TPR guides trustees in unprecedented times
The Pensions Regulator has today, Friday 20 March, issued guidance to help trustees during these unprecedented times. It provides a clear focus on ensuring pensioners can continue to be paid and all members are protected given a heightened risk of scams.
Wayne Segers, Head of Pensions Solutions at XPS Pensions said "At times like these it is more important than ever to focus on members. Our pensioners are most at risk in the current climate and it is essential that pension schemes ensure that pensioners can rely on receiving their pension payments. This is a key focus of the Regulator's statement which we support. All members need to be protected. Opportunistic scams are on the rise and we echo the Regulator's comments on this from what we have seen. Our anti-scams team is continuing to support trustees in protecting members here."
The Regulator expects employers to continue with contributions but recognises challenges they face. Some employers face a threat to their existence due to the coronavirus outbreak. A number are seeing a substantial impact on their revenues and workforce and a significant fall in cash flow. A short reduction or suspension in employer pension contributions can in some cases make the difference to an employer's survival.
Wayne Segers, Head of Pensions Solutions at XPS Pensions said, "We welcome the Regulator's guidance on how trustees should respond to requests to reduce contributions. We expect companies will already have a lot of the information they need to make the case to trustees on whether they can indeed keep paying contributions. We see most businesses planning for and measuring the impact of the current downturn on their business. This information should be shared with trustees to make them aware of the impact of scenarios and how being ready to reduce contributions can help in extreme outcomes.
Unfortunately some employers are already there. These may need to reduce contributions to survive and the Regulator recognises a need to help such employers. We'd also encourage trustees to see if there is any short term protection such as asset security to mitigate the impact of a reduction in contributions if it is needed."
XPS recommends that all trustees should proactively engage with their employers to understand how the current environment affects their business. The best way to ensure that a scheme can meet all pensions over time is to ensure that the employer is robust through the current crisis and can fund the scheme over the long term.
The guidance also notes the Regulator is suspending its regulatory initiatives and postponing some of its activity. Notable is that it expects to extend the consultation period for new funding rules. Wayne Segers added, "while an extension is understandable the good practice outlined in the code is very helpful for making decisions in such challenging times. I would encourage employers and trustees to reflect this in decision making.