We are excited to see that the regulator’s new (and rebranded) General Code is set for spring 2023.
Much has been written and discussed about the Pensions Regulator’s (TPR) enhanced requirements and, in particular, the additional governance challenges they might present for trustee boards (Read more about the new General Code).
Trustees have never had such a tough job to do. In a world where they are already busy with guaranteed minimum pension equalisation, market volatility, Pensions Dashboard requirements and the imminent new Funding Code, it’s easy to see how some might view the General Code as simply more work to do. But the opportunity is there to get real value out of the new requirements, beyond basic compliance. We see the introduction of the code as a chance for trustees to focus on new and growing risk and opportunity areas.
Cyber risks are a governance priority
Climate risk remains a leading pension risk
Climate change is an increasingly important aspect of pension risk, and it is widely recognised that pension schemes face material risks from rising global temperatures. These potential threats range from the physical effects on members and sponsors to the second-hand impacts of climate policies and a changing investment market. But are boards really addressing climate risk systematically for their pension schemes?
There is a lot to think about here: for example, understanding how to account for climate risk in your risk register, how and what to communicate to members and other stakeholders beyond the requirements of TCFD (Task Force on Climate-Related Disclosures) and more. Let’s not forget that corporates are also tackling this issue and trustees should be mindful of how the pension scheme’s climate strategy fits with that of the corporate sponsor.
Diverse pension schemes will achieve better outcomes
Consider the General Code and the Funding Code together
Defined benefit schemes should also take the opportunity to ensure pension scheme governance dovetails with the requirements of the new Funding Code. Trustees and companies will be gearing up to set the long-term target and journey plan to achieve the target. The General Code deals with the risk management process for achieving the target, and this encompasses so much more than investment risk. We held a webinar at which David Fairs, TPR’s Executive Director of Policy, Advice and Analysis, discussed the proposed new funding regime.
There is a great deal for trustees to do — and an opportunity to achieve real value. We would encourage every group of trustees to start thinking about these issues even before the final General Code lands.
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