COVID-19 & Pensions: Where Are We?
Many Employers are wondering what they can (and more importantly perhaps) cannot do in respect of their pension arrangements given the lockdown and precarious financial position in which currently find themselves. This is not a situation that will resolve itself quickly even when the lockdown is eventually lifted so here are just a few points to consider.
Defined Contribution Schemes: If you have furloughed your staff, you will still be liable to pay the minimum Auto Enrolment contributions. This will usually equate to 3% of the employees qualifying earnings. These however will be able to be claimed from the Government under the Job Retention Scheme. Any contributions the Employer makes above the statutory minimum will have to be met by the Employer. The Pension Regulator retains its powers to impose sanctions on Employers who fail to meet their obligations and while it may take a pragmatic approach, please do not assume that you will be able to ride roughshod over the rules!
Defined Benefit Schemes: Employers may wish to consider asking trustees to agree a deferral of their Deficit Repair Contributions (NOT the standard contributions - they will still be payable in full under the Schedule of Contributions). TPR Guidance suggests that trustees should be open to such requests, but that they should still ask some searching questions of the Employer and not just ‘rubber stamp’ a request. If financial information is sketchy then initially a three-month deferral can be granted. If a good business case can be made after appropriate due diligence then this could be extended. Trustees should of course ensure that if granted, no dividends or shareholder benefits are paid.
Hand in hand with this may be the need of a review of the current investment policies and cash flow requirements as well as administration ‘disaster recovery’ policies. It is important that the long term interest of the Scheme be kept in mind and knee-jerk investment decisions rarely turn out for the best. However, investment advisers and the Scheme Actuary are best placed to understand Scheme needs so keep your channels of communication open.
Most important, at times of crisis and uncertainty, the scammers move in so the Regulator has warned that members and trustees should perhaps be alerted to possible transfer frauds.