Pension trustees must be 'prepared to respond quickly' to sponsor distress

A guide for trustees seeking to manage sponsor distress has been published by Pinsent Masons, as the law firm warned that the Covid-19 pandemic is continuing to cause supply chain risk and a liquidity squeeze.

The blog post from the firm urged pension scheme trustees to be prepared to respond quickly to signs of scheme distress, such as requests from sponsoring employers to reduce or suspend the payment of deficit repair contributions.

It split managing sponsor distress into separate ‘prevention’ and ‘action’ stages, commenting that the former should see trustees reviewing their processes and procedures to ensure that they are fit for purpose and will allow for the testing and monitoring of different scenarios that may occur.

The ‘action’ phase was broken down into four steps, with the first being the emergence of a sponsor crisis.

During this stage, it was recommended that trustees take steps such as liaising with The Pensions Regulator (TPR), addressing member concerns, arranging for the appointment of any necessary additional advisors, implementing contingency plans and establishing whether further trustee training is necessary to deal with the situation.

Next, upon the arrival of the looming crisis, Pinsent Masons said it was key to tackle several administrative and governance steps such as considering moving banking and payroll to a third party, and ensuring member data and member files are accessible to extract if held on the employer's site.

The firm noted that following these steps and more was key to ensure that trustees are able to be completely on top of administrative and governance matters before the crisis escalates.

Thirdly, member communications should flag the potential risks of falling for scams when transferring away from the scheme, in-house administrators should have contingency plans for retaining member data and trustees should look to implement business continuity plans.

The final stage, which takes place after the employer has gone into liquidation, was heavily focussed on communications, and included recommendations for drafting pre-prepared statements, bringing in public relations consultants and making preparations to face a parliamentary select committee.

The blog post noted that trustees should seek suitable professional advice during both the ‘prevention’ and ‘action’ steps, adding that it was “important that trustees' processes and procedures not only meet TPR's guidance, but also improve scheme governance and risk management”.

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios