Single Code – Where are we now?
Almost two years to the day since the Regulator launched its March 2021 consultation on a new draft single code of practice, the Regulator has revealed that its new consolidated single code of practice will be published this Spring and will be called the General Code (the “Code”). There have been a few contributing factors in the delay, the DB Funding Code of Practice, which will form part of the Code is one obvious reason although since the Code will be a web-based document with updates being the norm, the delay in laying before Parliament amidst political upheaval towards the end of 2022 is perhaps a more significant factor. Whatever the reason, the wait, it appears, is now almost over!
Under the Code, all schemes need to have an Effective System of Governance (“ESOG”), and schemes with 100 members or more must prepare and document their first Own Risk Assessment (“ORA”) “within one year of this code coming into force”. The Code, if it isn’t already, now looks set to dominate trustee agendas and workloads for the remainder of 2023 for trustees to be able to meet the timeframe for compliance.
What steps should Trustees take now?
We set out details about the Code in our August 2022 Newsletter “Are you Code-ready?” and also addressed how trustees could and should be preparing to be “Code-ready”.
The ORA is an entirely new requirement and is therefore unlikely to be a small exercise for trustees. We would encourage action sooner rather than later to minimise the risk of falling foul of a capacity crunch at the final hour.
Although there is no requirement on trustees to submit their ORA to the Regulator, it must be available if the Regulator requests to see it “as part of supervisory activity”. We suspect that because ORAs are a flagship part of the Code, trustees should anticipate requests to submit to the Regulator.
As with all codes of practice, the Code is not a statement of the law. The regulations that form the basis of the Code amend s249A of the Pensions Act 2004 to impose a statutory obligation on schemes to establish and operate an Effective System of Governance (“ESOG”) including internal controls. They also set out the matters to be included in the Code in relation to the duty imposed by s249A which includes carrying out and documenting an ORA.
The draft Code states that the first ORA should be prepared “within one year” of the code coming into force with each subsequent ORA carried out and documented within 12 months of the previous one.
A sprint to the finish line serves no-one. We recommend the ESOG and ORA are standing agenda items, if they aren’t already. Schemes that stand to gain the most from the exercise will have taken full advantage of the time available to identify, review and assess existing policies before carrying out a gap analysis, filling those gaps and producing the ORA.