A 10-step guide for trustees
Suspending DB pension contributions
15 Apr 2020
The speed and scale of the COVID-19 crisis has had a severe impact on the economy and businesses around the globe. Understandably, this means some employers may be looking for short term relief from pension contributions. However, whilst the latest guidance from The Pensions Regulator (TPR) acknowledges that suspending contributions may be appropriate in some situations, trustees are still expected to fully consider all requests and the implications on members’ benefits.
Our 10-step guide outlines the key actions for trustees to consider:
- Compose a legally binding commitment stating that no dividends, or other forms of shareholder returns, will be made while contributions are suspended.
- Suspend/reduce contributions for as short a period as possible.
- Ensure you have enough information to properly consider the drivers for the employer’s request.
- Have a convincing case that stopping contributions temporarily will support the employer’s ongoing viability.
- Get legal advice to confirm you have the power to do this.
- Consider materiality – missed contributions should be paid within the length of the existing recovery period.
- Consider the availability of additional protections/security.
- Record all decisions carefully.
- Review/manage impact on short term cashflow needs.
- Have access to timely, relevant covenant information for ongoing monitoring.
For more details on each step, read our full guide.