Trustees can suspend deficit reductions, ignore current markets in their valuations and stop cash equivalent transfers under a raft of emergency measures published by The Pensions Regulator (TPR) today.
In a special Covid 19 guidance update published on its website today, TPR says DB scheme trustees can use historic valuation assumptions and ignore current market conditions when completing their assumptions. Schemes can also postpone filing recovery plan submissions.
TPR says it does not expect DB trustees who are close to completing their valuations to revisit their valuation assumptions to reflect current market conditions.
If trustees need more time to consider the scheme’s and employer’s situation, they may decide to delay their recovery plan submission by up to three months, and in that case we will not take regulatory action in respect of a failure to submit.
DB trustees should be open to requests to reduce or suspend Deficit Recovery Contributions (DRCs) in line with the principles set out in our guidance published March 20.
Where sufficient information is not available to make a fully informed decision, trustees may agree to a reduction or suspension of DRCs for as limited a period as possible while appropriate information is provided. This should not be longer than three months. We expect the scheme to be fairly treated compared to the other stakeholders of the employer. Employers and trustees should seek to work closely together and share relevant information.
The regulator says DB trustees may decide to suspend cash equivalent transfer value (CETV) activity for up to three months if this is in the best interests of their members.
DC trustees are being urged top consider how individual members might react in the current environment to headline market or fund value falls or reductions or loss in earnings. Members could make inappropriate decisions, crystallise losses, or be exploited by scams, it warns.
TPR executive director of policy David Fairs says: “The significant measures and clear guidance we are announcing reflect the unprecedented and challenging situation trustees and employers find themselves in. The current scheme funding regime is flexible enough to cope with the impact of a severe economic downturn. However, we are actively considering what additional support and guidance we need to provide now so that those who manage and contribute to people’s savings can take the right steps to ensure adequate protection, recognising the challenging situation some scheme sponsors are in.
“We will continue take a reasonable, pragmatic and proportionate approach in the weeks and months ahead and we call on trustees to follow the guidance closely to make well balanced decisions.”
