Almost half (47 per cent) of pension scheme trustees and professionals have cited a lack of clear information on the strength of sponsor covenant as a ‘major barrier’ in agreeing deficit recovery contribution (DRC) deferrals.

In response to the Covid-19 pandemic, The Pensions Regulator (TPR) has eased regulatory action against those seeking to defer DRCs for up to three months.

However, analysis from Hymans Robertson has shown that the scarcity of information on employer covenant has proved a stumbling block for many trustees looking to approve requests.

Additionally, more than a fifth (21 per cent) cited scheme funding as a major barrier in accepting deferral requests.

Hymans Robertson has estimated that around 14 per cent of schemes have either received or are expecting to receive DRC suspension requests.

It also found that requests for longer than three months and raising more debt at the same time as deferring contributions were less immediate issues for trustees.

“The speed and scale of the Covid-19 crisis has had a severe impact on the economy and businesses around the globe,” commented Hymans Robertson head of corporate DB, Alistair Russell-Smith.

“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 three 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.”

Russell-Smith added that he expected trustees to consider issues, such as deferrals for longer than three months or raising more debt, as “important points” for consideration, but still secondary to whether trustees have enough information on the corporate impact to agree deferrals.

“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,” he continued.

“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.”

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