The Pensions Regulator’s revised Defined Contribution Code of Practice comes into force today.
The Code is shorter than the previous Code and the 31 DC quality features have been replaced with six broad headings. These headings cover:
- The trustee board (chairs of trustees, member nominated trustees, and master trusts);
- Scheme management skills (managing risk, knowledge and understanding, and conflicts of interest);
- Administration (core financial transactions and record-keeping);
- Investment governance (including investment strategies, and security and liquidity of assets);
- Value for members (including restrictions on costs and charges); and
- Communicating with members and general reporting obligations.
The Regulator has issued additional guidance under each heading, intended to provide trustees with guidance on how they might meet the standards set out in the Code in practice. The Regulator has also provided an assessment tool for trustees to help them assess their scheme against the standards set out in the Code.
The Code incorporates the new DC governance requirements, including the requirement to produce a chair’s statement, introduced in 2015.
As previously, the Code applies not just to DC schemes, but to DC benefits such as AVCs and money purchase transfer credits in defined benefit schemes.
All trustees of schemes with any DC benefits (including AVCs and transfer credits) should consider the new Code and address any areas where their current governance arrangements fall short of what the Regulator expects.
The Code of Practice, “how to” guidance and assessment tool can all be found here.