LawDeb welcomes the long overdue overhaul of the Pensions Regulator’s codes of practice
- LawDeb believes the proposed 20% limit that can be invested in assets not traded on regulated markets is unreasonably restrictive
- Clarity is needed on what new documentation will be needed compared to what requirements are already in place
- Trustee boards should consider looking to independent pensions governance services who can help them comply proportionately with the new Code when it goes live
- Code will be useful for existing trustees, both in providing a refresher on existing requirements and in setting out the new requirements under the IORP II directive
Law Debenture (LawDeb) has today submitted a response to the Pensions Regulator’s (TPR’s) consultation on its new single Code of practice.
The overhaul of the existing codes of practice is long overdue and LawDeb applauds the amount of work that has been done by TPR in reviewing the existing codes, shortening them, and bringing them up to date with current legislation and industry practice. The new Code will not only be a strong foundation for educating new trustees on the requirements placed upon them, but it will also be very useful for existing trustees, both in providing a refresher and update on existing requirements and in setting out the new requirements under the IORP II directive.
Jane Beverley, Trustee Director at LawDeb, notes: “Inevitably in a work of this scale, there are a number of places in the Code where the guidance given could be improved, or where TPR goes beyond legislation to provide interpretations which fall outside normal industry practice. In particular, the Code introduces a limit of 20% that can be invested in assets not traded on regulated markets – this is unreasonably restrictive. Assets not traded on a regulated market cover many assets providing secure long-term income that are desirable for pension provision, including infrastructure and long lease property. It is crucial that these investment opportunities are not unduly limited.”
Natalie Winterfrost, Trustee Director at LawDeb, comments: “The Code gives welcome prominence to the importance of good governance around investment decisions. However, it could be clearer in explaining how most of the requirements are likely to be already complied with via the scheme’s statement of investment principles or implementation statement, rather than giving the impression that additional documentation needs to be produced. There is also an increasing focus on the timeliness of investment decisions. Trustee boards should ensure that they can operate effectively, for example by having streamlined processes for making decisions outside quarterly trustee meetings. Having a corporate sole trustee is an alternative approach that can ensure decisions are taken in a more agile way.”
George Norval, Senior Pensions Executive at Pegasus, adds: “Whilst much of the Code is a restatement of existing codes, there are many sections that will create extra work for trustee boards. The own risk assessment and the remuneration policy, for example, are entirely new and there are also a number of areas where trustees will need to carry out gap analyses to work out which of their existing policies need to be reviewed and which need to be written from scratch. We’re looking forward to working with trustee boards to help them comply with the new Code in an efficient and proportionate way.”