Navigating the General Code: A practical guide to ESOG and ORA
08 October 2024
- Contact Kerry Merryweather
- Director of Trustee Governance & Projects, ZEDRA Inside Pensions
- [email protected]
- +44 7734 954 021
The Pension Regulator’s (TPR) General Code has upped the ante for pension schemes.
New requirements like the Effective System of Governance (ESOG) and Own Risk Assessment (ORA) might sound complex, but they’re essentially formalising existing practices that many schemes already follow.
To help you cut through the jargon, we’ve summarised the key considerations and practical tips for navigating the General Code landscape.
Key considerations
- Keep it simple: Don’t let jargon or complex frameworks cloud the basic requirements of the General Code.
- Tailor your approach: It won’t be a one-size-fits-all solution. Adapt your approach to the ESOG and ORA based on your scheme’s size, complexity and long-term journey.
- Document what you’ve got: Many schemes already have solid governance systems in place. The key is documenting them to meet the Code’s requirements.
Back to basics
Imagine the General Code as a rulebook for your pension scheme. The ESOG is the housekeeping, ensuring everything is organised, risks are identified and managed, and decisions are made responsibly. The ORA is a self-check to test that your housekeeping is up to par.
The ESOG: A monitoring framework
- Proportionality and Pragmatism: Tailor your ESOG to the size and complexity of your scheme. A small, simple scheme might require less formal documentation than a large, complex one.
- Documentation: Ensure your ESOG is well-documented, and that you have considered how best to utilise tools already available to you, such as existing governance platforms.
- Strengthening Your ESOG: Identify any gaps in your existing system, via a gap analysis, and take steps to address them. This might involve updating policies, improving risk management processes, or enhancing governance structures.
- Ongoing Monitoring: Establish a system for regularly reviewing and updating your ESOG, including a mechanism for change-tracking. This will help you stay compliant with the Code and feed directly into your ORA assessment process.
The ORA: A structured assessment
The ORA is a structured assessment of a scheme’s governance and risk management practices. It is designed to ensure that the scheme is effectively identifying, assessing and managing risks, and that its governance arrangements are robust and fit for purpose.
Your first ORA
The first ORA report must be published in accordance with statutory requirements i.e. within 12 months beginning with the last day of the first scheme year that begins after the General Code came into force on 27 March 2024. For schemes with a year end of 31 March, the deadline for publication of the first report is 31 March 2026.
The reporting period for the first ORA should be based on the most recent completed scheme year. For example, a scheme with a year end of 31 March would assess the period from 1 April 2024 to 31 March 2025.
Future ORAs
TPR recommends conducting ORAs at least every three years, but schemes can choose to do them more frequently. The reporting period for future ORAs can be either the full three-year period since the previous report or the most recent completed scheme year, it’s completely up to the individual scheme.
Our recommendation: Focus on the most recent year
Given that the ORA is a snapshot of a scheme’s risk profile at a specific point, we recommend focusing on the most recent completed scheme year. This provides a more up-to-date assessment and allows for targeted analysis.
It’s important to acknowledge and factor in any significant events or changes that occurred in the previous two years that might impact future risks. These events could include:
- Changes in the scheme’s investment strategy
- Regulatory developments
- Economic fluctuations
- Changes in the scheme’s membership or employer
- Significant legal or actuarial events
The importance of independent oversight
While TPR hasn’t explicitly mandated external audits of ORAs, it has emphasised the importance of independent oversight and robust governance in the risk management process. It is entirely up to each scheme to decide who prepares the ORA and whether to appoint a firm to carry out an external audit, but this is not a requirement and many firms offering solutions (including ZEDRA) can provide internal assurance checks.
In summary
While the General Code may present challenges, a pragmatic approach and effective support can make the journey smoother. Through regular monitoring, gap analysis, and independent oversight schemes can better manage and mitigate risk, improving outcomes for members.
How ZEDRA can help
ZEDRA has a proven track record of assisting schemes in achieving compliance, supporting numerous clients to simplify the process.
We offer a comprehensive solution to help schemes navigate the ongoing ESOG monitoring and ORA assessment process. Our solution includes:
- Gap Analysis: Identifying any gaps in your existing ESOG.
- ESOG Monitoring: Providing a user-friendly dashboard to track and monitor your ESOG.
- ORA Process and Report Production: Guiding you through the ORA process and helping you produce a compliant report.
Our solution is designed to be customisable, ensuring it fits your scheme’s specific needs. It’s also fully TPR-compliant and minimises disruption to Trustee Board’s workloads.
Contact Kerry Merryweather or our Projects Team to learn how we can help you navigate your General Code journey.
Written by Lauren Branton.