Mercer has written to the Chancellor, Rishi Sunak, urging the government to allow sponsoring employers of defined benefit (DB) pension schemes to defer deficit recovery contributions (DRC) for up to six months.

In the letter, Mercer UK CEO, Sylvia Pozezanac, stated that allowing DRCs that would have been payable over the next six months to be spread out over the next three years would make it possible for “much needed capital” to be allocated to keep businesses afloat, without compromising the financial security of pension schemes.

Currently, employers can request DRC suspensions of up to three months, following an easement in regulatory activity by The Pensions Regulator (TPR).

Pozezanac warned that if the government did not extend the DRC suspension period, then the Pension Protection Fund (PPF) could face “huge demands” as businesses struggle to stay afloat.

“Pension schemes are long-term financial obligations, with pension payments typically made over many decades into the future, and the diversion of vital capital into them at this time will impede companies facing immediate cash flow crises”, Pozezanac continued.

“We are advocating for a balance between the shorter-term needs of plan sponsors with the longer-term goal of supporting retirement focuses for millions of people.

“You have already signalled the government’s intention to provide substantial support to British industry. It would be quite unfortunate if this unprecedented effort were to be undermined by capital demands from pension schemes.”

She noted that many of Mercer’s clients has been contacting the first seeking urgent advice on how to manage their pension strategies, and offered to work with the government to help alleviate these concerns.

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