COVID-19 – Updates from the Pensions Regulator
The Pensions Regulator (the “Regulator”) has issued updates to its coronavirus guidance as it continues to adapt its approach to the situation.
Many of the regulatory easements introduced by the Regulator early in lockdown are about to come to an end; guidance for trustees dealing with difficult decisions as a result of the pandemic’s impact has been given a “major rewrite”; and guidance for employers has also been updated.
Reporting requirements for trustees will return to normal from 1 July 2020, subject to one exception. Normal service is resumed in relation to:
- the suspension of deficit repair contributions (“DRCs”);
- late valuations;
- failures to agree recovery plans;
- delays to transfer quotations and payments; and
- failures to prepare audited accounts.
The Regulator has confirmed it will continue to take a pragmatic and sympathetic approach to its regulation of schemes, but expects trustees to comply with their reporting obligations wherever possible.
The one exception to the ending of easements is that pension providers will continue to have 150 days to report the late payment of contributions (as opposed to the normal 90 days). This is expected to remain the case until the end of September, when the Regulator will review the position.
Suspension or reduction of deficit repair contributions
The Regulator recognises that requests from DB scheme employers to suspend or reduce DRCs may continue to be appropriate, but now expects trustees to subject those requests to a greater level of scrutiny.
In view of the improved visibility of employers’ financial situations compared to March/April, most trustees should be able to undertake due diligence before agreeing to requests. They should also continue to seek appropriate mitigations and protections. These might include seeking agreement that no shareholder distributions will take place while a suspension is ongoing, or ensuring that suspended contributions will be repaid within the current recovery plan period.
Impact on the employer covenant
Updated employer guidance reminds sponsors of the obligation to provide trustees with the information they need. As updated financial projections which factor in the impact of COVID-19 become available, trustees will have to consider whether the employer’s covenant has worsened materially, and whether a new valuation or revised recovery plan is required in response.
DC chair’s statements and accounts
The Regulator has also announced that it will not review any chair’s statements until after 30 September. Any received by the Regulator in the meantime will be returned to the scheme unread, but this should not be regarded as an indication that the statement has met the Regulator’s requirements.
The Regulator has emphasised that it does not have any discretion in relation to fines for the late preparation of a chair’s statement. So while the Regulator will continue to be pragmatic about late audited accounts (until 30 September), the chair’s statement should be prepared and signed off separately if necessary.
Statements of investment principles
The Regulator has stated that it does not expect to take action if the review of a statement of investment principles or a statement regarding a default arrangement is delayed, provided that delay does not extend beyond 30 September.
As lockdown measures are eased, and businesses face up to the lasting impact of the crisis, it comes as little surprise that the Regulator’s easements are being removed.
It maintains that it will continue to take a flexible and pragmatic approach to regulation where breaches are Covid-19 related, but trustees, administrators and employers should ensure they have familiarised themselves with the updated guidance, and the Regulator’s expectations.
If you require any assistance or advice in this area, please get in touch with a member of the pensions team.
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