As the impact of Coronavirus grows deeper, The Pensions Regulator has issued guidance for the industry, stating that employers must keep contributing to pensions, and DB benefits should continue to be paid.
The government body said that it recognises the strain employers are currently under, and it will take a “proportionate and risk-based approach” towards enforcement decisions, with the focus being upon helping employers to get back on track.
In a statement, it said trustees must be “alive to risks” that would have significant consequences for the scheme and its members. As such, schemes should assess whether the business continuity plan is still adequate and contact either the administrator or service provider to find out what contingency plan is in place to mitigate the impact of increased work volumes or unavailable staff.
Wayne Segers, head of pensions solutions, XPS Pensions, said: “Our pensioners are most at risk in the current climate and it is essential that pension schemes ensure that pensioners can rely on receiving their pension payments. This is a key focus of the Regulator’s statement which we support. All members need to be protected.”
He added: “We see most businesses planning for and measuring the impact of the current downturn on their business. This information should be shared with trustees to make them aware of the impact of scenarios and how being ready to reduce contributions can help in extreme outcomes. We’d also encourage trustees to see if there is any short term protection such as asset security to mitigate the impact of a reduction in contributions if it is needed.
“All trustees should proactively engage with their employers to understand how the current environment affects their business. The best way to ensure that a scheme can meet all pensions over time is to ensure that the employer is robust through the current crisis and can fund the scheme over the long term.”
Kate Smith, head of pensions, Aegon, commented: “The expectation is that most employers will continue to meet the regulatory timelines. It’s really important that pension contributions from employers and employees are paid on time, and it shouldn’t be forgotten that employer contributions are part of employees’ wage packets.”
The Pensions Regulator also urged administrators to prioritise payments of benefits, retirement processing and bereavement services, above the processes needed to ensure accurate benefits.
Scams warning
In addition, it highlighted the growing issue of scams in the current climate, with savers potentially looking to transfer their pension as a result of the instability of their employer or the financial markets. It warned that this could lead to a rise in the number of scammers attempting to lure pension savers to “safe havens.”
It has recommended that pension schemes urge savers who have raised the subject of a pension transfer to exercise extreme caution and visit ScamSmart.
Smith added: “The climate we find ourselves in unfortunately is perfect for fraudsters, intent on preying on people’s anxieties and encouraging them to make decisions they wouldn’t normally. It’s ever more important to be vigilant to keep pensions safe, and for providers, advisers and guidance services to support pension savers to continue to make the right decisions.”
