Pensions - Articles - More covenant information needed before agreeing to deferral

 The consultancy estimates that around 14% of schemes have either received or are expecting to receive a contribution deferral request. The findings also showed that deferral requests for longer than three months and raising more debt at the same time as deferring contributions were less immediate issues for trustees. 

 Alistair Russell-Smith, Head of Corporate DB comments on the DB pensions environment today: “The speed and scale of the COVID-19 crisis has had a severe impact on the economy and businesses around the globe. Understandably, this means some employers are looking for short term relief from pension contributions. Regulatory guidance implies it should be relatively straightforward to agree deferrals for up to 3 months, even when covenant impact or visibility is not always clear or complete. However, our survey suggests that a lot of pension scheme trustees do want clear information on the covenant impact before agreeing to a deferral request.

 “I expect that trustees then consider other issues, such as deferrals for longer than 3 months or raising more debt, as important points that need to be considered, but secondary to the fundamental point of ‘do we have enough visibility on the corporate impact to agree to a deferral in the first place?’

 “Ultimately, it will be in the long-term interests of all parties to reach an agreement and for trustees to support their sponsor through a difficult, but hopefully temporary situation. The impact of the virus, and the measures to contain it, will be different for every business.   I’m sure, however, that both trustees and TPR will be keen to ensure these flexibilities are still used in the right way.”