TPR publishes General Code of Practice ahead of March implementation

The Pensions Regulator (TPR) has published its long-awaited General Code of Practice, previously known as the Single Code, confirming that the new code is expected to come into force on 27 March.

TPR said that it is looking to challenge governing bodies to use the introduction of its new consolidated code, which was based on the regulator’s 10 existing codes, as an opportunity to ensure their scheme is fit for the 21st century.

It aims to provide trustees with one set of clear, consistent expectations on scheme governance and administration, with the new format designed to make it easier for governing bodies to find TPR’s expectations and consider whether they are meeting them.

However, TPR clarified that while the new code looks different, with expectations set out in short and focused modules, many of the standards included are not.

In particular, the new code outlines in detail what TPR expects of a scheme that is required to maintain an effective system of governance (ESOG), bringing together many key aspects of running a scheme, not least in terms of risk management.

TPR said that it will also expect scheme governing bodies to be able to demonstrate that they have appropriate procedures and policies in place.

The own risk assessment (ORA) is a periodic review of the effectiveness of the features of the system of governance and will help the governing body focus on key areas in need of improvement in the governance and operation of their scheme.

In light of concerns raised during its consultation, TPR also confirmed that it will allow schemes to complete an ORA on their own timetable, and in part or in whole, provided it is carried out in its entirety at least every three years.

TPR first announced plans for the consolidated code in early 2020, before consulting on its draft General Code of Practice in 2021. However, the code has since faced numerous delays amid the political upheaval and the Covid-19 pandemic.

Commenting on the new guidance, TPR interim director of regulatory policy, analysis and advice, Louise Davey, said: “Our new general code 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.

“Some governing bodies have already grasped this opportunity and carried out analysis to ensure there are no gaps in their governance. However, we believe there are many who have not done so and risk falling short of our expectations.

“Those that do not meet the code’s expectations should take action to improve their scheme’s governance.

“Trustees of schemes unable to meet our expectations should consider whether defined contribution savers would be better off in a larger, better-run scheme, and whether defined benefit savers would see higher standards of governance in a consolidation arrangement.

“At the very least governing bodies should be aware of where they fall short of our expectations and have clear and realistic plans in place to address those shortcomings.”

This comes after previous research from TPR found that engagement with the regulator’s codes was not as high as hoped, with trustees of four in 10 (40 per cent) micro and small schemes either unaware of TPR’s codes of practice or never having used them.

And, despite extensive industry engagement during the consultation on the new code, less than one-quarter (23 per cent) of the trustees of these schemes were aware the new code was set to be introduced.

Trustees of small and micro schemes were again the least likely to report being aware, just one-fifth (19 per cent) and almost one-tenth (9 per cent) respectively.

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