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Interim response to TPR’s new code of practice consultation issued

Ref: PN21-23

Issued: Tuesday 24 August 2021

More than 10,000 individual answers were received during The Pensions Regulator’s (TPR) 10-week consultation on its new code of practice, it was revealed today (Tuesday).

In an interim response to the consultation, TPR said it received the 10,000 answers from a total of 103 respondents representing private and public service schemes and service providers.

TPR's 15 existing codes of practice are set to be transformed into a clearer, more accessible single online code, providing one up-to-date and consistent source of information on scheme governance and management.

Following the consultation launched in March, the interim response adds that with the help of key stakeholders, a programme of virtual events, run in addition to the consultation paper, also enabled TPR to engage with more than 1,000 members of the pensions community despite restrictions on social contact being in force to combat the COVID-19 pandemic.

David Fairs, TPR’s Executive Director of Regulatory Policy, Analysis and Advice, said: “I’m confident the feedback received during our new code consultation will help ensure the final version provides a clear, up-to-date and consistent source of information on scheme governance.

“I want to thank governing bodies and industry stakeholders for taking the time to be a part of our consultation process and reassure them that we have listened to concerns over limits on unregulated investments and the timeframe for the new own-risk assessment.”

Unregulated investments

TPR’s response explains that comments concerning a limit on unregulated investments, often referred to as the 80% or 20% rule, suggested some had interpreted the proposal as a restriction on investment in illiquid asset classes. 

The response explains that TPR’s intention had been, and remains, to protect members in small schemes, which are sometimes poorly run and where there can be investment in poor-quality or inappropriate assets.

However, TPR added that, while setting out that expectation, it inadvertently created a position that would affect well-governed, typically larger, schemes that hold unregulated assets as part of a well-managed investment strategy. 

TPR explained it will not be proceeding with this expectation in the way it had been drafted. However, it will explore options for achieving its original policy objective while allowing schemes with liquidity risk management plans and prudent investment strategies to maintain exposures to unregulated assets.

Own-risk assessment (ORA)

Responses on the own-risk assessment (ORA) showed its purpose as a review of a scheme’s existing controls had been understood. However, concerns were raised about the amount of work it would create, the timeframe, the look of the finished product and the burden it would place on smaller schemes.

The regulator said it was continuing to work through the responses in this area to identify possible changes or guidance requirements and re-examine the timeframe for the ORA’s introduction and the frequency schemes should renew it.

TPR’s response also explained:

  • TPR received general support for the principle of, wherever possible, setting common expectations on all schemes
  • respondents welcomed the modular format of the new code
  • applicability had been raised as a concern and TPR would explore ways to ensure the code’s applicability is more apparent

TPR said based on current expectations the new code would not be laid in Parliament before spring 2022.

Notes for editors

  1. The Pensions Regulator is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to 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 only).

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