The Pensions Regulator (the Regulator) has issued consultation on a new DC Code of Practice (the Code). The new Code is much shorter than the 2013 Code which it will replace. It concentrates on the Regulator's expectations of trustees in complying with their legal obligations and will be supported by more detailed guidance on specific areas of good practice.
This is a sensible approach. There is a lengthy statutory process for the amendment of a code of practice whereas it is much easier for the Regulator to produce new guidance to keep up with changing practice and conditions.
The draft Code assumes that trustees have a good knowledge of the legislation in this area and so does not set it out in detail. The Regulator says that the Code is not prescriptive and that Trustees should take an approach which is a reasonable and proportionate way for their particular scheme to comply with the legislative requirements.
The Code will apply to trustees of any occupational pension scheme holding money purchase benefits (other than certain very small schemes). This will include AVC sections of DB schemes and money purchase benefits with a DB underpin but only to the extent that the particular legislation applies to those sections or schemes. This means that the bulk of the Code will apply to most schemes holding money purchase benefits, but the provisions relating to charge controls will not apply to AVC sections nor to schemes not used for automatic enrolment. Please see our briefing setting out the detail of the application of charge controls.
Draft guidance will be issued for consultation in early 2016. Key areas which are likely to be covered by guidance include:
- good practice for trustee board composition, key competencies for trustees and chair and dealing with conflicts of interest;
- good practice processes and reasonable timelines for core financial transactions;
- the content of service agreements with administrators;
- trustee responsibilities in respect of transfers;
- pension scams and due diligence; and
- investment issues including identifying default arrangements (including some long-awaited guidance on "mapping"), setting a default strategy, using investment powers in the best interests of the beneficiaries and processes for monitoring membership profile.
The consultation closes on 29 January 2016 with the final version due to come into force in July 2016.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.