The UK Pensions Regulator (tPR) has updated its suite of COVID-19-related guidance notes outlining its approach going forwards. Much of the flexibility on offer and tPR’s more relaxed approach towards some areas of compliance have gone. These have been replaced with expectations of trustees doing their due diligence and an end to reporting easements. The feeling is that employers should now have had enough time to take stock, assess the situation and, at the very least, work out if the impact of the pandemic on their business is likely to be short term or more permanent.
Trustees of defined benefit schemes should pay careful attention to this updated guidance:
- Trustees are expected to carry out proper due diligence and to consider requests from employers carefully e.g. to suspend or reduce contributions.
- Full information should be requested, including around the employer’s cashflow and liquidity, and trustees should ensure that the scheme is being treated equitably in relation to other creditors and shareholders. Where only limited information is available, trustees should only grant short-term concessions (and think very carefully before doing so).
- It should now be clear to trustees whether temporary measures to help employers are appropriate or if new valuations and recovery plans should be implemented.
- Trustees are also expected to review scheme investments carefully to determine if any changes are necessary.
The overarching theme of reduced flexibility is echoed in the updated guidance for employers. Employers are now expected to share more information with trustees and take note of the factors trustees will have to consider when granting concessions. It is worth highlighting, however, that tPR information reveals that, so far, only 10% of schemes have agreed to a suspension or reduction of deficit reduction contributions. The vast majority of employers have looked elsewhere to reduce costs.
With the exception of reporting late payment changes (which will be reviewed at the end of September), reporting duties will return to normal from 1 July. As normal life looks like it is starting to resume, tPR too is looking to return to business as usual following the measures it implemented at the height of the pandemic.
Information contained in our COVID-19 articles and publications is correct at the time of print. This is, however, a constantly evolving situation across the globe and specific advice and guidance should be sought as required.