Pensions - Articles - TPR guidance to trustees - PwC comments

 Stephen Soper, senior pensions adviser at PwC, said: “This new guidance highlights the increasing importance of trustees and their sponsoring employers understanding their future cash flows and their ability to absorb and respond to risks as their pension schemes mature. Understanding the strength of employer covenant, the factors that may cause support to falter and developing credible mitigation plans are now an imperative feature of scheme governance.” 

 Julia Dickson, pensions credit advisory partner at PwC, added: “Whilst there will be many possible business plan scenarios being developed, trustees should understand the dependence of corporate cash flows on exchange rates, EU employees, imports and exports from which to consider positive and negative impacts at this stage.

 “Trustees should also take the time to ensure that they understand any proposed changes to the corporate’s investment strategy, and how this may impact on affordability. If employers are cutting back on their planned capital expenditure, trustees should assess whether this could affect anticipated growth plans. Trustees should also ensure that they are aware of any proposed changes to dividend policies to ensure there is a balance between deficit repair contributions and dividends.

 “For pension schemes not currently in the valuation cycle, it could be valuable to increase or bring forward any regular covenant monitoring.”