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Publication
Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | oktober 2022
At first glance the Pensions Regulator’s draft “super” Code of Practice is alarming in its documentation requirements. We counted just under 30 “policies”, nearly 40 “processes” and another 16 specific registers, reports and strategic documents, and that’s not including the suite of investment requirements. We’ve given you a couple of checklists at the end of this briefing to test against your own suite of governance documents.
However, the majority are more just about putting down on paper what you are already doing (and why) to allow you to flush out whether anything is missing or not actually as good as you thought it was. In this briefing, we look at some of those you may not yet be familiar with. We consider what trustees will need to get to grips with; what you can recycle from the policies you already have, and what needs looking at afresh.
This is the third in our series of briefings on the Pensions Regulator’s draft Code – please see the end of this briefing for links to the others.
Schemes with 100 or more members (excluding public service and master trust schemes) are expected to maintain a written remuneration policy in respect of those people undertaking scheme activities paid for by the trustees or the sponsoring employer. That includes both in-house members of staff and external administration, actuarial, legal advisory and investment services.
This expectation seems to assume that trustee boards have insight and/or some influence over the remuneration of in-house staff and appointments and that there is value in having an overarching policy for how to pay external providers. Authorised DC master trusts are already subject to similar requirements but we question whether this policy has any real role to play outside the commercial provider arena. However, we have set out the high level requirements below for you to consider how you might comply.
The policy should be proportionate to the size, scale, nature and complexity of the scheme’s activities. It should include measures to mitigate potential conflicts of interest, particularly with regard to in-house roles like trustees, trustee secretary, administration and sub-committees. It should explain the decision-making process for levels of remuneration and why you think they are appropriate.
The Regulator expects you to review this policy every three years as a minimum, although it may well be more practical to review it annually (or immediately following any significant changes in the scheme’s governing arrangements). You’ll also be expected to publish the policy on the scheme’s website or otherwise make it available to members.There is already a legal requirement for DC schemes to maintain processes around core financial transactions. However, the Regulator believes that these principles are equally valuable to all schemes and it has seized this opportunity to extend their application to all types of scheme.
Disaster recovery should already be part of your data risk management arrangements, not least in the aftermath of the COVID-19 pandemic. However, there is a much greater focus in the draft Code on more general continuity or contingency planning as part of your effective system of governance (ESOG).
We have another new acronym – the business continuity plan or BCP. It’s a good time to focus on this element of your ESOG while everyone’s memories of lockdown are fresh, including on how much can, or can’t, be achieved out of the office.
The Regulator expects trustees to:
Cyber security has been important for a while now and we already have the Regulator’s 2018 guidance on cyber security. The draft Code elevates some of that guidance to Code status, with the rest presumably staying as just guidance.
The Regulator expects you to:
The checklists at the end of this briefing itemise all the governance documentation expected by the draft Code. We would recommend setting up and running a single governance policy to cover most of the trustee and administrative aspects of the draft Code, with the equivalent of an operating manual for the more detailed processes. A single governance policy keeps everything together for the trustee board, gives you something to share with your service providers and advisers to make sure they work with your policies, and also simplifies the process of scheduling reviews of elements as they fall due. If you have sub-committees, use the same document to centralise terms of reference and any delegated powers.
The new regime may seem overwhelming but it’s best taken in stages, and in manageable chunks. We’ve set out below some pointers for trustees:
Our July 2022 briefing, “Turning up the heat on compliance: the Pensions Regulator’s “super” Code”, explained how the Regulator will expect trustees and sponsoring employers to be much more disciplined in their future approach to scheme management. We focused on the new requirement for trustees to develop an “effective system of governance” (or ESOG).
In our August 2022 briefing, “Own risk assessments: the Pensions Regulator’s “super” Code part 2”, we turned to the requirement for all schemes with 100 or more members to prepare an “own risk assessment” (or ORA) within 12 months of the new Code coming into force. We looked at the essential elements of the ORA and gave some practical pointers on how trustees could tackle its production.
Policies for trustee business |
Appointment processes:
|
Remuneration policy† |
Meeting processes:
|
Policy on managing actual and perceived conflicts of interest Register of trustee interests |
Policy on role of the trustee board, building and maintaining knowledge and governance of knowledge and understanding (TKU) Plan for maintenance and development of TKU |
Resignation and removal policy on who can remove a trustee board member, under what circumstances and steps for doing so |
Exercise of discretionary functions policy |
Gifts and hospitality |
Operational policies of sub-committees |
Policies for risk management |
Risk management policies for:
|
Risk register |
Processes for:
|
Policy on:†
|
Internal control processes for:
|
Policy on integration of risk assessment and mitigation into management and decision-making processes |
Own risk assessment† |
Policy on reviewing elements of the ESOG |
Business continuity plan |
Policies for administrative processes |
Appointing advisers/providers Processes for:
|
Process to authorise financial transactions |
Internal dispute resolution procedure Process to investigate and decide pension scheme disputes quickly and effectively |
Processes for reporting breaches |
Policy on maintaining, upgrading, and replacing hardware and software |
Value for members assessment‡ |
Policy on outsourcing activities† |
Policies for the use of devices, and for home and mobile working |
Policies on information management |
Processes to:
|
Policy on assessing whether data protection breaches need to be reported to the information commissioner |
Processes to:
|
Policy to encourage members to speak up about matters that affect them* |
Policy on public provision of information and information given on request |
* DC schemes for non-associated employers
† Schemes with 100 members or more
‡ Only schemes offering DC arrangements (other than AVCs)
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