Public sector schemes urged to act ‘swiftly’ on TPR’s new Code of Practice

Public sector pension schemes have been encouraged to act “swiftly” in preparation for new measures outlined in The Pensions Regulator’s (TPR) consolidated Code of Practice.

Aon stated that although 24 out of the 103 responses to the regulator’s consultation were from public service schemes, “much of the attention” has been on the code’s implications for the private sector.

Public service schemes had raised concerns about certain aspects of the updated code, including the proposed introduction of the term ‘governing body’ due to the specific organisation and structural differences that schemes and their administering authorities face.

“While the date from which the code is effective has been put back to the summer of next year, that’s no reason for public service schemes to delay reviewing how they need to comply and then putting in the work to make it happen,” said Aon partner, Alison Murray. 

She urged public sector schemes “as a minimum” to ensure they comply with the current code, but “strongly” recommended that they start looking at the new areas in the code, both as best practice and to ensure they are ready for any new requirements that emerge next summer.

She continued: “Demonstrating compliance is also important, so they need to make sure they have a good audit trail or methodology for reporting to their local pension board or committee.
“We were aware that some areas of the code, such as the definition of the term ‘governing body,’ would need further work to clarify their meaning, particularly for the Local Government Pension Scheme (LGPS).

“Aon’s response to the consultation focused on the need for clearer direction on who that body could be and whether in each module it applies to the scheme manager, the pension board. or, in some cases, the pension committee. We would therefore welcome clarity from the TPR on this key point.”

Murray noted that there were key areas of the code that should be on the agency of every public sector scheme, including the emphasis on the important of cyber risk management and the need for effective continuity planning as cyber threats emerge as a long-tail risk.

“We believe this is something that most schemes will be keen to review as we emerge from the Covid-19 pandemic,” she stated.

“There will be new ways of working and any business continuity plan will need to reflect this changing environment.”

Aon senior consultant, Mary Lambe, added: “Governance has rightly been moving up the agenda for public service pension schemes in recent years. We are increasingly seeing the appointment of governance officers in the LGPS - which reflects just how important this area is becoming. This high profile for governance looks set to continue, with the Scheme Advisory Board’s Good Government recommendations hopefully being progressed in the coming months by the Ministry of Housing, Communities and Local Government. 

“Alongside other emerging key governance considerations such as inclusion and diversity, this will have implications for officer, board and committee appointments as well as communications and other areas. Administering authorities should ensure governance areas are covered within their business plans and that they have the necessary budget and resources to deliver their objectives across all areas of the fund.”

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