On the go: New guidance for defined benefit trustees accepts that some employers may need to delay deficit repair contributions due to economic disruption caused by the Covid-19 outbreak, but urges schemes to test employer claims carefully.
The Pensions Regulator advised all DB trustees to ask their employer questions around their resilience to the virus and its impacts on supply, demand and cash flow. Trustees may ask specific questions about the lending facilities upon which the company relies, the guidance added.
It advised trustees to ascertain as much information as possible about sponsors’ obligations over three-month and six-month periods, as well as how far an economic rescue package unveiled on Friday would mitigate disruption.
They should also ask whether anything is likely to threaten payment due to pension schemes.
“Understandably, we have seen a rise in the number of employers requesting deferral of deficit repair contribution payments. We recognise that such actions may be appropriate in the current circumstances, but you should consider any request carefully to ensure that any support given is part of a co-ordinated and fair response across key stakeholders,” the guidance read.
If trustee boards are to allow any such delays, the regulator said they must carefully establish the need to do so by looking at sponsor cash flows, ensuring that other stakeholders are not being treated better than the scheme, and insisting that contributions restart as soon as normal trading resumes.
The regulator also issued guidance for trustees of all scheme types, asking them to ensure benefits continue to be paid, scam risks are minimised, and employers continue to contribute.
Savers should also be supported to make good decisions, while the regulator accepted that it would take a “proportionate and fair” approach to any breaches of the law that result from the outbreak.
The watchdog also announced that it is suspending all regulatory initiatives, including its work on a new tougher regime for DB funding.
