Single code series #7 – reporting to The Pensions Regulator

When the single code of practice is introduced by The Pensions Regulator (TPR) it will replace 10 of the 15 current codes. With the new code arriving any day now, pension trustees need to understand the new practices for reporting to TPR, ramp up preparations and think about processes they could start implementing.

There are currently four main requirements for trustees to report to TPR: when a scheme is first registered; annual Scheme Returns (completed by trustees/ pension scheme managers); notifiable events; and whistleblowing – reporting breaches of the law.

It’s clear the much mentioned effective system of governance (ESoG) will need to ensure compliance in several reporting areas where changes are likely. Here are some practical aspects for pension trustees to consider.

Reporting breaches of the law

This is one of the codes of practice being replaced. There will be breaches of the law affecting pension schemes which will need to be considered for reporting to TPR – and potentially some new areas to be aware of too.

The decision whether to report requires two key judgements:

1. Is there reasonable cause to believe there has been a breach of the law?

2. If so, is the breach likely to be of material significance to TPR?

Not every breach needs to be reported, but pension trustees should monitor, record and act on any breaches. Failure to comply with the obligations without ‘reasonable excuse’ is a civil offence.

A key tool to help compliance is to set up a ‘breaches log’. This should cover not only breaches that may need to be reported to TPR, but also any General Data Protection Regulation (GDPR) breaches or cyber incidents which may need to be reported to the Information Commissioner’s Office (ICO).

Although scheme administrators and actuaries should have their own breaches logs, pension trustees should also maintain their own separately. Having a single log for all breaches makes it easier for trustees to monitor. It should be short and easy to review. If not, the scheme is likely to have poor controls and governance.

Notifiable events

The principal purpose of the notifiable events framework is to give TPR early warning of possible demands on the Pension Protection Fund (PPF) and to reduce the risk of compensation being payable.

Claims for compensation on the PPF will arise when, broadly speaking, an employer becomes insolvent and its DB pension scheme is underfunded. Notifiable events provide an early warning of possible insolvency or underfunding, giving TPR the opportunity to assist or intervene before a claim is made. A consequence of intervention will, in many cases, be to improve the protection of scheme members’ benefits.

Pension trustees and employers (as scheme sponsors) are required to notify TPR of prescribed events. The draft regulations show the intention to extend the type of events covered, whilst removing an existing one. This is a key area of governance that needs to be properly monitored and reported to TPR. For good practice, many of our pension trustee boards already table this at every meeting . If you’re not doing it already, start doing so as a matter of course.

It’s all in the detail

Although not strictly an area for TPR reporting, another area that comes to mind here is the requirement to post a DC Chair’s statement, statement of investment principles (SIP) and implementation statement on a publicly available website. In our experience, the proportion of members looking at them vary greatly from scheme to scheme and often depends on how effective other member communications are. However, they’ve proved quite useful for the industry as a whole.

This is worth highlighting as they can be another trap that it’s easy to fall foul of if pension trustees don’t have good controls in place. TPR has suggested in the draft code trustee meeting minutes also be posted publicly. The industry almost universally thought this was a step too far so we expect it will be dropped from the final code.

Whatever is or isn’t in the final single code, we’ll continue to create effective tools and guidance and be on hand with help and advice for our clients and pension trustees.

Simon Riviere


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