Implementing The Second Pensions Directive And The UK's New Single Code Of Practice

• Published date: 24 September 2021
• Subject Matter: Employment and HR, Retirement, Superannuation & Pensions, Employee Benefits & Compensation
• Law Firm: lus Laboris
• Author: Ms Jessica Ferrari-Wells (Sackers) and Michaela Berry (Sackers)

Part of the UK's implementation of the second European Pensions Directive (IORP II) involves a new governance code of practice. Other EU states have implemented the Directive's governance provisions in a variety of ways.

Background

The second European Pensions Directive ('IORP II') came into force in January 2017, with the aim of improving governance and accountability in relation to 'IORPs' (broadly, occupational pension schemes).

Under this Directive, occupational pension schemes were (amongst other things) required to put in place an 'effective system of governance' and to carry out an 'own-risk assessment' at least every three years and 'without delay' following a significant change in their risk profile.

UK Governance Regulations

The UK incorporated these IORP II requirements into national legislation with the passing of the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 ('the Governance Regulations'). These regulations require occupational pension schemes to establish and maintain an effective system of governance that is:

• proportionate to the complexity, scale and organisational structure of the scheme, and to the nature of the risks to which it is exposed; and
• if the scheme has more than 100 members, assessed by the trustees in a documented own-risk assessment ('ORA').

However, the Governance Regulations do not prescribe how schemes should establish or carry out these processes, or how the UK Pensions Regulator ('TPR') should regulate them, requiring this detail to follow in TPR's codes of practice.

TPR's new single code of practice

TPR currently has several codes of practice which give practical guidelines on how to comply with the legal requirements of UK pensions regulation, and which are taken into consideration by the courts and TPR when assessing if these requirements are met. TPR chose to set out the detail of the new governance processes in its new single code of practice, which aims to combine TPR's existing codes into 'a clearer, more accessible' whole.

In March...