New pensions code is a missed opportunity to raise standards among poorly governed schemes

The Pensions Regulator has announced its new General Code of Practice today. The new code, which aims to raise standards among trustees by improving 10 of the 15 current codes, has been years in the making. However, RSM UK is raising concerns that it lacks the regulatory enforcement and documentation needed to achieve its objective. 

Ian Bell, head of pensions for RSM UK said: ‘The new code has been a long time coming, but its impact will be somewhat diluted, as compliance with it is entirely voluntary. Without any mandatory reporting or proactive monitoring of the Trustees’ Own Risk Assessment (ORA), there will be no motivation for poorly managed schemes to improve their system of governance. If the regulator is not asking for any documentation or monitoring the uptake, and there is no whistleblowing procedure, it’s not clear how this will be policed, or what repercussions there will be for Trustees that choose to ignore it.’

He continued: ‘For schemes that already have good governance in place, the new code will help them tighten up their risk management processes further, and those who are keen to improve will likely find the updated code a useful tool. However, introducing and demonstrating the Effective System of Governance (“ESOG”) required by the new code will add a further layer of administration to Trustees’ workloads, and without improved software systems to support them they could become overwhelmed by additional administration that takes their focus away from strategy, and adds extra costs and complexity. We’ve developed a new software solution that will help trustees manage the administrative burden of the new code, enabling the ESOG elements to be considered in unison with the risk management function. Trustees will need to consider options that will work for them to ensure they are ready to report on their first ORA within the required timeframe.’