Codes of Practice
No.1: Reporting Breaches of the Law, 6 April 2005
Sets out the categories of those required to report breaches of law relevant to the Pensions Regulator. Potential reporters now include trustees, managers, scheme administrators, employers and advisors of occupational pension schemes.
Explains how the duty to whistleblow should be discharged and how to decide whether a breach is of material significance. The Regulator expects those under a whistleblowing obligation to be aware of it, train relevant members of staff and have a procedure in place to deal with any relevant breaches.
Looks at what constitutes “as soon as reasonably practicable” for the purposes of whistleblowing.
No.2: Notifiable Events, 30 June 2005
Gives guidance to trustees and employers when reporting a notifiable event.
Sets out what to do if trustees cannot reach a consensus to report collectively.
Looks at what constitutes “as soon as reasonably practicable” for Notifiable Events reporting. What is reasonably practicable depends on the circumstances. In all cases however it implies urgency.
Sets out the minimum information that should be included in a notification.
Says that trustees must take “all reasonable steps” to comply with the notifiable events duty and that employers must comply with the duty to notify unless they have a “reasonable excuse” for not doing so. Looks at what this means in practice.
Draft Codes of Practice
Trustee Knowledge and Understanding (TKU), March 2005
States the high level principles of knowledge and understanding that trustees must have to enable them to meet the legal requirements for all occupational schemes. In addition, there are requirements for trustees to be conversant with certain scheme specific documents.
The exact scope and extent of the knowledge and understanding for individual trustees needs to be appropriate for their particular roles. The process of determining any gaps in knowledge and taking steps to ensure that learning is undertaken should be regularly repeated.
There is a time period of six months during which a newly-appointed trustee may undertake the necessary learning activities for the role.
Funding Defined Benefits, March 2005 (Revised December 2005)
Sets out guiding principles for trustees when making decisions in relation to scheme funding and looks at matters that trustees should take into account, when evaluating the advice given by their scheme actuary and to help them when they seek the employer’s agreement. Also sets out what is regarded as reasonable periods for passing certain information to the Pensions Regulator.
Dispute Resolution - Reasonable Periods, April 2005
Provides guidance to trustees or managers of occupational pension schemes when they have to decide on matters in dispute and notify the applicant of their decision.
Covers the Pensions Regulator’s expectation of what the trustees or managers should consider as the reasonable time periods stated in the legislation. In practice this means that IDR complaints must be dealt with within 10 months if a two-stage process is retained.
Early Leavers - Reasonable Periods, May 2005
Looks at requirements to notify early leavers with at least 3 months and less than 2 years’ service of their rights. States that members must be given a reasonable period within which to reply (at least three months) and outlines a default procedure where a member does not reply.
Reporting Late Payment of Contributions to Occupational Money Purchase Schemes, May 2005
Sets out how trustees can meet the requirements to report late payments of contributions to the Pensions Regulator and members within a reasonable time. Looks at what factors make a late payment “material” and outlines what is a “reasonable period” for reporting in differing circumstances.
Reporting Late Payment of Contributions to Personal Pensions, May 2005
Sets out how trustees can meet the requirements to report late payments of contributions to the Pensions Regulator and members within a reasonable time. Largely mirrors the Occupational Money Purchase Schemes code of practice.
Modification of Subsisting Rights, July 2005
Provides guidance to trustees of occupational pension schemes about how they can comply with the requirements of sections 67 to 67I Pensions Act 1995 where modifications to the scheme rules are being considered which affect members’ subsisting rights.
Member-nominated Trustees and Directors - Putting arrangements in place, July 2005
Looks at the nomination and selection processes required to put member-nominated trustee arrangements in place.
Sets out what constitutes a “reasonable period” for deciding upon arrangements (up to 6 months) and for implementing arrangements (6 months) and a “reasonable interval” for re-running a nomination process in the event of insufficient nominations (normally 12 months).
Reasonable periods for the purposes of the Occupational Pension Schemes (Disclosure of Information) Regulations 2006, September 2005
Sets out the Regulator’s views as to what constitutes the reasonable time periods outlined in the draft Occupational Pension Schemes (Disclosure of Information) Regulations 2006.Internal Controls, September 2005
Describes and gives examples of internal controls and explains their role in “managing and mitigating risk”. States that trustees need to determine the risks relevant to their scheme and determine a suitable internal control framework. Internal controls are expected to be proportionate to the level of risk identified.
Funding Defined Benefits, March 2005
Contains practical suggestions and examples (including an action plan and specimen documents) to be of assistance to trustees in meeting the legislative requirements for funding defined benefits. It is important to read this guidance in conjunction with the draft code of practice.
Clearance Statements, April 2005
The Pensions Regulator only expects clearance to be sought where there has been an event “affecting an entity which is financially detrimental to the ability of a defined benefit scheme to meet its pension liabilities” and the scheme has an FRS17 deficit. However, clearance remains an entirely voluntary process.
Specifies three different classes of event (Type A, B and C) to help parties decide whether they should seek clearance. Type A events being specified events which are financially detrimental to the ability of a defined benefit scheme to meet its pension liabilities and for which it may be appropriate to seek clearance. Type B events being those which do not affect the pension creditor and for which clearance is not necessary. Type C events being events that might affect the pension creditor. Clearance is not relevant for these events if they do not also fall within Type A.
Guidance is given on the Pensions Regulator’s role when clearance is sought for a Type A event.
The Pensions Regulator envisages that, where possible, scheme trustees will be consulted before the Regulator issues a warning notice indicating its intention to grant clearance.
Complying with the Duty to Report Breaches of the Law, April 2005
Gives guidance and examples for specific paragraphs of the code of practice (above). Explains the traffic light framework for whistleblowing dealing with events in which the Pensions Regulator is interested (red), events in which it might be interested (amber) and those in which it is not interested (green).
The Pensions Regulator and the Freedom of Information Act 2000, April 2005
Guidance on how to obtain information from the Pensions Regulator made available under the Freedom of Information Act 2000.
The Notifiable Events Framework, August 2005
Guidance on the framework to the notifiable events regime, setting out in more detail how the Pensions Regulator (Notifiable Events) Regulations 2005 should be read in light of Directions issued by the Pensions Regulator under Section 69(1) Pensions Act 2004.
Multi-employer Withdrawal Arrangements, November 2005
Guidance on when a withdrawal arrangement may be applicable, how and when to apply to the Pensions Regulator for approval of a proposed withdrawal arrangement, what happens during the approval process, and what factors the Pensions Regulator is likely to consider before granting approval.
States that the Pensions Regulator will only approve a withdrawal arrangement when its terms have been agreed between the parties to it.
Sets out the various documents which must be submitted to the Pensions Regulator with the withdrawal arrangement.
Looks at the potential conflicts of interests on trustee boards in negotiating these agreements with a scheme’s employer. The Regulator expects conflicted trustees to either not take part in the decision-making process or rely on independent professional advice.
Directions Issued by the Pensions Regulator Under Section 69(1) Pensions Act 2004, 6 April 2005
This article first appeared in our Pensions update January 2006. To view this publication please click here to download it as a pdf in a new window.