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Law360, London (April 21, 2020, 2:28 PM BST) -- More than 500 companies are likely to delay tackling their pension deficits, a survey has suggested, as employers take advantage of relaxed rules introduced during the coronavirus crisis by the U.K.'s pension watchdog.
Pensions consultancy Lane Clark & Peacock said on Monday that 10% of employers could delay making deficit recovery contributions to the 5,436 defined benefit pension schemes operating in Britain.
The missed contributions could add up to approximately £500 million ($610 million), LCP said. The company examined data from 200 pension schemes for which it acts as an adviser.
"Some firms that are fundamentally sound are nonetheless facing huge short-term cashflow pressures during the present crisis," Jill Ampleford, partner at LCP, said. "The ability to agree with trustees a delay in making pension contributions will help them to weather the present storm and continue their support to the scheme in the long-term."
The Pension Regulator has said it will not take enforcement action against companies that fail to make contributions to workplace pensions over the next three months as it seeks to ease the burden on businesses already struggling under the COVID-19 crisis.
But Ampleford added that pension schemes should agree a recovery plan with employers to make up the shortfall, particularly as deficits "could have materially increased due to changes in financial markets".
PricewaterhouseCoopers said this month that British employers had a £290 billion hole in their pension plans by the end of March, an increase of £120 billion since the start of the year. The audit company said the coronavirus was "clearly a significant factor."
Struggling U.K. department store chain Debenhams became one of the first household names to defer its deficit contributions. A spokesman told Law360 the company was not "dumping its pension liabilities."
"Discussions with the trustees and the [Pension Protection Fund] are continuing for a temporary suspension in contribution payments, given The Pensions Regulator's recent announcement that companies could access a three-month pension contribution holiday over the COVID-19 disruption period," the spokesman said.
TPR said in March that it would not take action against companies that failed to keep up deficit payments because of the "challenging situation some scheme sponsors are in."
--Editing by Ed Harris.
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