Word on the grapevine is that TPR will shortly publish the final version of its Single Code, now re-branded as the General Code.
The new Code will consolidate 10 existing codes of practice, including Code 14 (Governance & Administration of public service pension schemes). It will also cover the new and modified requirements of s249A Pensions Act 2004 (“PA04”) (originally introduced to comply with IORP II) and the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 (to establish and operate an effective system of governance including internal controls).
With the new Code on the horizon, it seems an appropriate moment to remind ourselves of TPR’s role in relation to LGPS Funds, and look at what pension boards can do to ensure they’re in the best position they can be to meet the new Code’s requirements.
TPR’s role in respect of public service pension schemes
As a reminder, although TPR’s remit in relation to public service pension schemes is narrower than it is in the private sector, since the reforms in the Public Service Pensions Act 2013 (“PSPA”) TPR does have regulatory oversight for public service pension schemes, as well as being responsible for setting governance and administration standards. Section 90A(1) of the PA04 (inserted by the PSPA) gives TPR power to issue codes of practice in relation to public service pension schemes.
As a funded public service pension scheme, TPR’s role in relation to the LGPS in particular can sometimes be unclear, especially in relation to investments where TPR has no clear jurisdiction for public service schemes. However, notwithstanding this lack of clarity, our view is that it will still be important that Funds work to comply with the Code as far as practicable when it is published, including in relation to what it says about investments.
TPR’s priorities
Ahead of publication of the General Code, we can look to the strategic priorities identified in TPR’s Corporate Plan for 2021 to 2024 for an indication of where TPR’s attention is likely to be focussed. The five priorities are:
1. Security – for pension savers’ money;
2. Value for money – for pension savers;
3. Scrutiny of decision-making – decisions made on behalf of savers are in their best interests;
4. Embracing innovation – market innovates to meet pension savers’ needs;
5. Bold / effective regulation.
Top tips for LGPS Funds looking to get General Code ready
These are our top tips for making sure your LGPS Fund is General Code ready. In the absence of the final Code this can only be a “best guess”, but if your Fund acts on all of these recommendations we’d expect it to be in good shape to hit the ground running when the Code comes into force.
1. Understand your Fund's current level of performance. For example, we’d recommend that Funds consider their AVC arrangements, and be confident that their AVC provision is competitive. Whilst we are aware there is a limited provider market, Funds should continue to test value;
2. Assess current performance levels formally in respect of how members can better interact with savings and benefits. Set your own KPIs and consider appointing external auditors.
Of course, we are aware that Pensions Dashboards are coming, with the connection date for public service schemes currently set for 30 April 2024 (recognising that the Government is due to confirm the timetable in due course). However, Pensions Dashboard requirements may produce different outputs to member portals, therefore Funds should still consider whether their portals are innovative and support members in making good decisions;
3. Focus on pension scams by ensuring compliance, and where considering the tests in the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, act with prudence having regard to the TPR's strategic focus. Funds can also demonstrate their commitment to this cause by signing up to TPR’s pledge to combat pension scams.
4. Ensure each party understands the scope of their duties. The previous draft of the then Single Code restates the obligations on Funds to establish and operate adequate internal controls to secure administration and management in accordance with the scheme rules;
5. Ensure Pensions Boards are diverse, balanced and able to understand/ challenge advice promoting diversity and inclusion, which TPR expects will produce good decisions for members.
Pension Board members must also have ongoing training to ensure they have the right knowledge and understanding. The previous draft of the Single Code (as it was then known) reminds public service schemes there are specific record keeping obligations in the Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations 2014 which reinforce clear decision making with accountability;
6. Have appropriate procedures for identifying, assessing and reporting breaches;
7. Demand high performance from third party providers, including requiring innovation. Driving innovation through competitive procurements may support innovation even with limited budgets;
8. Understand GDPR obligations, and ensure data security compliance from third parties;
9. Have a clear plan with specific actions and timeframe to improve areas of underperformance;
10. Understand your Fund’s likely Task Force on Climate-Related Financial Disclosure (“TCFD”) obligations, and how it will ensure decision making on investment governance is scrutinised;
11. Work with other Funds, advisors, the LGA and the Scheme Advisory Board to share and understand best practice;
12. Take advantage of the TPR’s tools and guidance, for example the compliance checklist and public sector toolkit, to understand the TPR's new pro-active approach to regulation;
13. Ensure Scheme employers understand their obligations to provide accurate information to the Fund; and
14. Ensure your Fund has clear and appropriate policies. For example, conflict policies for Pension Boards.
Next steps
We’re keeping a close eye on developments – look out for more from us in due course when the General Code is published.
In the meantime, if you have any questions about anything in this article, or if you need any help implementing any of our top tips, please do get in touch.