LONDON – 26 March 2024 – The UK pension industry is gearing up for a significant milestone as the UK Pensions Regulator's General Code, published in January 2024, is poised to formally come into effect tomorrow, 27 March 2024. In anticipation, pension schemes have been preparing with many engaging in comprehensive gap analyses in line with the requirements of the Code.
Useful insights into Scheme’s preparedness are already emerging from WTW’s Code Assessment Tool (CAT), which allows schemes to assess their compliance against the Code's requirements on a scale of 0-100.
According to initial assessments* of those that have either refreshed or undertaken the CAT gap analysis for the first time this year, the average Code alignment score stands at an impressive 87%. This highlights that most trustee boards will already be operating robust governance models which might only require fine tuning to align with the Code. Scores range from 72% to 96%, indicating a notable level of adherence across the board.
“This data is a testament to the dedication of the trustees and managers of these schemes towards maintaining high standards of governance.”
Jenny Gibbons | Head of Governance, WTW
"This data is a testament to the dedication of the trustees and managers of these schemes towards maintaining high standards of governance and should be reassuring to members involved and the Pensions Regulator," remarked Jenny Gibbons, Head of Governance Consulting at WTW. She added: "While the majority exhibit commendable levels of compliance, there is always room for improvement, and improvement is always worth striving for."
Proportionality as a theme is prevalent throughout the General Code, with TPR recognising that different schemes have varying sizes, natures, scales, and complexities. Gibbons commented, “It is important to remember that ‘proportional’ in relation to the Code doesn’t mean aiming to do less in all areas. For example, a bought in scheme looking to buy out may have less to do on investment governance but should arguably be boosting time spent on strategic, legal and data related governance issues and ensuring the board itself is fighting fit to see the scheme through to buyout.”
Among schemes that have completed their gap analyses, the next priority varies, with a roughly even split between:
"While there is still a journey ahead, it's encouraging to witness schemes embracing the significance of good governance," added Gibbons. "In some areas of course the name of the game is efficient compliance, but most recognise that in other areas there’s significant value for members in additional thoughtful focus on good governance and risk management.”
*WTW’s Code Assessment Tool (CAT) data is based on an assessment of 21 large UK defined benefit pension schemes in 2024.
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Schemes without a gap analysis and a plan to address shortcomings risk falling short of the Regulator’s expectations.
