The new Code will introduce new pension scheme governance responsibilities. Trustees/governing bodies will need to identify the required changes to their current processes, check current policies and procedures are fit for purpose, and implement changes where necessary.
How can Mercer help?
We suggest a three stage process to being compliant with the ESOG and ORA elements of the requirements:
Conduct an ESOG gap analysis to determine what areas you will need to work on to be compliant.We have developed our own gap analysis which covers all required areas and allows trustees to prioritise areas of focus for action.
Document your ESOG.There are many ways you could do this. We have developed our own ESOG inventory to aid you in doing this, including wording to cover off the areas of the Code which may not require a full policy. Our ESOG inventory covers all policies and procedures across the five key areas set out within the Code. Our solution will allow you to tailor your approach in a pragmatic and proportionate way – get in touch to find out more.
Complete your ORA (for schemes with 100 members or more).This is a qualitative assessment of the effectiveness of your ESOG and is expected to be a substantial piece of work in the first instance. We have developed an ORA template which you can use to carry out the assessment and highlight areas of potential improvement and development.
TrainingDo you understand the requirements of the new Code?
Gap analysisDo you know what areas you will need to work on to be compliant?
Review or establish new policiesReview your existing policies alongside the draft Code and consider whether additional policies will be required. Some may be new to you, for example considering climate change or cyber risk. You may need to do more work in these areas with appropriate training alongside.
Whilst the new Code puts a spotlight on good governance and sets out new requirements, don’t forget the activities and projects that can contribute to best practice and effective governance.
Mercer’s governance team can help with whatever you need to achieve your aims, including, but not limited to:
Frequently asked questions around the General Code
Compliance is likely to be deemed necessary in order to discharge trustees’ statutory duties to have an effective system of governance. However, the legislation acknowledges that systems of governance should not be homogenous across pension schemes, stating that they must be “proportionate to the size, nature, scale and complexity of the activities of the pension scheme”.
Therefore it is likely that for larger more sophisticated schemes, TPR would expect them to meet most of the ‘should’ expectations in the Code unless they can demonstrate they are meeting the expectations in an alternative way.
For smaller schemes, some of the ‘should’ expectations may be disproportionate, although many are not new and so where they have been in place for some time in the existing codes, then TPR is likely to expect that most schemes will already be meeting those aspects.
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