ORA: an overview

Basics of the Pension Scheme ORA

The Own Risk Assessment (ORA) is a new element in pension scheme governance, brought about by the General Code of Practice, with many schemes having to produce their first ORA by 31st March 2026.

Under the Code, a pension scheme ORA is an assessment of how well the scheme’s ESOG (Effective System of Governance) is working, and a detailing of the way risks are being managed.

pension scheme ORA: Image illustrating the concept of an own risk assessment through someone looking at a laptop with a magnifying glass

At publication of the General Code of Practice, TPR stated that the ORA should “be a more straightforward project for any well-run scheme”. This was after its initial statement during the consultation period on the Code was that the ORA would be a “substantial process”.

This change of emphasis, while welcome, has still created a level of uncertainty amongst pension scheme administrators, managers, and trustees, as they discuss the Code and the requirement to produce their first ORAs.

This knowledge hub post provides a top line overview of the ORA, aiming to reduce some of this uncertainty. In coming posts we will look in more detail at parts of the pension scheme ORA.

What is a Pension Scheme ORA and What Value Does it Add?

The ORA assesses the effectiveness of governance frameworks and risk management practices within pension schemes.

Governing bodies should use their pension scheme ORA to help them with the continual improvement in the governance of their scheme.

Conducted every three years, the ORA provides a snapshot of the governance framework at a specific time. Highlighting actions that need to be addressed before the next ORA.

As such, it should be regarded a crucial checkpoint for trustees and scheme managers, helping them ensure that their governance mechanisms are robust and responsive. And where they are not, spotlighting the areas of work that the governing body needs to act on.

Ultimately, TPR is keen for the ORA not to be seen as a tick-box exercise, but as a crucial aid to the governing body’s work on the pension scheme.

Eligibility and Timing for Conducting a Pension Scheme ORA

Pension schemes with one hundred or more members are required to conduct an ORA.

The initial assessment must be completed within 12 months after the end of the first scheme year following the implementation of the General Code of Practice, and subsequently at least every three years, or as and when major scheme updates or changes occur.

As illustration, with the Code being in effect from 27th March 2024, a scheme with a year end of 31st March, needs to produce its first ORA by 31st March 2026.

Key Areas Covered by the Pension Scheme ORA

The ORA encompasses five critical areas of pension scheme management.

In alphabetical order, they are:

Administrative Accuracy

Evaluating risks in financial transactions, scheme record management, and how the governing body manages the situation/issues created by late contributions.

Benefit Distribution

Assessing operational risks related to the payment of benefits and their management/record keeping to pension scheme members.

Governance Policies and Procedures

Covering how risk assessment is integrated into strategic decision-making. Plus, the policies about the role and knowledge of the governing body’s members.

Investment Oversight

Focusing on governance, risk assessments, and monitoring in investment processes: including processes, stewardship, monitoring, and decision making. Plus, consideration and/or assessment of climate change impacts, the protection of members benefits, and sponsor guarantees. 

Risk Management Strategies

Emphasising conflict management, internal controls, and succession/continuity plans.

How to Document the Pension Scheme ORA

The pension scheme ORA needs to be in writing.

Within that, it is recommended that the ORA be maintained as an electronic document, readily accessible to all governance members through an online platform.

This not only ensures compliance but also facilitates easy reference and review.

Also, consideration needs to be given to what ORA documentation should be made available to scheme members.

TPR has stated that records don’t need to be sent to members, but if asked by a member to see demonstration of the ORA, then the request should be supported. So, the governing body should decide what will be shown – the whole ORA, a part, or a synopsis – ahead of the ORA’s production.

For ORA sign off, good practice is to have the Chair sign and date the ORA, on behalf of the governing body.

The Importance of the Pension Scheme ORA in Risk Management

The ORA is not merely a regulatory requirement; it is a strategic exercise that provides profound insights into the operational health of a pension scheme.

By regularly assessing governance and risk management frameworks, schemes can ensure that they remain agile, compliant, and well-positioned to manage both current and emerging risks effectively.

Consequences of Non-Compliance or Failure to Complete an ORA

Non-compliance with ORA requirements can lead to regulatory scrutiny, reputational damage, and could negatively impact legal defences in cases of governance failures.

For example, TPR could consider failure to complete an ORA as an indicator of poor pension scheme governance.

This in turn could lead to more scrutiny from TPR, reputational damage and doubt over the governing body’s ability to fulfil its duties and responsibilities to scheme members.

It is therefore paramount for pension schemes to adhere strictly to ORA guidelines and timelines.

Conclusion

The pension scheme ORA is more than a compliance exercise; it is a critical governance tool that supports robust risk management and ensures the longevity and health of pension schemes.

By embracing the ORA process, pension schemes can enhance their governance structures, meet regulatory expectations, and provide better outcomes for their members.

How Assure UK can help with your pension scheme ORA

As with the ESOG, we highly recommend that pension scheme governing bodies look at their ORA responsibilities sooner rather than later.

While it won’t be until the end of March 2026 before the first ORAs need to be presented, a body of work needs to be completed and evidenced, which in turn needs discussion and agreement.

If only the first steps of scheduling diary time and the assigning/agreement of responsibilities are taken, these will help bring the ORA into focus, put it on the governing body’s horizon, and go a good way to reducing the uncertainty of going about producing an ORA.

Assure UK, with our specialist expertise in all elements of pension audit and assurance, is available to help, advise, and work with trustees and governing bodies on their pension scheme ORAs.  

Call us on 020 7112 8300, email us at info@assureuk.co.uk, or set up a meeting.

Helpful articles and insights on pension scheme audits

Effective System of Governance (ESOG) – What you need to know

A Straightforward Guide to the General Code of Practice

A Pension Scheme Audits Overview

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