By now, you have probably heard of the Single Code of Practice, however are you aware of the Own Risk Assessment (ORA)? Section 64AL of the Pensions Act 1990 requires all trustees with Schemes over 100 members, to carry out and document an ORA.
The draft Code has stated that the latest date by which the Trustees can complete this initial ORA for their Scheme 12 months after the Code is finalised, in order to gain a thorough understanding of the Schemes risk profile including corresponding actions required to mitigate these identified risks. The ORA will subsequently be an annual requirement for all eligible Schemes, or sooner should if any material changes are presented to the risks facing the Scheme or the way it is governed. Example of material changes are:
- Significant change in structure of the trustee board
- Going concern issues with the Sponsoring Employer
- A merger or acquisition affecting the pension scheme
- Fully securing member benefits with an insurer
So what is an Own Risk Assessment?
In a nutshell, the ORA is an assessment into how well your governance systems are running regarding the processes of investments, administration and payment of benefits. It also requires a review of the effectiveness of policies and procedures for the governing body and risk management. This assessment will be a standalone risk management process to the risk register and is to cover all Scheme arrangements including DB, DC and hybrids. The ORA should be available upon request in a written format, signed by the Chair on behalf of the governing body.
The assessment of the effectiveness of your governance system can be tested through asking yourself some of the following questions:
- Is the policy reflective of the current circumstances and processes of the Scheme?
- Is the aim of the policy clear?
- Are relevant roles and responsibilities clearly defined?
- Is the date the policy was reviewed, and next review date disclosed in the policy?
- How easily accessible and known is the policy?
- Is the policy updated with the correct most relevant legislation?
Long term good governance enhances risk management and decision making, leading to improved outcomes for your members, therefore the findings from the ORA should be effectively actioned and incorporated into the Schemes current processes. Ensuring policies and procedures are fully documented will allow consistency and efficiency across the governing board, streamlining decisions and strategies.
If you would like to find out more on the Own Risk Assessment and the requirements of completing, please contact Assure UK for more information.