Last week’s interim consultation response from the Pensions Regulator addressed a common concern about the “Funding and Investment” section of the draft single Code of Practice: it confirmed that it would drop its proposal for a 20% cap on unregulated investments.

This is a point that we are aware had been troubling some larger pension schemes in particular.  Their trustees and investment managers will be breathing a sigh of relief.

But there’s another point buried in the same section of the Code that could be equally worrying for smaller schemes.  This is the Regulator’s suggestion that schemes that are not legally required to have a statement of investment principles (SIP) should maybe produce one anyway (or at least something similar).  This includes public sector schemes and also schemes with fewer than 100 members.

The draft Code says:

“In cases where preparing a SIP is not a legal requirement, in our view it would be good practice for governing bodies to prepare a document that is similar in nature, and to publish it online as if it were a SIP.”

Producing a SIP, keeping it under review and publishing it on a publicly available website is a substantial piece of work.  Is this an example of law-making through the backdoor?  Okay, so the Regulator hasn’t said that smaller schemes have to do this, or even that it expects them to, but the implication is that not to do so is out of line with “good practice”.  So is this really a choice, particularly if most smaller schemes fall into line and you end up in a minority who aren’t producing a (non-)SIP?

Will this make it into the final draft or has there been a backlash at consultation stage?  We await the next version of the Code with interest.