TPR publishes its 2020 Annual Funding Statement
The Pensions Regulator (TPR) has published its 2020 Annual Funding Statement (AFS) today, setting out its latest expectations for pension scheme trustees and sponsoring employers with valuations between 22 September 2019, and 21 September 2020.
Key points for trustees and sponsors to note are:
1. Work collaboratively through the COVID-19 crisis
Trustees and sponsors must work together through this crisis, as having a strong employer will make a material difference to member outcomes. But scheme treatment needs to be fair, and flexibility provided to the sponsor needs to be clearly in members’ interests and supported by adequate protection where possible
2. Revisit journey plans
Once the immediate crisis has passed, trustees should reflect that the impact will be felt for years and that some covenants will have been weakened considerably. This reduction in affordability and sponsor risk capacity means that journey plans made before the crisis may no longer be appropriate and should be reviewed
3. Maintain focus on contingency planning as this becomes more important than ever
Current events are a reminder of the role of covenant in supporting schemes. In the current environment, material risk scenarios will arise (e.g. debt covenant breaches, or takeovers) and contingency planning is an essential part of a rapid and effective response to protect members.
Darren Redmayne, CEO, comments: “The Pensions Regulator’s Annual Funding Statement reaffirms covenant as being centre-stage in the prospects for a DB scheme – its health is critical for their wellbeing and should not be taken for granted. In recent years, the benign environment was causing drift towards a one-size-fits-all approach to funding and risk. However, as sponsors and trustees navigate this crisis, the benefit of the flexibilities in the current funding regime, in respect to the covenant, are being brought to the fore.”
Read the Annual Funding Statement on TPR’s website. Please get in touch with us if you’d like to discuss.
See press coverage where we have commented:
Money Marketing: Darren Redmayne shared comment, view here.
Pensions Age: Darren Redmayne comments, to view click here.
Pensions Expert: Alex Hutton-Mills comments, view here (subscription required)
Professional Pensions: Darren Redmayne penned a piece ‘Something old, something new’, link here (subscription required)
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