SCOOP: Longer DRC deferral requests more likely to be accepted - PwC

Employer requests to defer pension deficit recovery contributions (DRC) are more likely to be accepted if it is for a longer period of time, data from PricewaterhouseCoopers (PwC) has suggested.

In its analysis of over 50 DRC deferral decisions, PwC found that 63 per cent of postponement requests for between nine and 12 months had been granted, with the remaining 37 per cent either being rejected or pending a decision.

Company requests seeking DRC suspensions for three months or less were less likely to be granted, with 55 per cent being accepted and the other 45 per cent being rejected or pending a decision.

PwC said that although the data does not “capture the challenges and potentially difficult conversations which happened as part of the negotiations”, it suggested that companies that were seeking longer-term deferrals were presenting trustees with the information to justify a suspension.

The vast majority (86 per cent) of pension DRC deferral proposals that decisions had been made on had been accepted for the length of time requested, according to the analysis.

For those seeking a deferral of between six and nine months, 75 per cent of negotiations were still ongoing and 25 per cent has been granted for a shorter period than requested (three months).

PwC found that almost half (49 per cent) of requests for DRC suspensions were for three-month deferrals.

Shorter deferrals were more frequently accepted in terms of total number, which PwC pensions director, Dickon Best, said "reflected the uncertain nature of the economic impact in some sectors", with trustees aiming to retain flexibility to allow then to grant an additional extension depending on the financial landscape.

Best concluded: “What is clear, is that businesses will be managing the effects of Covid-19 for some time and will be carefully managing cash over the short term, and that the longer-term prospects will be more uncertain.

“This raises a number of enduring questions about covenant, funding plans, alternative funding mechanisms such as contingent assets and how this may change each scheme's end game.”

PwC’s DRC deferral decision data came from both corporates and trustees.

    Share Story:

Recent Stories

Re-shaping the future of fiduciary management?
Pensions Age Editor, Laura Blows, speaks to River and Mercantile co-head, Ajeet Manjrekar, about the future of fiduciary management in the UK

Pensions Age Editor, Laura Blows, speaks to Christopher Rossbach, CIO and Portfolio Manager of the J. Stern & Co. World Stars global equity strategy about the investment opportunities for global equities in these unprecedented times.

Fixed income markets during coronavirus disruption
Laura Blows speaks to Ewan McAlpine Senior Client Portfolio Manager, Royal London Asset Management about fixed income markets during coronavirus disruption