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COVID-19 - pensions pinch points

24 March 2020
The outbreak of COVID-19 is affecting all aspects of our daily lives, but what issues should pension scheme trustees and employers be considering amid the uncertainty we face?

The Pensions Regulator (TPR) expects trustees to have monitoring and contingency plans in place and to be alive to risks that would have significant consequences to their scheme and its members. However, those plans are unlikely to have been designed for such an unprecedented situation. To help trustees and employers manage this, here are some of the key issues to consider and some tips on managing them.

As a team used to agile working, we are willing and able to help with any conundrums you might have please email or call your usual contact.

COVID-19's impact on business

We think this is the "big issue" that TPR is going to be busiest with.  As we have already seen in our communities, the negative impact on businesses may be far reaching – particularly on the retail sector, already the scene of many a collapse and PPF entry.  The need for businesses to have some breathing space to pay bills will almost inevitably affect DB pension contributions in the short to medium term – the FT has already reported on this.  

Both trustees and employers will need legal and covenant advice on this. There is a need to get the balance right and make sure that the scheme is fairly treated alongside other stakeholders such as banks and suppliers and doesn't lose ground in the crisis; but also that the employer can get through the crisis in one piece and doesn't inadvertently breach banking covenants or trigger scheme wind up. Any adjustments and conditions also need to be clearly documented. It's also critical that, if the worst is going to happen, trustees are sufficiently prepared in advance and can be confident that their scheme can enter PPF assessment smoothly.  

We have significant experience in this space and a proven track record in helping trustees and employers to come to a sensible deferral solution for the benefit of both; and in understanding (and smoothing) the wrinkles sometimes encountered around PPF entry.

Trustee meetings in a virtual world

A socially isolated country means that face to face trustee meetings won't be able to take place for the foreseeable. Fortunately, we can make use of technology as a helpful alternative (imagine if this had happened 20 years ago…).

Trust Deeds / articles of the trustee company may provide for the use of Skype, telephone call or video link to be used to hold a trustee meeting. If this is the case, the meeting can go ahead as normal, once everyone has got the hang of their webcam etc. On the other hand, if they don't, amendments will be needed to ensure decisions are validly made. We are happy to assist with both advising on whether the Trust Deed/articles allows for such meetings and to amend where necessary. 

Document management in a pandemic 

Along with the increase in use of technologies such as Skype and telephone conferences, trustees may need to think about document execution. Remote execution of documents is often possible, and trustees may wish to use tools such as Docusign, for signing contracts online. 

Admin, admin, admin

If administrators (or indeed other advisers) haven't been in touch already, trustees should ask what contingency plans they have in place to keep the scheme running as smoothly as possible in challenging circumstances (in particular, making sure pensioners are paid). Trustees may wish to take legal advice where a service provider intends to rely on a force majeure clause to modify its performance of a contract in the midst of the pandemic, but they will also need to sensibly discuss priorities.

Employment issues

Trustees should address any changes the employer may make that may impact employees' pensionable salary or the scheme's administration. 

Our employment team has produced some helpful resources to assist employers with the many issues facing them currently. These can be found at the following links: 

Legal Insight

Employers asked to stick by their employees whilst employment and wage subsidy package is finalised. Read more >


Watch our Webinar with Kirsty Rogers and Joanne Frew: Questions and answers for employers. Read more >

Pension Protection Fund

The PPF has published its own guidance confirming its contingency plans to ensure continued payment of member benefits. It has also confirmed that contingent asset submissions should be now sent by email, and forms authorised by e-signature software can be accepted. Contingent asset and ABC assessment reports need not be changed if already signed off and a light touch approach is being taken with regard to the need to include assumptions on COVID 19 for reports being done now.

The link to the full guidance is here

Further Reading