TPR Publishes New Code of Practice for DC Schemes
Following a consultation earlier this year1, today, 11 July 2013, TPR has published its new code of practice for trust-based DC schemes (the “DC Code”). The DC Code will apply to trustees of all occupational DC trust-based pension schemes with two or more members.
In this Alert:
- The DC Code aims to set out practical guidance to help trustees to meet the legislative requirements for running an occupational trust-based DC scheme.
- We are waiting for TPR to publish its guidance and regulatory approach. The drafts suggested that it would be a “comply or explain” regime.
- The DC Code is expected to come into force in November, with TPR’s updated regulatory approach document and final DC regulatory guidance intended for publication at the same time.
- According to TPR, compliance with the DC Code (and forthcoming guidance) will only result in additional costs for schemes which are not already complying with the law and operating on the basis of good practice standards.
TPR is focusing on DC trust-based schemes as, in its words, “the world of DC pension schemes is changing, particularly as a result of the Government’s automatic enrolment policy. This is likely to result in most employers using a DC scheme to meet their duties”.
In order to achieve good outcomes for members of DC schemes, TPR considers it “vital that those running the scheme ensure it is effectively governed, durable and offers value for money”. With this in mind, it has designed a new framework to regulate the governance and administration of occupational DC trust-based schemes.
The DC quality features form the core of TPR’s regulatory approach. They represent the standards and behaviours TPR expects DC trustees to attain.
In its opinion, schemes which demonstrate the presence of these features are more likely to meet the standards of governance and administration that it expects.
Each section of the DC Code contains DC quality features that are connected to pensions legislation. The sections set out the legal requirements that trustees need to be aware of and provide practical guidance on how they can be met. Trustees will not need to follow all the practical guidance in every circumstance. TPR now acknowledges that it may be justifiable to use alternative actions or approaches.
TPR’s intention is not to replace its other codes and guidance. Instead, the DC Code aims to complement and build on the information contained in them by addressing the requirements specifically from a DC perspective.
While trustees need to be familiar with the DC Code as a whole, TPR suggests that they work through each section systematically: “For example, trustees could prioritise sections of the [Code] and work through the detail on a modular basis.”
Autumn 2013 will be busy for trustees of schemes offering DC benefits – as well as pure money purchase schemes the DC Code will apply to AVCs under occupational DB schemes, the DC element of hybrid schemes and money purchase benefits with a DB underpin.
The DC Code is expected to come into force in November 2013, with TPR’s updated regulatory approach document and final DC regulatory guidance intended for publication at the same time.
We can also expect a consultation on proposed assessment criteria for master trusts and a joint publication from the FCA and TPR on how the regulation of work based personal pensions operates. It is possible we will also see further action from the DWP following on from this month’s Call for Evidence on quality standards in workplace DC schemes.
1 See our Alert: “TPR ‘sets the standard’ for DC schemes” dated 16 January 2013