Published by Phil Duly on
This follows a period of consultation and goes by the snappy title of 'Code of practice no. 13: Governance and administration of occupational trust-based schemes providing money purchase benefits'!
The DC Code sets out the standards of conduct and practice that TPR expects trustees to meet in providing defined contribution (DC) benefits, also known as money purchase benefits. Accompanying practical guidance is provided, designed to help trustees run high quality schemes.
The update brings welcome clarity and guidance to the new DC governance standards, with which some trustees have struggled to date, e.g. areas such as assessing value for members and reporting through a chair’s statement.
TPR expects trustees to use the DC Code to check the quality of any defined contribution (DC) pension arrangements they operate.
Trustees are expected to do this on an ongoing basis. In practice, we suggest at least every three years, or sooner in the event of any significant developments, e.g. relevant changes to legislation, scheme membership or service providers.
There are substantial changes from the previous (2013) version:
In view of the substantial changes, trustees may wish to bring forward the next quality review of their DC arrangements.
TPR expects a proportionate approach to be taken for AVCs, recognising the risks to members in the context of the value of the AVCs to members’ overall benefits.
For schemes where the only DC benefits provided are AVCs, our approach is exactly this - a pragmatic and proportionate review, recognising the nature of the AVCs and assessing only those areas relevant, e.g. the governance standards and charge controls will not apply.
Pension schemes vary, and the benefits they provide don’t always follow standard defined benefit (DB)/DC conventions, for example:
Overall, a thumbs up from us for the updated DC Code - it’s now clearer and comes with more practical guidance. In many areas, the methods trustees may use are not prescriptive and can be tailored to the nature and size of the DC arrangements operated.
A green light to proceed for the many trustee boards which have been waiting for the update before reviewing their schemes.