Processes

CDC code in force: 1 August 2022

The Regulations set out the matters that we must take into account in deciding whether we are satisfied that a CDC scheme’s processes are sufficient to ensure that it is run effectively^PR1. This code uses processes to mean policies, processes and procedures. These processes underpin the governance framework, and we expect to see them reflected in that framework.

If a CDC scheme does not have all the relevant processes, we are unlikely to be satisfied that the authorisation criteria have been met. Once the scheme has entered live running, we expect to see evidence that the processes are used in running the scheme and that they are effective.

We expect to see provision for processes to remain sufficient and for it to be clear how and when they will be reviewed.

In assessing processes, we are more likely to be satisfied where the matters set out below are addressed.

Managing the trustee board

Requirement	Matters more likely to satisfy TPR
Trustee recruitment	It is clear who is responsible for the recruitment and selection process and what input is required from other parties. It is understood which skills and competencies need further development on the trustee board as a whole, and how this is monitored over time. There is a succession plan to maintain the skills and competencies needed by the Board. The principles for determining trustee remuneration are assessed and agreed. There is an agreed budget for trustee training. Fitness and propriety are assessed on an ongoing basis, along with any potential conflicts of interest and how these are managed or resolved. A resignation and removal policy is in place, which makes clear who can remove a trustee, how, and under what circumstances.
Diversity and inclusion	Trustee boards benefit from access to a range of skills, views and expertise as that supports robust discussions and decision-making. We expect to see that: there is a policy on diversity and inclusion the policy includes objective selection criteria consideration has been given to using inclusive language in advertising for roles flexible working has been considered for roles there is the ability to capture and monitor data on diversity and inclusion
Trustee governance	There is clarity about: the frequency of trustee meetings and under what circumstances this may change the circumstances where extraordinary meetings may be called and how trustees’ expectations in preparing for meetings and the actions needed in between them who is responsible for setting the agenda and frequency for trustee meetings and who else is consulted in developing an agenda (for example trustees or employer) standing agenda items the quorum at trustee meetings who decides in a scenario where both the employer and trustee have an interest, including a clear process for trustees to express and record their views if the decision falls to the employer the process for notifying trustees of breaches of the law, and the corresponding process for monitoring breaches and determining whether they should be reported to TPR the process for notifying trustees of significant and triggering events and reporting them to TPR
Managing service providers	Service providers are assessed before appointment, including access to due diligence carried out as part of the appointment process. Performance indicators are agreed and documented on appointment and the service provider is accountable, with escalation points, for ensuring the indicators are met. The performance indicators are considered regularly by an appropriate person, outcomes are recorded, and all actions are allocated and tracked. Service providers and advisers are kept under review, including detailed criteria for assessment (and key performance indicators (KPIs) and service level agreements (SLAs) if they apply). Trustees can show how they establish that their service providers are qualified and experienced to meet the needs of the scheme. This may include evidence of the checks carried out by service providers on new staff and how tender processes are operated. The role of the trustee board and employer is clear if a decision is needed to replace any service provider. The terms of appointment of each service provider include clear lines of responsibility for ensuring a smooth handover with no interruption of service if the service provider is replaced. There is a clear process for ensuring information about the performance, evaluation and ongoing suitability of service providers, including any issues or concerns, is brought to the attention of the trustees in a timely manner. Trustees can show that they understand and are familiar with the contracts and agreements (and any impacts on service or ability to act) with all service providers to the scheme. There should also be a written process documenting how these can be updated and agreed.
Planning resources	All key administrative tasks, including the timely sending of notifications and documents to TPR, are fully documented with detailed end-to-end processes. These process documents and maps are reviewed regularly, particularly as part of a system or process change, to ensure that enough human resources are allocated. Key resources, with the skills and experience to deliver the objectives in the business plan, have been identified and there is a plan to ensure continuity of service. There is awareness of the timeframes required to bring new human resources on board and what contingency is in place to mitigate any under-resourcing due to increased work volumes or loss of staff.

Administration

Requirement	Matters more likely to satisfy TPR
Record-keeping	The process directs how records are kept up to date and exception reporting is in place to ensure that errors and gaps are reported to the relevant governance function. There is a plan to rectify data errors, and the continuity strategy reflects the impact of data quality in the scheme. There is evidence of service provider agreements that include provisions, roles, responsibilities and source of funds for resolving errors that impact members. The process sets out the action that will be taken to put members in the correct position if errors or inconsistencies are found.
Member events	There are documented processes for member events including leavers, deaths, retirement and transfers. There is a process for managing member events and choices during a triggering event.
Annual exercises	There is a process for the annual valuation data extract to ensure that it is complete, accurate and timely. There is a process for calculating the annual benefit adjustment, loading the data onto the system and notifying members of any changes.
Contributions	The scheme can quickly identify missing contributions and there is an effective process in place to chase them. In the event of an employer insolvency or claim on the Redundancy Payments Service, there is a process for reclaiming any outstanding contributions from employer assets. There is a process for rectifying missing contributions. There is a log of missed contributions, which includes actions taken in response to the missed contributions.

Investment

Requirement	Matters more likely to satisfy TPR
Investment governance	The trustees, on an ongoing basis: take adequate advice from appropriate advisers can show a logical connection between the trustees’ declared investment philosophy and the investment strategy being pursued can show they have the necessary expertise to fulfil their fiduciary responsibilities as they relate to investment can show a thorough understanding of the investment strategy from the perspective of risk, return, markets, asset class and outcome have a process for managing real or perceived conflicts of interest in the governance framework will identify any deviation from the agreed investment strategy guidelines that would have required their approval immediately address any material breaches of the investment management guidelines they have contractually agreed to with their suppliers have processes to deliver data that enable them to effectively analyse and review their investment strategy
Managing people	It is clear who manages the key investment functions and who is accountable for: providing investment advice the investment management guidelines and permissions implementing all aspects of the investment management strategy and subsequent oversight of it ownership of the investment governance framework design and ongoing review of investment strategy portfolio construction, eg multi-asset and/or fund of funds structures selecting investment managers and their ongoing review cashflow management processes to implement change to the investment strategy policy on environmental, social and governance (ESG) issues and climate change
Data	There is sufficiently detailed information to enable trustees to monitor investments effectively, including: evidence of adherence to the agreed formal investment management agreements that the trustees enter into with the various suppliers of investment services details of the investment returns and the risk profile of the investment strategy, which are consistent with their stated objectives a suitable range of risk metrics, which trustees use to inform their ongoing assessment of returns detailed performance attribution analysis of the investment strategy, including benchmark and peer group relative performance details of any material breaches of investment guidelines and corrective action taken to prevent reoccurrence together with any agreed restitution a framework that enables trustees to assess the continued suitability of the investment strategy

Risk

Requirement

Matters more likely to satisfy TPR

Risk management

There is an ongoing process for identifying, recording, measuring, monitoring, prioritising and resolving risks, including investment risks. Appropriately skilled individuals are responsible for monitoring risk against the work planned and aims and objectives, with access to the management information and intelligence they need to carry out this task properly. Information and relevant data are received regularly (at least quarterly) from the accountable individuals to enable the risk register to be properly updated and investment risk analytics to be monitored. The trustees have documented how issues identified through risk management will be resolved by the accountable individuals. There is a risk register to support the ongoing monitoring of risks and it has been considered and agreed: the risk register is regularly reviewed in detail by trustees, with considerations and decisions being documented and ownership and actions attributed, along with timelines for delivery an annual review is conducted to ensure no additional risks have arisen that should be included on the risk register

Actuarial

Requirement

Matters more likely to satisfy TPR

Annual exercises

There must be effective processes for actuarial matters. The annual valuation is the backbone of annual scheme work and we expect to see: a plan for managing the valuation on an annual basis a process for extracting and checking the valuation data clear dates for the stages of work needed and sign-offs provision to give adequate notice to pensioner members if their income is adversely affected a process for completing the viability certificate and alerting all relevant parties, including TPR, if issues are identified

Legal reference

^PR1 Regulation 14 and Schedule 5 to the Regulation

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