• Check how your schemes funding level has been impacted and whether your risk management strategy is resilient or needs refining
• Understand how the outbreak may impact the employer – most schemes only fail when employers fail and some industries (e.g. travel) are more vulnerable than others
• Don’t stop any plans to increase hedging just because the market levels have fallen – prices might be less attractive but there is no reason to believe that Gilt yields will improve from here on – don’t reduce plans to take risk off the table
• If, as part of your strategic allocation to reduce risk, you are planning to sell equities – think about continuing with that plan because equity risk is substantial and just because we have seen markets fall, doesn’t mean we can’t see them fall further – we are probably only half way through the magnitude of impact we saw back in 2008 or 2001 – so you should still be thinking about taking risk off the table
• There is an opportunity to extend the duration of your credit assets – rise in credit spreads mean you earn a higher return for holding that risk – you can extend the maturity of those bonds and lock in to that higher credit spread for longer
• Communication is key – trustees won’t want to alarm members unnecessarily but should have strategies in place to communicate with members as circumstances develop to say the right thing at the right time
3 step plan:
1. Assess your current position
2. Engage and discuss with stakeholders the implications for your scheme
3. Act on those discussions
https://www.xpsgroup.com/news-and-views/latest-on-the-impact-of-coronavirus-on-pensions-schemes
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