Employers are advised to work with their pension trustees to ensure they understand two new codes of practice from the Pensions Regulator.
The codes – Member-nominated trustees and directors and Internal controls – came into effect in November, and place a new set of requirements on trustees.
The first states that at least a third of trustees must be member-nominated by October 2007. Richard Murphy, a partner at actuary firm Lane Clark & Peacock, said this will mean many pension funds will need to change their board of trustees. "Many will have agreed their own form of board, which may have no member-nominated trustees. They are now required to have a third of their trustees [nominated by members]."
The second code, Internal controls, has already come into effect. This provides guidelines for trustees and managers of occupational pension schemes about how to meet legislative requirements and assess risk. Although the codes of practice are not statements of law, they will be taken into account in a court of tribunal where relevant. Therefore, trustees are advised to comply as soon as possible.
"From a company perspective, they should want the pension scheme to be well run so they have an incentive to get the trustees to demonstrate compliance with [the codes]," Murphy said.
He added that a concern for schemes now is whether or not members can be persuaded to become trustees. "The real challenge is that, with so many codes to comply with and with such a high level of training expected, whether anyone will volunteer," said Murphy.