy should only cover costs for which the governing body is directly responsible (so if the employer bears all the costs, it will be very short). The policy does not have to set out levels of remuneration and does not need to be published. Trustees should be familiar with the remuneration policy as part of their trustee knowledge and understanding.

Other matters

There are a number of other changes in the Code, including a new module on reporting payment failures, which includes examples of situations that TPR would (or would not) consider to be ‘materially significant’ for reporting. The period for reporting employers who fail to provide payment information to trustees to support the monitoring of contributions has been extended from 14 to 28 days.

In relation to reporting breaches of the law, and in response to requests to maintain the existing traffic light guidance, TPR says that an updated version of this guide will be published on or shortly after the new Code comes into force. The module includes examples of breaches that are considered to be materially significant.

Trustees will need to review the Code and have training on it as appropriate.

Read the Code.
Read the consultation response.