TPR releases its 2021 Annual Funding Statement

A varied picture faces DB schemes in the year ahead

On the 26th of May the Pensions Regulator published its 2021 Annual Funding Statement setting its expectations of trustees and sponsors for the year ahead. We summarise the key points below.

1. Covenant visibility has improved – but not always for the better…
Over 12 months into the pandemic, the impact on sponsors is now much clearer. While the worst is over for many (and some have been clear ‘winners’), challenges remain and some trustees will need to carefully balance supporting sponsors through the bounce back (e.g. by deferring contributions) against ensuring their members are being treated fairly.

2. An expected surge in corporate activity and changing regulation will increase requirements of trustees
M&A, refinancing, restructuring, insolvency…TPR expects that the post-pandemic picture will be coloured by corporate activity. With regulatory changes coming from the Pension Schemes Act 2021 (which still remain to be finalised) trustees will need to pay greater attention to their covenant and get a seat at the table in negotiations. Information sharing, monitoring, contingency planning and regular dialogue with the sponsor remain the key.

3. Don’t lose focus on the journey to an end game
The turmoil of the last year has shown the risk of the unexpected that no model can predict. Against this, the spectre of climate change and the profound risks it will bring to covenant looms large. Now more than ever, trustees need to agree an end game that will be acceptable for their members and agree a journey plan to reach it which is supportable by the covenant.

 

Speak to Matt Harrison to find out more.

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