The UK’s pensions regulator is taking more time to finalise its proposed new, single code of practice in light of the nature and amount of feedback it received, according to an interim response to its consultation.
TPR said it received more than 10,000 individual answers during its 10-week consultation on the code, which was necessitated by the introduction of regulations transcribing elements of the IORP II Directive into UK law.
In its interim consultation response, published today, the regulator said the responses “provided many good challenges and ideas, with a wide range of views from different areas of the pensions industry”.
“We also received several well-argued direct challenges to aspects of our work,” it said. “Because of the scope of the consultation, and impact of the code, it is essential that we allow the necessary time to fully consider our responses.”
TPR also indicated that a longer period of review and analysis might allow it to incorporate in the first iteration of the code content arising from major pension schemes legislation adopted this year.
It said it did not currently have a firm final publication date for the new code, but did not expect to lay the new code in parliament before spring 2022. The code would therefore probably not become effective before summer 2022, it said.
Sara Cook, principal and senior pension management consultant at Barnett Waddingham, said that although the “finer details” will not yet be finalised, trustees and scheme managers “should not put off having some agenda time to discuss and plan resource for what the new code will bring”.
“They can use this period of breathing space to undertake a review of their governance frameworks, which will place them in a better position for any changes they need to make from next summer.”
ORA, investment cap concerns
David Fairs, TPR’s executive director of regulatory policy, analysis and advice, said he was confident the feedback received during the code consultation “will help ensure the final version provides a clear, up-to-date and consistent source of information on scheme governance”.
He said he wanted to thank governing bodies and industry stakeholders for taking the time to participate in the consultation process, and to “reassure them that we have listened to concerns over limits on unregulated investments and the timeframe for the new own-risk assessment.”
On the former issue, the regulator said it had received “strongly argued comments”, with some respondents having interpreted the limit – proposed at 20% – as a restriction on illiquid investments”.
TPR said its intention had been, and remained, to protect members of poorly run and typically small schemes, and that it “will not be proceeding with this expectation in the way it is drafted”.
The Financial Times revealed this planned change earlier this month in the wake of an open letter from the prime minister and chancellor that challenged UK pension funds to invest more in domestic long-term assets.
According to TPR, the aspect of the code that received the most attention was the new requirement for an own risk assessment (ORA).
The regulator said comments on the ORA showed its purpose as a review of a scheme’s existing controls had been understood, but that concerns were raised about the amount of work it would create, the timeframe, the look of the finished product and the burden it would place on smaller schemes.
The regulator said it was continuing to work through the responses in this area to identify possible changes or guidance requirements and re-examine the timeframe for the ORA’s introduction and the frequency with which schemes should renew it.
TPR’s interim response also noted concerns about the code’s applicability, and that it would be looking into a suggestion for how to resolve difficulties for public service schemes with regard to the use of the term “governing body” in the code.