Out-Law News 2 min. read
15 Sep 2015, 2:02 pm
Mark Baker of Pinsent Masons, the law firm behind Out-Law.com, said that trustees and employers urgently needed "practical and user-friendly" guidance on how to perform their new duties, taking into account new requirements in relation to scheme charging and governance. A new draft code of practice for DC schemes is expected to be published before the end of this month, which will incorporate the new rules into the 2013 code of practice, he said.
The regulator is legally required to consult on any changes to its statutory codes of practice, and then lay the final documents before the UK parliament before they can come into force. Baker said that employers and trustees would be keen to see a "shorter, more focused" code of practice, supported by subsequent guidance.
"The DC guidance needs to follow the model that the regulator has used so successfully in relation to defined benefit (DB) schemes – carefully observing good practice and then drawing up guidance that's well-balanced and to the point," he said.
"However, it should hold back from trying to define best practice. The DC market is changing so quickly that the regulator isn't in a position to tell trustees exactly how they should be operating. The amount of management information available to trustees and employers is about to increase hugely, which will change the way trustees operate. It will shift their role away from just administering the trust, and towards making it work for members," he said.
Baker added that these trends had "a long way to develop", and that the regulator should "allow the market some room to evolve".
New governance standards for workplace pension schemes came into force on 6 April 2015, along with new rules restricting the value of member-borne charges to 0.75% of the value of the funds under management. The changes require greater monitoring and review of the scheme's default arrangements and investment fund performance, and require trustees to appoint a 'chair' who will have to sign off a mandatory annual statement setting out how the new standards have been met.
The new governance requirements and chair's statement build on, rather than replace, the Pensions Regulator's Code of Practice 13, which sets out how trustees should go about discharging their legal duties under pensions legislation and trust law. However, the code has not yet been updated to take account of the new requirements, which are set out in the 2015 Occupational Pension Schemes (Charges and Governance) Regulations.
Speaking at an industry conference organised by Professional Pensions earlier this month, the regulator's executive director of DC and public service pensions said that a final draft of the updated code was due at the end of September, with a formal consultation to follow in November 2015. He said that he expected the code to be laid before parliament in May 2016.
The Pensions Regulator has updated the existing code of practice with a non-exhaustive list of points that trustees should be particularly aware of to ensure compliance with the new requirements, ahead of its formal revision of the code. Trustees should ensure that they meet the new legal requirements in relation to any points where the code differs from what is set out in the regulations, it said.