Matthew Swynnerton: Key pension issues arising from Covid-19

Matthew Swynnerton: Key pension issues arising from Coronavirus

Some trustees may receive requests from sponsors to reduce, delay or suspend contributions, as employers may seek to deviate from the schedule of contributions due to cashflow concerns.

Any such proposal would require the consent of the trustees, who would need to consider the members’ best interests, the scheme rules, The Pensions Regulator (TPR) guidance and ensure the scheme retains adequate cashflow. Trustees should consider whether to undertake a covenant review of their sponsor and whether triggers for financial support in any security arrangements they have in place have been activated.

Investment, funding and insurance considerations are also key and trustees should consider their investment strategy and potential lockdowns of investment, and the effect of force majeure provisions in their insurance policies. For valuation cycles with a 2020 effective date, trustees and employers may wish to seek actuarial advice on whether they can set alternative effective dates for actuarial valuations or take into account post-valuation date experience in determining additional funding requirements.

While TPR guidance indicates that trustees can suspend cash equivalent transfer value (CETV) quotations and payments for up to three months, trustees should consider whether this is appropriate for their scheme. Where it is being used, trustees and employers are likely to have to consider a number of complex pensions aspects of the Coronavirus Job Retention Scheme. To help those facing difficult decisions and circumstances, TPR continues to issue further guidance on a wide range of issues.

Effective and regular communications to members is arguably more important than ever at this time. Trustees and employers may wish to pre-empt member concerns about the impact that the current financial uncertainty could have on their pensions. Defined benefit (DB) members may be concerned about the employer’s ability to support the scheme and defined contribution (DC) members may be concerned that market volatility will have depressed their fund values. All members may want to understand what contingency arrangements are in place with the trustees’ service providers and should be alerted to the risk of pensions scammers, who are sadly exploiting the current situation.

Finally, remote working means that trustees are also having to contend with numerous logistical and legal issues in relation to remote execution and witnessing of documents, quorum, delegation and ensuring confidential information remains protected and GDPR-compliant

Matthew Swynnerton is a pensions partner at DLA Piper.