Code of practice no: 13 – Governance and administration of ...

1 code of practice no: 13. Governance and administration of occupational trust-based schemes providing money purchase benefits July 2016. Draft to lie before Parliament for forty days, during which time either House may resolve that the code be not made. code of practice no. 13. Governance and administration of occupational trust-based schemes providing money purchase benefits Presented to Parliament pursuant to Section 91(5) of the Pensions Act 2004. 9 May 2016. The Pensions Regulator July 2016. The text of this document (this excludes, where present, the Royal Arms and all departmental or agency logos) may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not in a misleading context.

2 The material must be acknowledged as The Pensions Regulator's copyright and the document title specified. Where third party material has been identified, permission from the respective copyright holder must be sought. Any enquiries related to this publication should be sent to us at: You can download this publication from: Contents Purpose of this code of practice page 5. Introduction page 6 Status of codes of practice page 6. To whom is this code directed? page 7. Northern Ireland page 7. Terms used in this code page 8. The trustee board page 9. Appointing a chair of trustees page 9. Member-nominated trustees page 10.

3 Relevant multi-employer schemes (including master trusts) page 10. Scheme management skills page 12. Managing risk page 12. Trustee knowledge and understanding page 13. Appointing and managing relations with advisers and service providers page 14. Working effectively with the employer page 16. Conflicts of interest page 16. administration page 17. Core financial transactions page 18. Investment Governance page 21. Documenting investment matters page 21. Setting investment objectives and investment strategies page 22. Monitoring and reviewing investment strategies and fund performance page 23. Security and liquidity of assets page 24.

4 Default arrangements page 24. Value for members page 26. Assessing value for members page 26. Restrictions on costs and charges page 28. The adjustment measure page 29. Communicating and reporting page 30. Communicating with members page 30. Reporting page 33. How to contact us back cover code of practice no: 13. 5. Governance and administration of occupational trust-based schemes providing money purchase benefits Purpose of this code of practice 1. This second version of code of practice 13 replaces the version published in 2013. 2. The purpose of this code of practice is to set out the standards of conduct and practice that we expect trustee boards to meet in complying with their duties in legislation.

5 The code assumes that trustee boards have a good level of knowledge of the legislation with which they are required to comply, so while often referring to legislative requirements, it does not seek to set out in detail all the requirements of the law. The absence of reference to any particular piece of legislation must not be taken to mean that we do not expect trustee boards to comply with that legislation. If trustees are not confident that as a board they are conversant with the legislation relevant to those running a scheme which offers money purchase benefits, we urge them to consider whether they are meeting the requirements for trustee knowledge and understanding, and undertake training as appropriate.

6 3. The standards set out in this code are those that we expect all trustee boards to adhere to insofar as the law applies to them. They represent our view of actions and behaviours which are expected of trustee boards and which demonstrate compliance with the law. In many instances the code is not prescriptive about particular methods that trustee boards should use to meet the standards, in recognition that different approaches may be appropriate for different schemes, eg what is appropriate for a large master trust may not be appropriate for a small single employer scheme. Trustee boards will need to make judgement calls as to what is a reasonable and proportionate method of ensuring compliance for their scheme.

7 4. If trustees are, for any reason, unable to act in accordance with the standards set out in this code they should consider their statutory duty under section 70 of the Pensions Act 2004 to assess and if necessary report breaches of the law. 5. A number of pieces of guidance support this code of practice . The practical guidance contained in these is designed to help trustee boards in running a high quality scheme. The guidance sets out (and clearly distinguishes between) recommended best practice and suggested approaches that trustee boards may choose to take, where appropriate, for the circumstances of their scheme.

8 code of practice no: 13. 6. Governance and administration of occupational trust-based schemes providing money purchase benefits Introduction 6. This code of practice (the DC code ) is issued by The Pensions Regulator (the regulator), the body that regulates occupational pension schemes. The code has been produced under the power given to the regulator in section 90 of the Pensions Act 2004, and has been developed in light of the statutory objectives which were introduced by the Pensions Act 2004. 7. Our statutory objectives are to: protect the benefits of pension scheme members reduce the risks of calls on the Pension Protection Fund promote, and improve understanding of, the good administration of work-based pension schemes maximise compliance with the duties and safeguards of the Pensions Act 2008.

9 Minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator's functions under Part 3 of the Pensions Act 2004 (scheme funding) only). 8. We have developed this code to meet the objectives relevant to defined contribution (DC) schemes but recognise trustee objectives to comply with their fiduciary duties and ensure that scheme benefits can be paid as they fall due. Status of codes of practice 9. Codes of practice are not statements of the law and there is no direct penalty for failing to comply with them1. It is not necessary for all the provisions of a code of practice to be followed in every circumstance.

10 Any alternative approach to that appearing in the code of practice will nevertheless need to meet the underlying legal requirements, and a penalty may be imposed if these requirements are not met. When determining whether the legal requirements have been met, a court or tribunal must take any relevant provisions of a code of practice into account2. 10. If there are grounds to issue an improvement notice, or a compliance notice, we may direct a person to take, or refrain from taking, such steps as are specified in the notice. These directions may be worded by reference to a code of practice issued by the regulator.