Pensions Regulator gives guidance on managing COVID-19 pension risks
What you need to know
- The Pensions Regulator (TPR) has set up a dedicated web page to provide guidance on the impact of COVID-19 on the pension system. It will update the page as circumstances develop.
- The page can be found here: https://www.thepensionsregulator.gov.uk/en/covid-19-an-update-for-trustees-employers-and-administrators
- The guidance directs those involved with running pension schemes to focus activities on key risks to pension savers arising from the virus outbreak.
- TPR expects trustees to be alive to the risks that can impact their pension scheme and its members. Trustees need to ensure they can keep running their pension scheme. It is paramount to ensure pensions can be paid and trustees must contact TPR if not able to pay pensions.
- TPR also expects trustees to urge extreme caution to members looking to transfer their pension. Scams are on the rise and members should be directed to the ScamSmart website and the Money and Pensions Service.
- TPR expects employers to continue paying contributions to their scheme but has set out guidance for those who cannot.
Actions you must take
- Read the guidance on TPR’s website – we encourage trustees and employers not to rely solely on summary briefings such as this one.
- Activate and assess your pension scheme’s business continuity plan to ensure that it is robust and effective.
- Engage with your administrators and service providers to assess what contingency plans are in place and whether they can continue to service the pension scheme.
- Report to TPR if you expect the scheme will not be able to continue to pay pensions.
- Review your scam protection for members looking to transfer – follow TPR’s request to direct members to online help and determine if you need to put in place more robust protection.
- Follow the principles set out in the guidance for distressed employers if looking to reduce or suspend employer contributions to the pension scheme.
Key risks set out on TPR’s COVID-19 web page
The finer detail: Guidance on TPR’s COVID-19 web page
TPR sets out expectations for trustees, administrators and employers. Additional detailed guidance is included for distressed employers. It also provides an update on business as usual regulatory activity stating regulatory initiatives are temporarily suspended.
Guidance for trustees
Business continuity plans
Assess plans to determine if adequate. Contact service providers to check what plans they have in place to continue to operate.
Clearly establish priorities, such as payments to pensioners, and confirm this with administrators. In the event your sponsoring employer is at risk, read the guidance on corporate distress (see below).
Be aware that opportunistic scams are on the rise. Urge caution to members and direct them to ScamSmart and the Money and Pensions Service.
Guidance for administrators
Prioritise payment of benefits, retirement processing and bereavement services. Focus on services linked to these.
TPR understands that some non-critical services may be impacted (for example producing annual benefit statements).
Guidance for employers
Recognition of current challenges
TPR recognises the strain employers face. TPR will be proportionate and aims to help employers get back on track. It directs employers to business support information published by the Government. Further guidance on corporate distress is also provided.
Principles to take into account when considering a delay in employer contributions
Trustees should understand current cash flow and reasons for the need to reduce contributions. Trustees should check no payments will be made to shareholders or related entities.
Understand what role other stakeholders are playing (e.g. lenders). Are they also being supportive? Ensure scheme is being provided with security if other stakeholders are.
Any suspension of payments should have an end date and ability to restart sooner if trading returns to normal.
Take advice including covenant and legal.
Recognise that the current situation is fast-moving. Timescales are very short so pragmatic concessions can be made but should be short term. Detailed information may only be made available later for a more considered decision.
For further information, please get in touch with Wayne Segers or speak to your usual XPS contact.