Coronavirus and pension schemes – what should trustees be doing?
The impact of coronavirus on pension schemes may not be immediately obvious but there are important issues trustees should be thinking about to protect their schemes.
The Pensions Regulator has released a statement which stresses the importance of minimising the impact of coronavirus on scheme members. The Regulator expects trustees to effect or update contingency plans to mitigate potential under-resourcing of staff and ensure that scheme activities are prioritised to lessen the impact on members. For example, trustees should ensure that pensioner payments are paid on time and retirement and bereavement notifications are responded to timeously.
The most noticeable effect of the coronavirus on schemes is the financial market’s impact on scheme funding. Trustees should be in contact with their investment advisers and seek advice on potential exposure and possible adjustments to their portfolio. If appropriate, trustees should also consider updating their statement of investment principles. If the scheme is undergoing a restructuring exercise, the trustees should take advice on whether it is appropriate to continue with such an exercise at this time.
The changing financial climate is also likely to have an impact on employer covenants with employers likely to be facing cash flow problems in the coming weeks or months. Trustees should consider obtaining updated advice, especially if they receive requests from employers to halt contributions or postpone payments under recovery plans.
As face-to-face trustee meetings are cancelled, meetings are likely to be held by telephone or skype/ video conferencing facilities. The scheme’s rules on trustee meetings should be checked: are changes needed to quorum or decision-making rules to make allowances for the current circumstances? Trustees should also consider communicating with members to explain that some disruption is likely, such as delays in processing transfers or requests for investment switches. Any such announcement might also include a sensitively worded reminder to members to check their nominated beneficiary form is up to date.
Trustees should contact their service providers and advisers to check that contingency plans are in place, and should consider the possibility that service providers or advisers may need to work from home. Appropriate measures should be put in place to continue key services through-out the coming months. Trustees should also ensure that IT security and data protection issues are covered by any such contingency plans, especially in situations where member data is processed by providers/advisors whilst remote-working. Most contracts with service providers will include a force majeure clause, which will allow them to modify or possibly suspend performance in certain circumstances. If any service provider contacts the trustees intending to rely on a force majeure clause, the trustees should contact their legal advisors for advice on how to proceed.
The PPF has also issued a statement on coronavirus. For the foreseeable future any PPF levy documents are to be submitted electronically. Any PPF-specific documents may be signed electronically (for example by use of e-signature software) – however trustees should ensure that any document that is to be effective for any purpose beyond the PPF is signed validly. We can assist with queries to ensure documents are validly executed. In relation to deadlines, the PPF has stated that they cannot approve extensions, but they understand documents may be lodged late and will accept them if the circumstances are reasonable (such as key individuals being unwell or needing to self-isolate).
How we can help you
The coming weeks and months are uncertain, and government guidance is changing all the time, but if you would like any assistance with preparing your scheme for the impact of coronavirus, please get in touch with a member of the pensions team who will be happy to help.
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