The Code of Practice for CDC is our bible!
I will strain my blog to deliver something that is very serious and meaningful to the DWP, TPR and the few people set upon getting authorised to run a CDC from next year. I liken this document to the bible – maybe to Leviticus, that lays down what can and cannot be done to stay on the right side of the deity.
There are 153 pages of the CDC code or practice laid before parliament by the Pensions Regulator.
It is a bible for finance, marketing, administrators, governors, funders and the proprietors of a multi employer (UMES) workplace pension scheme. I cannot pretend to be expert in all or any of these sections, but I promise myself, my team and the Pension Regulator that I will read every page and ask questions of my colleagues and the Pension Regulator what I or we do not understand.
In answer to the question “how can you get a CDC scheme authorised, the answer is to read the bible and follow what it says. The bible is known as the code of practice and though not following the code may not be criminal , it leads a CDC proprietor to a dark place of sin!
Is this code an advancement on what TPR consulted on?
The last version was responded to by 29 firms. We consulted through the company of our actuaries and consultants, Goddard Perry. This is what TPR concluded from reading these responses and it is now for us to read the new code and comment on the changes (a hard job to compare but I’m sure that AI will help us!)
Here is what TPR are saying to all organisations looking to be authorised and those who will advise them .
We have taken on board the feedback received and acknowledge that there is some nervousness about trustees going further than just providing factual information about the scheme. This is a new area of regulation for us, and for occupational pension schemes. We are committed to a pragmatic regulatory approach which will be informed by and evolve with developments in the market. We will also publish some standalone guidance later this year which will look at addressing some of the concerns raised. We will keep this guidance under review as the market, and our experience of it, develops.
There are a few areas where we have tightened up some of the wording in the code to make it easier to understand. For example, we have expanded the definition of an inducement, so it captures all pension schemes to future proof it as much as possible. We have also tightened up the wording from the Financial Conduct Authority (FCA) test on whether an item is defined as a promotion, which several respondents asked for clarification on.
We also note that several respondents asked for clarity around the respective responsibilities of trustees and scheme proprietors when it comes to promotion or marketing. As the trustees are prohibited from undertaking any of these activities, the responsibility would sit with the scheme proprietor and/or any other person they have delegated this responsibility to. Trustees have an important role in challenging key promotional materials if they believe they are unclear or misleading, or both. On the rare occasion trustees may not have identified issues, we do reserve the right to also take action against them.
Finally, some respondents questioned the use of the wording ‘member detriment’ as marketing and promotion is only aimed at employers. Whilst this is true, schemes should recognise that ultimately any misrepresentation of scheme benefits will impact the member. Trustees have a fiduciary duty to act in the best interests of members, and we believe therefore the wording is correct and will remain as is.
The Code itself and how to get to it.
I have put our “bible” iitself at the bottom of the page, protected by a disclaimer which you must accept to see the bible itself. Alternatively you can click this link.
I may be one of the few people to read it and I do so because Pensions Mutual , of which I am a founder, would like to be authorised and supervised by the code. Of course , all the team will read it to and we will consult with TPR in person , on the web and in writing.
I take as a sample of the Code of Practice a description of what must go into an application for authorisation. It is at the front of the code and is followed by details of the changing requirements of those running multi-employment schemes.
These have changed once and will change again, we are told that there will be a final version (for now) in October but there will be more, when we have a Retirement CDC and maybe beyond that a Code for accepting individuals wanting to swap pot for pension.
But for now , the code is not for individuals, it is not retail. It is onerous and shows the level of regulation we, in this country, require of our pension schemes. I think the code of practice is a small price to pay for getting paid for securing pensions for what we expect to be more than a million people in some schemes.
Here is a sample of the Code as it stands; this relates to the getting authorised and is one question to that asked in the title of this blog. But behind it are the details that need to be complied with – a further 150 pages.
For multi-employer CDC schemes only, the following must also be included with the application
6:a. The scheme’s business plan.
b. The scheme’s latest accounts (if any).
c. The scheme proprietor’s latest accounts (if any).
d. The latest accounts of any undertaking (other than an unincorporated association)
that partly or completely funds the scheme proprietor.
e. A statement signed by the trustees of the scheme confirming that the scheme has
a single scheme proprietor that meets the requirements set out in section 14C of
the Pension Schemes Act 2021.
f. A statement signed by the trustees of the scheme confirming that no trustee
promotes or markets the scheme or acts as the chief financial offer of the scheme.7. If there has been no promotion or marketing of the scheme and there is no intention to do any in the future, a statement must be provided, signed by the scheme proprietor,
that confirms this fact and explains how and why this is the case.78. If there has been, or is intended to be, marketing and promotion of the scheme you
must include:
a. details of any promotion or marketing of the scheme
b. details of the matters set out in Part 1 of Schedule 1C to the Pension Schemes Act
2021 (no promotion or marketing that is unclear or misleading)
c. details of the matters set out in Part 2 of Schedule 1C to the Pension Schemes
Act 2021 (promotion or marketing: systems and processes), including details
of the systems and processes used, or intended to be used, for the purposes and promotion of the scheme.
Below is the code itself, access to this holy bible can be attained by clicking at the bottom of the box you see before you.
Whether you have read this far out of pleasure or regulatory interest, I hope it gives a view of what the Pensions Regulator’s Code of Practice will do for CDC. CDC is the better for it , though it is expensive to comply to and will stop many aspirant schemes from opening doors.
To its Proprietor, running a CDC scheme is a serious commitment. It needs a bible to set out and as it carries on. It is good that the Code of Practice for CDC is a well written and consistent bible.
