The Pensions Regulator

Refreshed TKU code and guidance published for consultation

Ref: PN08-24
13 October 2008

The Pensions Regulator has refreshed the trustee knowledge and understanding framework to ensure it remains relevant, and is today publishing a draft revised code of practice and scope guidance for consultation.

The revised code of practice sets out practical guidance for trustees in relation to the TKU regime, while the scope guidance provides trustees with a checklist of the topic areas of which they need to have knowledge and understanding. Both documents support those seeking to meet trustee knowledge and understanding requirements, introduced by the Pensions Act 2004.

The consultation follows a review of the existing code of practice and scope guidance, undertaken to ensure that the TKU framework remains relevant for trustees. Changes reflect:

• the importance of good administration;
• the forthcoming introduction of registration and auto-enrolment requirements;
• emerging buyout issues, including abandonment and inducement; and
• pension scheme wind-up and appropriate preparatory steps.

Regulated community learning manager Terry Clayworth said: “The refreshed code and scope guidance reflect changes in regulation, legislation, the market place and the focus of the regulator – while seeking to lighten the load wherever possible.

“We welcome industry views on our trustee knowledge and understanding consultation – those with the greatest interest will be pension scheme trustees, advisers and education providers to trustees.”

The twelve-week consultation period ends on 31 December 2008.

Editor's notes

1. The code of practice came into force in May 2006 and the Pensions Regulator undertook to review it after two years. The scope guidance has been available since 2005.

2. The original scope guidance covered what it was that trustees needed to know and understand - these requirements have not changed but have been updated in light of changes in the pensions landscape as listed above.

3. The regulator's free e-learning programme the Trustee toolkit will be updated in due course to reflect the changes in the code and scope after the consultation is complete. It will not be necessary for those who have already completed the toolkit to redo the toolkit.

The trustee toolkit www.trusteetoolkit.com is a free, e-learning programme developed by the Pensions Regulator, covering the whole scope of the trustee knowledge and understanding regime.

4. As with the existing code and scope, the pensions industry has worked closely with the regulator to review the documents.

Four documents have been published for consultation today:

• The code of practice;
• The three documents which make up the Guidance on the scope of the TKU requirements. These are for trustees of: 1. Defined benefit schemes (including those with a DC element), 2. Defined contribution schemes (with no DB element) 3. Small, fully insured DC schemes.

5. Codes of practice are not statements of the law. However they do have evidential value, meaning they will be taken into account by the Pensions Regulator Determinations Panel, a court or tribunal where relevant.

6. Under the Pensions Act 2004 (sections 247-249), pension scheme trustees must:

• have knowledge and understanding of pensions and trust law;
• have knowledge and understanding of investment and funding principles; and
• be conversant with documents relating to their pension scheme.

7. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:

• collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
• issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
• direct pension schemes as to how to calculate their liabilities and the contributions required;
• issue a contribution notice where there is a deliberate attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.