Notable to see that the key themes from the Regulator's Annual Funding Statement include not only the need to focus on the current challenges due to COVID-19 but also to maintain an eye on long term funding ...and not to forget Brexit.
Key aspects of the guidance include:
- schemes close to competing valuations are not required to take into account post valuation experience in their valuation assumptions
- TPR expects trustees to consider these developments when setting recovery plans
- Post valuation experience must be applied consistently, both the positives and negatives
-As regards bringing forward valuation dates to a date when conditions might be considered more usual - "Trustees should consider very carefully why they believe such an option is in the interest of their members"
- For March and April 2020 valuation assumptions it is "reasonable to delay taking decisions about TP assumptions until more clarity emerges"
- the current circumstances accentuate the importance of trustees working collaboratively with their employer
- Where there are DRC deferrals trustees "should ..agree contingent contributions to comment on the reintroduction of shareholder distributions and/or agree formal blocks … this should be a properly documented legally enforceable condition of the DRC reduction"
- Trustees should look ahead and set clear plans for reaching their long term funding target
- Assessing covenant, and vigilance re covenant leakage is key and trustees should consider security over assets and "upside sharing" agreements.
We appreciate these are very challenging times for many businesses as they deal with the effects of the COVID-19 pandemic. It is important for trustees and employers to work together to manage the immediate impact of COVID-19, but they should also make sure they retain a focus on the long term - most specifically around planning and risk management. The best support for a pension scheme is a strong employer, and we are here to support and provide guidance to businesses and trustees, and to ensure savers are protected.
https://www.thepensionsregulator.gov.uk/en/document-library/statements/annual-funding-statement-2020