“Code of practice no. 13: Governance and administration of occupational defined contribution trust-based schemes” may not be the most imaginative of titles, but to coin a popular phrase, “It does what it says on the tin”. It also sets out a vast number of ‘expectations’ to be placed upon trustees – we have counted 126 uses of the term “we expect” but we would accept any reasonable challenge on this point. Trustees need to be prepared for some investment time to assess how their pension plan stacks up against the UK Pensions Regulator’s (existing and new) expectations when the new code is published in its final form. It is set to come into force in July 2016.

The draft code is shorter than the previous version, well-structured and, in most cases, clearer. It consolidates existing material and regulatory messages contained in more recent statements (such as the charge capping and governance legislation introduced in April 2015). The code is divided into 6 sections covering trustee boards, scheme management, administration, investment, value for members and communicating and reporting. Very soon we expect to see the first drafts of the series of ‘how to’ guidance which will accompany each of the sections, expanding on the information contained in the code and offering practical guidance to trustees.

The ‘how to’ guidance should address some of the questions that will inevitably arise. Trustees often struggle with ‘value for money’ assessments because this is a subjective issue and potentially very time consuming. How much time should be devoted to assessing what services are valued by members? The Guide issued by the Pensions and Lifetime Savings Association on this issue is useful but more help from the Pensions Regulator would be welcomed.

Another difficult issue is establishing the extent to which the DC assets are ‘protected’ and would be covered by the Financial Services Compensation Scheme, via indemnity insurance or through contractual agreement. Unlike ‘value for money’ this is not a subjective area; it can in fact be incredibly technical depending on the pension plan’s investment structure and the contractual arrangements in place. Therefore, we expect that the Pensions Regulator will do no more than provide additional information in this area, so that trustees are signposted in the right direction and understand the need to seek advice.

There are a number of ‘governance’ expectations in the draft code. The process for appointing a chair is required to be “robust and documented” and the process should consider the “leadership qualities of candidates and their ability to drive good practice within the scheme”, but it is not clear how trustees would handle this in practice where a chair has been in situ for some time.

Additionally, the recruitment process for trustees should take into consideration the fitness and propriety of candidates, and this should be regularly reviewed across all board members. Although this seems reasonable, compliance may not be so easy in practice. For employer-nominated trustees, who exactly is responsible for carrying out these checks – the trustees or the employer? And just how far should trustee boards go to determine the fitness and propriety of their trustee colleagues whom they may have been serving alongside for a number of years? Perhaps this is the right time for Bill to announce that he had always thought that Charlie was “a bit dodgy”! Now that would make for an interesting trustee meeting…