UK pension schemes with 100 members or more that are required to operate an effective system of governance (ESOG) must now complete an own risk assessment.
In the rules introduced by The Pensions Regulator on 28 March, the ORA is an assessment of how well the ESOG is working, and the way potential risks are managed. Governing bodies of other schemes may carry out an ORA as an example of good practice.
TPR may consider failure to complete an ORA as an indicator of poor governance. As the ORA will identify the key governance risks facing the scheme, the governing body should incorporate the findings into its management and decision-making processes.
Rachika Cooray, partner and head of governance at consultants Lane Clarke & Peacock, says: “In a landscape where reforms are accelerating across both DB and DC, trustees need more than compliance checklists. They need a governance tool that helps them steer.
“A well-crafted ORA does exactly that. It shines a light on how decisions are really made, exposes blind spots early and turns governance into something active and forward-looking. At a time when trustees are being asked to do more with less, that clarity isn’t a luxury – it’s essential to running a resilient and future-ready scheme.”
The ORA must also cover the scheme’s investment governance processes, how investment performance is reviewed and monitored, and how the governing body assesses investment risks relating to climate change, the use of resources and the environment.
