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Law360, London (May 1, 2020, 11:39 AM BST ) Britain's pensions watchdog has told trustees and employees to work together and focus on long-term plans to protect savers if they are to weather the economic hardship associated with the COVID-19 crisis.
The Pensions Regulator has issued guidance for pension schemes on how they should approach their upcoming valuations during the global pandemic, which has killed more than 200,000 people worldwide and more than 26,000 in Britain.
The watchdog said its guidance, released on Thursday, will help funds strike a balance between supporting employers that have been hit hard by the fallout of COVID-19 and strengthening their funds for savers.
"What is clear is that COVID-19 is testing employers and trustees like never before, and it is vital that they work together collaboratively," TPR Chief Executive Charles Counsell said. "We are clear that the best support for a pension scheme is a strong employer and so we are here to support both groups in our role to ensure savers' retirements are protected."
The guidance advised those employers that are considering suspending contributions toward cutting the pensions deficit amid the COVID-19 crisis to also hold off from dividends and any other payments to shareholders during the crisis.
PricewaterhouseCoopers said in April that British employers had a £290 billion ($364 billion) hole in their pension plans by the end of March.
Trustees should consider seeking independent advice on their upcoming valuations to help them understand how employers have been affected by the global health crisis. They are also advised to use the valuation process as an opportunity to study the probable long-term effects of the pandemic on their schemes.
Counsell said that the regulator had seen an overall improvement in funding levels at the end of 2019, but warned that the pandemic will have battered this progress.
"We don't yet know the full impact the crisis will have on the pension landscape," he said.
British employers have taken significant hits as the health crisis has deepened. The Pensions Regulator said in April that as many as one in 10 British employers have asked to delay making payments to reduce pensions deficits.
Pensions consultancy Lane Clark & Peacock has said 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, LCP said.
Britain's pensions watchdog has repeatedly warned savers and fund managers that the pandemic will be a breeding ground for pensions scams. Fraudsters will be looking to take advantage of heightened financial anxiety to pressure savers into moving their pension pots around, the regulator said.
--Additional reporting by Martin Croucher. Editing by Ed Harris.
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