Minority of DB schemes suspend deficit repayments and transfers

Only 5 to 10 per cent of sponsoring companies are expected to suspend or reduce deficit contributions into DB pension schemes, according to research from the Society of Pension Professionals.

In a survey of of members, the Society said that deferral of pension contributions is “definitely happening” but not in a large number of schemes at present. 

The survey shows that 55 per cent of SPP members said they did not expect any of the DB schemes they advise to suspend or reduce deficit contributions. Meanwhile 19 per cent said they expect up to 10 per cent of schemes to take this action. Just 5 per cent of members expect between 25 and 50% of schemes to take this action and only 1% expected more than half of DB schemes to suspend or reduce contributions.

The SPP says that while this means the majority of sponsors do not need to take action at present, for those that do it is a valuable lifeline which could be the difference between the business surviving or not. 

It points out that while numbers remain low, this could increase over time as the impact of the lockdown is felt more severely by businesses.

The survey also asked members about whether they are suspending transfer values. 

There has been concerns that with gilt yields falling over the first quarter of this year this has pushed up transfer values at a time when underlying asset values have declined, due to market falls. This could have an impact on funding levels. There are also concerns about access to financial advice and the increased risk of scams during the Covid-19 pandemic. 

However, the survey shows only a minority of schemes have opted to suspend giving transfer values at present.

In total 62 per cent of SPP members said none of their DB schemes had suspended transfer activity. Only 3 per cent of members said they more than half of the DB schemes they advice had put transfer activity on hold. 

This survey also asked members whether trustees have convened remotely to discuss the ongoing Covid crisis, and the potential impact on workplace pension schemes. The SPP found that on average only about 50 per cent of schemes had called special meetings. 

However, it points out that in a typical month around a third of pension schemes will have had scheduled meetings and larger schemes will also have had sub-committees meeting more frequently. 

The SPP adds: “Anecdotally our conclusion is that many schemes have managed the current crisis within their existing governance framework.” 

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