After a lovely summer, the seasons are starting to change with the first signs of autumn beginning to appear. Personally, autumn is my favourite time of year, whether it be the amazing colours, crunching through leaves, or the knowledge that Strictly will soon be returning to our screens!
As with the change of season, our approach to pension scheme governance needs to evolve and adapt. Since the publication of the draft new code of practice in March 2021 by The Pensions Regulator, and the subsequent interim response to the consultation in August last year, we are now waiting for the final code to be published. Originally, we were expecting the code to be laid before Parliament in the spring with the code becoming effective in the summer. Clearly these timelines have been pushed out, partly due to the sheer number of responses to the consultation. When the final code is published, there will be a period of 40 days in which it will be laid before Parliament and once effective, a further 12 months to introduce the requirements.
Once the details of the final code are known, trustees and advisers will need to reflect on the specifics of what is required. However, the essence of the code will not change, nor will the continued – and increasingly regulatory – journey of improving pension scheme governance and, ultimately, member outcomes.
So what can you be doing now to prepare? Here are my seven suggestions for the next couple of months:
- Use your upcoming trustee meeting to consider which actions you need to take and how these will be resourced, in terms of time, effort and personnel.
- Consider setting up a subcommittee or working group to focus on this area. If you do this, remember to put terms of reference in place so that everyone involved is clear on their role and any delegated powers.
- Carry out a gap analysis to understand what policies, processes and procedures you currently have in place and what you will need to introduce, update and be prepared to adapt for changing circumstances. A proportional and pragmatic approach is vital here.
- Consider how to best prioritise your actions based on the individual circumstances and journey plan for your pension scheme. It is not realistic, or indeed necessary, to plan for all the required changes to be made from day one.
- Clearly establish which actions will form part of the own risk assessment, and those which will sit outside it.
- Think about your internal controls: do these need reviewing and updating? Are they documented in one place? Internal controls are crucial to being able to demonstrate that you have implemented an effective system of governance.
- Undertake training when the final code is published, so that all relevant parties are familiar with the details.
Agreeing a clear action plan with timescales and designated responsibilities will ensure that you are as fully prepared as you can be to demonstrate that you have an effective system of governance in place.