The Pensions Regulator has distinguished between its expectations on trustee competence for new and experienced trustees, as part of amendments to its new code for collective defined contribution schemes.
The watchdog laid its CDC code before parliament on June 9, giving it enough time to pass through the legislature for CDC applications to begin from August 1.
The code is expected to be made after it has laid in parliament for 40 days.
CDC schemes will first be limited to those created by single employers, or two or more connected employers. The Pension Schemes Act 2021 allows for further developments of the CDC market, such as multi-employer schemes.
“We have seen the positive effect of CDC schemes in other countries and this code brings us one step closer to making them a reality here at home,” pensions minister Guy Opperman said.
TPR also published its response to an eight-week consultation over the code that ran from January to March this year, having received 24 responses.
It has pledged to issue guidance on fitness and propriety criteria, and how fees are calculated for authorising additional sections of a CDC scheme.
A disproportionate level of detail?
The PSA21 introduced the authorisation and supervisory regime for CDC schemes, while the Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022 set out expectations for TPR when it authorises schemes, along with the information it should receive for applications and during supervision.
Consultation respondents noted the level of detail in the code, questioning if this detail was proportionate for single employer schemes, or whether it was more appropriate for multi-employer schemes, the regulator said.
Fears were expressed that its “onerous” nature could act as a barrier to multi-employer and smaller schemes.
The watchdog maintained that the level of detail within the code was necessary, though it has made a number of clarifications.
For example, TPR will not expect newer trustees to meet the same competency threshold as their more experienced counterparts. New trustees will need to have completed basic training and have frameworks for continued development.
Those that have previously been appointed to trustee roles, however, will have to have gained “sufficient equivalent knowledge through previous experience as a trustee or in a senior role in a comparable scheme”, it said.
Experienced trustees will also need to have accreditation with either the Association of Professional Pension Trustees or the Pensions Management Institute.
“A small number of respondents said that they didn’t believe we should be assessing individuals who appointed or removed trustees. However, we are required to do this by the PSA21 and so have retained this in the code,” the regulator said.
TPR acknowledged concerns over requirements to report on member feedback to trustees, which has been viewed by some as an expectation to actively seek savers’ views every quarter.
“We’re not expecting schemes to develop a significant number of member communications as this could lead to overload and, as a result, a negative effect on member engagement,” the regulator said.