As widely reported in the media, the UK economy has been through significant turbulence recently.
Increasing inflation, interest rates and fuel / energy prices have impacted both businesses and the public alike. In addition, according to the Bank of England’s monthly ‘Money and Credit’ statistics, the level of debt taken on by UK businesses has increased during the pandemic which has reduced resilience and there has been an increase in borrowing by small and medium-sized enterprises.
A high level of debt among businesses can risk their ability to support defined benefit (DB) pension schemes.
With this continued uncertainty, we expect trustees and all relevant stakeholders to remain vigilant to further economic challenges which may negatively impact the ability of sponsoring employers to support DB pension schemes.
A robust employer is one of the key protections for savers and trustees should ensure they have an appropriate understanding of the employers’ financial position and potential future challenges. During times of economic challenge, it is even more important to closely monitor the employers’ financial position and to take appropriate advice.
Sponsoring Employer Distress Useful Guide
In autumn 2020 we published guidance to support trustees dealing with employer stress or distress during the unprecedented impact on the UK economy caused by COVID-19. Given the ongoing but different challenges the economy is currently facing we have refreshed this guidance and have republished it. Read our updated guidance.
We expect all trustees to have appropriate covenant monitoring in place as part of their integrated risk management framework and we urge trustees to revisit this guidance and take appropriate action.
Engaging with TPR
We remind trustees of DB pension schemes whose sponsoring employer is demonstrating signs of stress or distress, to engage with us and other key stakeholders, at an early stage.
Trustees who may, for example, be concerned about their employer or who may already be involved in discussions about a restructuring plan, a company voluntary arrangement or other form of restructuring, refinancing or insolvency process should ensure they have read our guidance and are clear on our expectations.
Employers and associated corporates should also know that we are receptive to early discussions regarding plans they are considering that may impact the pension scheme.
Our role is not just to use our powers when things go wrong. While trustees are the first line of defence for pension savers, we can provide trustees with support so they can achieve good outcomes.
By Nicola Parish
Executive Director of Frontline Regulation
2 thoughts on “Refreshed guidance for trustees in challenging times”
Pingback: UK Pensions Regulator refreshes its guidance for trustees on being prepared for sponsor distress – Money Lowdown
Pingback: Pensions Weekly Update – 17 May 2023 – Money Lowdown
Comments are closed.