We’ve been discussing the draft Code with clients and other Trustee contacts whilst we framed our response to TPR’s consultation and since. Guidance to help trustees interpret it for their schemes, particularly in the new IORPII areas, wasn’t forthcoming when the Code was launched. So here’s a sense of what trustees, pensions leads and people with risk roles we’ve spoken to have been making of it so far.

How single is single? Expectations are not clear yet in the way the Code is written – many are not sure what they will need to do so as to start planning. Concerns are high about how the Code will land particularly, but not only, for smaller and mid-sized schemes with less resource and time to engage with the scale and detail of it. The role of a Chair and concept of a governing body are not directly translatable into the LGPS and the legal setting is different. Overall it can be hard to see what to apply.

Unintended consequences? The length and detail in the Code send signals of greater complexity in trustee roles, increased compliance responsibilities and Trustee governance costs. There’s expected to be further acceleration in the use of professional trustees, outsourcing, sole trusteeship and consolidators (for DC that’s been strongly flagged since). Will this be better for members and inspire their confidence?

Transparency – things can only get better? Often service providers cite commercial confidentiality, limiting trustees’ ability to probe and assure themselves on areas of risk, such as cyber risk, such as in full service arrangements. Could the final Code call for greater transparency to support trustees on this?

Upcycling? Even for those running well-resourced schemes, getting to grips with the risk and ORA modules looks to be significant work. More clarity is wanted from TPR on how existing risk, policy and reporting work can be rebadged to meet expectations, with practical guidance upfront. There is a lot of theory, but the key thing is to demonstrate how this fits with practicalities of what a Trustee needs to do.

Catalyst or checklist? Scheme costs could rise without adding much value if the Code encourages a checklist mentality and/ or leads to a consultants’ bonanza. If trustees look through a lens based on clear objectives for the scheme, it should be possible to apply the Code proportionately and point to why this fits the scheme’s needs. That’s what good governance should be all about. But it needs TPR to show clearly it’s the approach they want to see. Guidance and the Toolkit need to stay in step with the Code and be available when the final version is launched, especially to support the IORPII requirements.

Competence and integrity are two capacities and values which are as vital as they are difficult to define. Competence is often in the eye of the beholder, and integrity can mean different things to different people. A trustee board needs to be clear about the skill, competencies and behaviours that the individuals bring, and where the gaps might be. This must include the softer skills that many thought were lacking from the PMI’s proposed professional trustee qualification. Trustee boards need to have people that are good at mentoring, encouraging participation and facilitating discussion. These are difficult attributes to examine, but are just as important, arguably more so, than a technical knowledge of S75 debt.

We often find that new trustees struggle with the move to a non-executive role or are inexperienced at being part of a decision-making forum. Therefore, it is critical that the trustee board encourages the airing of views and provide a comfortable environment for people to ask questions. A trustee that behaves with integrity would welcome alternate views and challenge as a way to strengthen decision-making. Listening to challenge doesn’t have to mean changing your mind, it is about testing the assumption and facts that have influenced a position.

Trustee boards should be much more proactive, in the same way as corporates are now, about the skills and people they need. They should be much more assertive in ensuring that the trustee board has a good cross-section of competencies and understands what integrity means.

There are important questions that every trustee board should ask themselves:

• What kind of skills are needed?
• How big does the board need to be?
• What is an appropriate term limit?
• How should trustees be selected?
• What induction is provided?

All of these will play into the ongoing governance of the pension scheme. For example, a larger board can encompass a greater range or depth of expertise, but large forums can make decision-making unwieldy and debate protracted. It is about striking a balance, but if none of these things are considered in the first place, then problems could lay ahead.