Leading audit, tax and consulting firm RSM welcomes the new pensions code of practice following the launch of a consultation from The Pension Regulator, which will see the biggest shake up in pension governance requirements since the Pensions Act in 2004. However, whilst the new code will add some much-needed clarity, the firm warns of the ever-increasing administration burden for trustees, and signals an increase in scheme consolidation.
The consultation for the new code of practice, which closes on 26 May, will replace the existing codes of practice and align with the EU IORPII Directive which came into UK law in January 2019 – requiring an ‘effective system of governance’ thereby offering better protection for members and increased assurance for trustees and employers.
Ian Bell, audit partner and head of pensions at RSM, said: ‘We welcome the consultation on the new pensions code of practice, as it addresses concerns we’ve raised around over reliance by trustees on advisers; the depth and consistency of trustee oversight; and having the right internal controls in place.
‘Members will be better protected, and the new framework will bring more trustee confidence; however, this will add to the growing cost of running schemes with the sponsoring employers picking up the tab.
‘Trustees will need to wake up to the potential gap in expectations from what is covered in the external audit and what additional internal governance procedures and processes are needed to remain compliant with the new rules. This greater level of scrutiny of scheme arrangements will be required for any pension scheme with more than 100 members, which will impact a huge percentage of the market.
‘In some cases, smaller schemes may struggle to adhere to the new set of criteria due to the level of complexity and resource needed to comply, which could lead to more consolidation in the pensions market.’