Taking stock on the General Code

Following publication of the final version of TPR’s new general code of practice (the “Code”) in January 2024, the Code came into force on 28 March 2024.

Signifying a new era for pension scheme governance and compliance, trustees will now need to focus on making sure that their systems of governance are in order.

What is an effective system of governance?

Occupational pension schemes are required to have an effective system of governance, or ESOG. The ESOG should include policies and procedures to ensure compliance with a range of topics covered by the Code, including board structure and activities, knowledge and understanding, risk management, investment matters and communications and disclosures.

The ESOG must also be proportionate to the size, nature, scale and complexity of the scheme. This is good news for trustees; it means that the policies and procedures that are or are not in place (subject to certain policies which are legally required) and the content of those documents ought to be tailored to and evolve with the scheme.

It is helpful that TPR is not expecting a one-size-fits-all approach to compliance. What TPR does expect, however, is better awareness of TPR’s expectations regarding how schemes are governed, and improved governance and outcomes. TPR is taking governance seriously and expects schemes to do the same.

Starting with the gap analysis

We suggest that trustees start with completing their “gap analysis”. This is, broadly, a checklist of policies and procedures that relate to running the scheme and managing the risks associated with this. Trustees should be checking whether:

  • there are already policies, processes or other governance tools in place which address those risks
  • the content of those policies covers the points raised by the Code
  • any policies are out-of-date or no longer followed on a day-to-day basis, eg where the circumstances of the scheme have changed or where practice has moved on.

A completed gap analysis should provide valuable insight as to any gaps that need to be filled, and how completion of any gaps could be prioritised.

Next blog…

Developing a strategy for prioritising and filling in any gaps will be the subject of the next post in our General Code Corner series.

Please speak to your usual Sackers contact if you have any queries regarding the issues highlighted above.

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