TPR issues guidance for DB pension schemes with sponsoring employers in corporate distress
The Pensions Regulator (TPR) has issued guidance for defined benefit (DB) pension scheme trustees with a sponsoring employers in corporate distress due to the COVID-19 outbreak.
Due to the fluidity of the situation, the trustees and other interested parties should visit the TPR’s COVID-19 webpages on a regular basis for further updates.
Due to the current environment, TPR highlights that there is a heightened need for trustees to understand the corporate health of their scheme’s sponsoring employer and consider any previously drafted contingency plans. This should be considered in conjunction with the impact of any falls in asset values on the scheme.
Employers should keep the trustee body, as a key stakeholder, informed of the best available information, while recognising that information will not be as robust as it would normal due to the difficulties and uncertainties employers are facing.
The guidance sets out a series of questions in relation to the COVID-19 outbreak that trustees should ask the scheme’s employer to help focus discussions. These focus on the employer’s business operations, its business continuity plan, cashflows, any banking covenants, borrowing facilities and applicable government support.
In circumstances where the sponsoring employer requests to defer deficit repair contribution (DRC) payments the TPR acknowledges that this may be appropriate in the current circumstances, but trustees need to exercise care to ensure that any support given is part of a co-ordinated and fair response across key stakeholders.