The Regulator’s updated DC Code of Practice came into force on 28 July 2016 and replaces the previous version published in 2013. The new Code responds to some of the criticism of the previous version and reflects changes following the introduction of DC flexibilities in April last year. The Regulator has stated that “In revising the code, we have responded to calls from the pensions industry to shorten and simplify it, with an increased focus on legislative requirements.”[1] The Code is accompanied by ‘how to’ guides which expand on each of the headings that the Code is divided into. The six key areas that the Code focuses on are:

  • The trustee board – Aims to ensure that those appointed as trustees are fit and proper to carry out their duties and emphasises the need to have a strong chair of trustees.
  • Scheme management skills – Highlights the importance of trustees possessing the “right level of knowledge and understanding in relation to their scheme”[2] including to enable them to understand the advice they receive from their advisers and to monitor their performance.
  • Administration – Emphasises the importance of good administration and the need for promptness and accuracy. Trustee boards are expected to consider administration as a substantive item at every regular meeting and for it to be included on the scheme’s risk register.
  • Investment governance – Explains the importance of having the right investment governance. Trustee boards are expected to “clearly document their investment governance, including the objectives, roles, responsibilities and reporting relationships of all parties involved in making investment decisions”[3].
  • Value for members – Examines areas that trustee boards are expected to consider as a minimum when looking at value for members and to make improvements where necessary if there are areas that do not provide good value for members.
  • Communicating and reporting – Explains the need to communicate to members at the right time using plain English and to regularly review member communications. This also incorporates the Chair’s annual statement.

The purpose of the “how to” guides is to provide practical information on how trustee boards can meet the standards set out in the Code of Practice. The guides also give examples of approaches the trustees could take and factors to consider.

In addition, the Regulator has produced a comprehensive self-assessment template which assists trustees in assessing their scheme against the standards of conduct and practice in the DC Code on an on-going basis, helping to identify any areas of weakness. The sections in the self-assessment template correspond with the six headings in the DC Code.

The Code applies to DC schemes and schemes that provide DC benefits such as AVCs and money purchase transfer credits in defined benefit schemes although the Regulator has emphasised that a proportionate approach should be taken in respect of AVCs, considering the value of AVCs relative to members’ total benefits in the scheme.

Whilst the practical guidance provided by the “how to” guides and the self-assessment template is welcomed, there is a significant amount of material for trustees to digest and work through. With the Regulator continuing to focus on the importance of DC governance, trustees should ensure they have assessed their scheme against the standards set out in the DC Code and accompanying documents, documented their findings and made improvements where necessary. Trustees should also re-evaluate the position on a regular basis. For more information on the DC Code and meeting its requirements please contact the Gateley Pensions Team.

This post was edited by Kate Lloyd. For more information, email blogs@gateleyplc.com

[1] TPR Press Release 28 July 2016 Ref: PN16-40.

[2] Paragraph 35 of the Code of Practice no: 13 Governance and administration of occupational trust-based schemes providing money purchase benefits.

[3] Paragraph 90 of the Code of Practice no: 13 Governance and administration of occupational trust-based schemes providing money purchase benefits.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.