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DB scheme funding: COVID-19 guidance for employers

Guidance for employers with defined benefit (DB) pension schemes on working with the trustees during the COVID-19 situation.

This guidance supplements our Annual Funding Statement published on 30 April 2020.

Published: 27 March 2020.

Updated: 16 June 2020.
General updates to make sure the guidance is consistent with updated guidance for trustees.

Involving scheme trustees

We acknowledge the challenging circumstances faced by many employers. However, it is important that employers provide trustees with the information they need (or at least whatever can reasonably be provided) in a timely manner (as per their legal obligations). Employers should also keep trustees informed of any discussions with other stakeholders, such as banks and other lenders, which may impact on the position of the scheme.

This will facilitate appropriate and swift decision-making which will benefit the employer and the scheme members.

We understand that paying for advice at a time where employers are under financial pressure is a difficult decision to make. Employers and trustees should work together to identify how best to make use of professional advice in a targeted way and how this can be paid for.

We will be reasonable in scenarios where trustees are being asked to agree to a previously unforeseen arrangement (such as reductions or suspensions in deficit repair contributions, 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 equitably 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 stopped

We 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.