How does the new code of practice impact the role of a scheme secretary?

A typical scheme secretary appointment includes maintaining pension trustees’ policies, trustee board support and sharing good industry practice across all areas of pension scheme compliance and operational matters.

The introduction of the new single code increases the importance of the scheme secretary role as there is significant overlap, particularly around how governance work is evidenced. The trustee secretary is best placed to own the delivery of this work, particularly when they’re not tied to scheme advisers.

Scheme secretaries to become pension governance specialists and quasi risk managers?

The single code revisits The Pensions Regulator’s (TPR) existing codes of practice and other areas that weren’t codified. The key challenge for scheme secretaries is to understand:

• what their schemes are currently doing and where the gaps are

• how to adapt what’s there and add new policies or tools, but do so proportionately

• how to embed an ‘effective system of governance’ (ESoG) and be able to measure and report against it (the Own Risk Assessment)

They’ll need to evolve much closer to a pensions governance and risk manager rather than a company secretary, as they have been historically.

Training for all!

Several areas of pension governance have flown under the radar and are now being codified and measured. Trustee boards will need training on what’s required under the single code’s governing body modules and how to challenge their advisers – it’s important the trustee secretary supports this.

A good scheme secretary should already be sound in governance and risk management techniques and have a team that provides support. However, pension trustee boards will need to ensure adequate competence to manage adherence to the code. Going forward, additional training may be needed for some scheme secretaries, for example where they aren’t up to speed with AAF, ISO/BSi and other business standards, to demonstrate the ability to own this governance work and provide quality assurance.

Scheme secretaries will need support

The breadth and depth of the single code of governance is vast, across c150 pages and 51 modules (with 5 of the 15 existing codes of practice still to be reviewed by TPR). No single scheme secretary can honestly claim to be an expert in all these areas. While they are in the best position to coordinate activities and own some of the policies and tools, a pension scheme secretary will need to rely on colleagues and advisers, eg the scheme administrator, to understand what a proportionate approach looks like.

Processes need to be effective and efficient

The flow from doing to monitoring, to reviewing and demonstrating effectiveness could create a cumbersome ‘ecosystem’ if not done correctly. Developing good technology and processes is essential and will need to evolve as the single code changes. It will need to capture and automate an audit trail to make implementation as painless as possible, to support the scheme secretary and provide transparency for pension trustees, or TPR, should they ask.

How documents are filed and accessed will need to be reviewed to fit into an efficient ESoG framework. The scheme secretary will need to identify where a document, tool or process can cover more than one module or outcome to help save time and cost, eg including topics like scams and transfers activity in the quarterly administration report.

One size does not fit all

Legislative requirements under the single code need to be met in full or there would need to be a legal justification for not doing the work. The scheme secretary will need to assess whether items that are ‘expectations’ under the single code require a ‘bronze’, ‘silver’ or ‘gold’ approach and, in some cases, if work is needed or not. If not, a process is needed to capture how that has been decided.

Key risks and opportunities

There’s a real danger of reinventing the wheel and not acknowledging what’s already in place. Advisers could have single code services that cost a lot but don’t deliver much in return. By checking the current position, the scheme secretary can do an important bit of housekeeping and pinpoint requirements that could be managed more effectively going forward.

The single code gives scheme secretaries the opportunity to grow their skills and add value to their schemes through better management of risk and advisers and by saving costs. If your scheme secretary is not adequately skilled, pension trustees may need to pay extra to get this assurance elsewhere.

Ultimately, a good outcome in single code implementation would be limited impact on business as usual without a disproportionate compliance burden for the scheme secretary. To achieve this, a fair amount of work and support is required with the scheme secretary leading the way. It’s also a good time to transition to more online technology to leverage efficiencies and strengthen governance.

 

 

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