When The News Broke…
Last Wednesday I was on a Teams call with a client discussing some forthcoming cyber security training when a news alert flashed up. I had to interrupt – “Oh gosh, the general code is finally out!” We shared a brief silence, each mentally reviewing our to do lists and working out how this was going to fit in. Then we grimaced and returned to the task in hand. After the call it dawned on me that I was also due to give a (now even more timely) legal update slot at a conference the following week. Gulp.
When I checked my LinkedIn feed at the coffee machine (it was definitely a three-cup day) it had already filled up with posts announcing and commenting on the news. In some ways this was not surprising as The Pensions Regulator (TPR) had been indicating for some time that the code was ready but awaiting parliamentary time (which has been in short supply). The pensions industry was poised for action (although not necessarily so early in the new year).
Key Thoughts And Takeaways
Once I had a chance to read TPR’s press release for myself, I was reassured. Our excellent Professional Support Lawyers gave the whole pensions team a whistle-stop tour of the highlights at our monthly briefing the following day and our general code of practice working group was swiftly resurrected to discuss next steps. More to come from #TeamSPB in the coming weeks, but in the meantime here are our initial key thoughts and takeaways.
- The general code is a big achievement and TPR is to be praised for the simple and easy-to-read style. A lot is packed into 170 pages. Going forward, it will be a helpful resource for trustees, sponsors and advisers.
- Getting to grips fully with all the detail takes much longer than a week! Happily, there does not appear to be any fundamental change to the principles set out in the original draft single code – TPR has taken on board the consultation feedback and made positive changes around the edges (including some of the points that our pensions team made in its response). There are, however, some subtle changes in emphasis to digest.
- In its consultation response, TPR said, “We consider that the ESOG [Effective System of Governance] is predominately a rebadging of things that the governing bodies of well-run schemes should be doing already.” This is not an obligation for all schemes to re-invent the wheel – compliance does not need to be turned into a circus performance. It is an opportunity for trustees to perfect their processes and ensure their scheme meets good standards of governance. The general code will help, not hinder.
- The immediate trustee focus should be to assess current policies and frameworks against the requirements of the code and have a plan to fill any gaps, so that trustees are confident in the Scheme’s ESOG. This will then need to be assessed in the Own Risk Assessment (ORA) – the first of which needs to be completed in 2026 for most schemes (with the exact date depending on the scheme year end). This is a sensible period within which to achieve compliance, so there is no need for panic but there is a need for steady progress. Trustees need a plan, but it can be measured.
- Where trustees have already made some progress towards compliance, based on the draft code, the vast majority of what has been done will remain valid. They will need to check their draft policies against the final code and consider whether any supplements are now necessary. This can be tackled on a “risk basis” – acknowledging that some policies are used more frequently than others.
- Where trustees have not already started thinking about compliance, there is no need to panic – once trustees start delving into the code’s requirements they may be in a better place than they think. We have lots of resources available to help and can advise on what is an appropriate and proportionate (but still compliant) approach. This will depend upon the scheme’s circumstances – for example, a scheme that is fully bought-in and preparing to buy-out and wind-up in the relative near term will require a different approach to a scheme that remains open to benefit accrual and new members.
- The general code will be a moving feast – it is likely there will be regular (perhaps annual) updates and, in time, it is intended that the codes that remain separate for now (e.g. the Funding Code) will be integrated. In the meantime, monitoring changes, reviewing policies and making appropriate tweaks to a scheme’s ESOG should just become part of a trustee’s business as usual activities. Good governance is there to help a scheme run well and efficiently – so do not fear it.
Time will tell, but the industry may look back on the launch of the general code as another step-change in ensuring better outcomes for members, by raising governance standards for all. One thing is clear: it will be a marathon not a sprint and being first out of the starting blocks is no guarantee of success. Take your time to work out what is right for your scheme and use the general code to help and guide you – that is what it is there for.