The Pensions Regulator (TPR) has launched a consultation on its first steps towards creating a single code of practice for pension scheme governing bodies.

The regulator said this consultation would lead to the streamlining of 10 of its 15 codes into an online code that would provide the industry with one up-to-date and consistent source of information on scheme governance and management.

The first phase of the consultation requests industry views on how TPR has proposed consolidating these 10 codes into just one, which the regulator said had resulted in the number of pages being halved.

A draft of the code is available online and TPR said it would be carrying out a series of engagement activities to share further details about the new code and to provide industry with the opportunity to share its views, with trustees, advisers and pension professionals set to be able to sign up to a virtual workshop to discuss modules and content in more detail with experts.

The consolidation of the regulator's codes of practice has been planned since July 2019.

TPR executive director for regulatory policy, analysis and advice, David Fairs, said the new code would "determine how governing bodies should approach governance and administration and provide consistent expectations across different types of scheme set at a level we consider appropriate for any well-run scheme”.

He continued: "This user-friendly new code should make it easier for governing bodies, and those providing them with professional services, to distinguish between legal duties they must meet and what we expect should be done to comply with those duties.

"Providing feedback on the new code will help us to make it as clear as possible for the people who need it to run their pension schemes."

The 10-week consultation will run until 26 May and also incorporates changes introduced by the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018.

These include stipulations that trustees must have an effective system of governance proportionate to the size, nature, scale and complexity of their scheme, as well as the need for private sector schemes with 100 or more members to carry out an own risk assessment.

Commenting on the consultation, Aon partner, Susan Hoare, said “having a code of practice all in one place is very helpful from a user’s perspective” but added that “some of the benefit of the concise modules is lost in combining the codes of practice for both private sector and public service pension schemes”.

She continued: “Intermingled in any one module are the differing requirements for both, with the terminology switching between trustees, scheme managers or governing bodies. Overall, we see the code as more directive in style, with TPR spelling out clear expectations at the end of each module.

“While this is a tidying-up exercise, we would recommend that pension schemes check compliance with each of the expectations. There are some significant new requirements that have been brought in by the Single Modular Code, including the own risk assessment. We believe it is very much a positive that the requirements on risk management are now more robust.

“The best governed schemes may well find they already comply and just need to document it in a new way, but for others this may be a significant step up in what is required.”

Baker McKenzie pensions practice partner, Chantal Thompson, commented: “Whilst IORP II and UK governance regulations requirements pre-date Covid-19, the challenging financial and logistical issues that the pandemic has thrown up for pension schemes mean that a strong focus on governance is more important than ever.

“But actions speak louder than words, and there will be much interest in what concrete changes come out of the new code and its recommendations.

“It will also be interesting to see how the industry reacts to the regulator’s position on disclosing remuneration arrangements. If that includes service provider remuneration arrangements, then there may be significant push-back. Disclosing that type of sensitive information would likely be a big cat to let out of the bag and I would expect full disclosure to be resisted.”

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