Guidance designed to help pension scheme trustees and employers cope with the financial impact of COVID-19 has been updated by The Pensions Regulator (TPR).
Among the updates is further guidance for trustees of defined benefit (DB) schemes facing employer requests to agree to suspend or reduce deficit repair contributions (DRCs). Trustees may agree these where it may be necessary to support employers navigating the challenges resulting from COVID-19.
However, the guidance now asks trustees to resume reporting certain key information to TPR to ensure risks are being managed and savers protected.
Charles Counsell, TPR’s Chief Executive, said: “COVID-19 has had a huge impact on us all and so during this unprecedented time we have continued to listen and talk to trustees and employers.
“We are determined to help where we can by taking a pragmatic approach while remaining focused on the need to protect savers.
“The information we issued in March and April remains relevant and today’s updated guidance outlines how we are continuing to support schemes in these challenging times.
“In making decisions on regulatory action, we will continue to do so on a case-by-case basis and take a flexible and pragmatic approach where breaches are COVID-19 related. As such, we feel the resumption of some reporting is now important.”
While data shows around 10% of DB schemes have sought to defer DRCs, with discussions ongoing for others, TPR recognises that there is a need for deferrals to continue.
Trustees of DB schemes should continue to be open to requests from employers to delay DRCs. This should be subject to their undertaking due diligence, particularly since TPR expects greater insight into an employer’s short-term liquidity to have developed since the COVID-19 lockdown began.
Trustees remain the first line of defence for a well-supported DB scheme and today’s information clarifies TPR’s expectations.
There continue to be impacts on DB schemes’ funding positions and covenants. Conditions remain highly uncertain although visibility is improving for many employers. Cash equivalent transfer values (CETVs) were suspended for a small number of schemes during the period of market volatility but a normal level of activities now appears to be resuming.
From 1 July, pension trustees should resume reporting information to TPR. This will ensure the regulator is able to horizon-scan effectively, identify risks and act as necessary to protect savers.