Further delays to the General Code

The General Code has not been laid in Parliament. This means that the delayed governance code is unlikely to become law until autumn at the earliest, creating further uncertainty for trustees and the wider pensions industry.

The Department for Work and Pensions has confirmed that the code must be laid in Parliament for 40 sitting days before it passes into law. There are less than 40 days until the summer recess begins on the 20 July, meaning the code will not pass into law before the recess.

What is the General Code?

The General Code is the commonly used term for the new, combined pensions governance code which aims to consolidate and simplify existing codes of practice. It was born as a result of the IORP II Directive, which came into force in January 2019, with the objective of raising the bar on occupational pension scheme governance.

The Pensions Regulator (TPR) published a draft code for consultation in March 2021. There have been several updates from TPR on the timeline for the final code; the latest was that it would be published in spring 2023, which has not transpired.

Why has the code been so delayed?

One possible explanation for the delay was the industry feedback on the draft code when TPR consulted on it in 2021. Heather Chandler, partner at law firm Shoosmiths elaborates: “The Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 require trustees to carry out an own risk assessment at least every three years, whereas the draft code made that an annual requirement.

"Almost two years later we still have no further clarity on exactly what is required of trustees.”

Heather Chandler, partner, Shoosmiths

“Industry concerns over the burden this would present, particularly for smaller schemes, forced the Pensions Regulator back to the drawing board in August 2021, but almost two years later we still have no further clarity on exactly what is required of trustees.”

What does the hold-up mean for pension schemes?

Georgina Jones, a partner at law firm Sackers, is relatively sanguine: “TPR may have missed the date for laying the new general code before Parliament, but we remain hopeful that it will be published in draft form over the summer. This would allow schemes to start working out where changes to their governance may be needed. However, the message to date is that most well-run schemes will have little to do, so this is one area where a delay is unhelpful but not a disaster.”

Rosanne Corbett, client director at Muse Advisory adds: “We've had the draft for a while now, as well as requirements for the Effective System of Governance (ESOG) and Own Risk Assessment (ORA) being set out in the Governance Regulations from January 2019. So, we know what the requirements and expectations are. There may be some wordsmithing and reshaping but fundamentally, what's there in terms of the ESOG and ORA shouldn't won't change dramatically as it's already set out in the regulations. And therefore, there's an opportunity for schemes to look at whether they meet the ESOG and policy requirements now, looking to add value to their governance arrangements."

Corbett caveats: “The counter to that is, wait until the code is published so as not to do work now that might need unpicking. However, with what we know about the requirements that seems unlikely. With a potentially busy period ahead for project work (dashboard, TCFD, DB Funding Code), using resources in the right way, at the right time and keeping the work proportionate to the activities of the scheme will hopefully add value in the right places.”

Heather Chandler is more concerned about the impact the delays could have on pension schemes. “If the General Code has not been laid, further delay will ensue. That delay will mean continued uncertainty, particularly in relation to the new effective systems of governance and own risk assessment requirements, where the draft code presented trustees with more onerous obligations than the regulations which brought them into law.”

She adds: “The uncertainty isn’t restricted to these new governance requirements. The code updates the Pensions Regulator’s guidance in several areas. Some of those changes were subtle in the draft code, but I’m sure the industry is wondering whether recent events might lead to further changes in the final version. An obvious example would be cyber risk in the wake of high profile cyber incidents in the pensions industry in recent weeks.”

Chandler concludes: “Specifics aside, the Pensions Regulator admitted when the code was first published for consultation the existing codes of practice that are being consolidated are out of date, meaning schemes are targeting out of date standards which is far from ideal from a risk and governance perspective.”

A spokesperson for The Pensions Regulator said: “Our general code will provide one set of clear, consistent expectations on governance and administration to help governing bodies ensure their scheme is fit for the 21st century. 

“We would urge governing bodies that have not already done so to carry out analysis to identify possible gaps in their governance before the code comes into force.”

“We are keen for the regulated community to see the finished code and are now waiting for a gap in the Parliamentary timetable to enable it to be laid.”