86% of trustees need to make significant changes to comply with new Code of Practice

When The Pension Regulator’s (TPR) new Code of Practice is finalised, most schemes will only have one year to meet what many believe to be their biggest governance challenge for 15 years. For example, any scheme with at least 100 members will be legally required to produce an own-risk assessment (ORA) - something TPR acknowledges will be a “substantial” process.  Do trustees know what is about to hit them?

During our latest webinar, An introduction to the new Code of Practice, we identified that many trustees were not fully aware of the new requirements and would need to make significant changes to become compliant.

Ahead of the presentation 63% of those surveyed thought the changes required to comply with the new Code would be significant for their scheme, but 21% thought the changes wouldn’t be significant and 16% didn’t know what the changes were.  However, following the presentation, which looked at how the new Code will impact trustees and schemes, 86% believed their scheme would need to make significant changes to be compliant – a swing of 23%. This leaves the industry questioning if there has been enough clear guidance and whether trustees truly understand what is about to hit them.

Further findings

• 43% of respondents anticipate advisers will lead this project, compared to 33% who believe it will be the trustee board.
• Despite TPR’s increased focus on ESG factors in investment strategies, 50% of those surveyed have not reviewed their scheme’s exposure to ESG risks. Roughly 6 in 7 of those plan to look into this in the next 12 months but around 1 in 7 have no plans to consider it at present.

Sara Cook, Principal and Senior Pension Management Consultant at Barnett Waddingham, said; “Governance can be a word that switches people off but this is all really about risk management and ultimately better member outcomes. What remains to be seen is how proportionate schemes are allowed to be. The volume of what the Regulator seems to be asking schemes to do could frustrate their ability to focus resource on the highest risk and strategic issues that really make the difference.

“Trustees should be setting aside some agenda time now to start considering how the Code impacts their existing processes and risk management framework. For some that might be additional planning and resource with the right skills to ensure they comply with the final Code.”