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DB scheme funding: COVID-19 guidance for employers

We recognise that this is an extremely difficult time for many businesses, with significant uncertainty around trading continuity, staffing, and the longer-term implications for a number of sectors. Notwithstanding the many competing demands on management time, we expect the trustees of defined benefit (DB) schemes to be provided with regular updates on employer outlook and contingency planning. This is particularly important as DB schemes are often a significant creditor of the employer. We also expect employers to make all reasonable endeavours to provide trustees with the information that they need to assess the impact on the employer covenant and the affordability of deficit repair contributions (DRCs).

Published: 27 March 2020.

Our Annual Funding Statement also provides messages relevant to all DB schemes, but particularly schemes with valuation dates between 22 September 2019 and 21 September 2020 (Tranche 15, or T15 reviews), as well as schemes undergoing significant changes that require a review of their funding, investment and risk management strategies.

We will be pragmatic in scenarios where trustees are being asked to agree to a previously unforeseen arrangement (such as DRC reductions or suspensions, or additional debt being secured over employer assets) provided:

  • The need for this can be justified.
  • A plan is made for deferred scheme payments to be caught up (eg beyond the shorter term).
  • A plan is agreed for mitigating any detriment caused to the scheme (we recognise this may not always be possible and any decision to proceed without mitigation should be made in accordance with trustees’ fiduciary duties).
  • The scheme is being treated fairly compared with other stakeholders. In particular, we would first expect payments to shareholders (as well as other forms of value leaving the employer) to have ceased.

We would strongly recommend that employers document their position regarding the treatment of their schemes, particularly as this may assist in any future engagement with us.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme provides essential support for workers and employers at the current time. It also supports an employer’s ability to make pension contributions. Find more information about the Coronavirus Job Retention Scheme and what this means for employer pension responsibilities.

What you can expect from us

The current scheme-specific funding regime is flexible enough to cope with the impact of a severe economic downturn but we appreciate that schemes and employers will be affected to a larger or lesser extent depending on their circumstances, and some may face significant challenges.

The regulatory easements in this announcement will be maintained until 30 June 2020, but we will review this date as matters progress. We will continue to consider, as we do above, whether more specific flexibilities or restrictions are required (in the context of developing public policy responses). We would also like to reassure employers that we will take a reasonable, pragmatic and proportionate approach to our regulation of scheme funding and continue to reflect prevailing market conditions in our operational processes.

The Pensions Ombudsman has confirmed it will take into account our latest guidance on COVID-19 issues if it receives complaints about delays caused by COVID-19 circumstances. Read The Pensions Ombudsman statement on COVID-19.

Please contact us via if you require assistance. Given the current circumstances, please use email rather than write by post.