Trustees could be in “a challenging position” following new defined benefit (DB) scheme guidance from The Pensions Regulator (TPR), Lane Clark and Peacock (LCP) has warned.

The firm emphasised that while TPR stated schemes should be “open” to considering a delay in pay contributions of up to three months, “the law of the land has not changed” and trustees still have a legal duty towards members.

The guidance itself also clarified repeatedly that TPR has no power to waive statutory duties, but that the regulator would make allowances in terms of its enforcement activity to provide easements for schemes amid the COVID-19 pandemic.

The updates also included allowances for the suspension of cash equivalent transfer value activity and delays to scheme valuations, though again no statuatory changes were made.

However, LCP has warned that this could leave trustees in a difficult position as they juggle regulatory guidance, individual legal obligations, and respective scheme rules.

LCP partner, Jonathan Camfield, said: “Clearly TPR can’t change the law. They also can’t change the rules of the pension schemes and they can’t change the professional duties of trustee advisors – with the scheme actuary having an important role here.

“Because of this, TPR are keen to stress all the hoops that they expect trustees to go through before agreeing to these concessions.

“This includes ensuring that there is a legally binding commitment not to pay dividends during any suspension of deficit contributions.

“And on top of that, the trustees still have their general duties to do the best thing for members – and generally that won’t be deferring contributions other than in the more extreme cases where a business’ survival is in question."

Echoing this, Hymans Robertson head of DB pensions, Susan McIlvogue added: “Trustees should carefully consider what actions to take.

"Suspending pension contributions may be in members’ best interests if it results in a strong and health sponsor once we emerge from the ravages of covid-19."

"However," she clarified, "in some cases, suspending contributions will not be enough to save the sponsor and could ultimately result in members receiving lower benefits".

Camfield also highlighted that whilst the concessions were likely to help some companies survive throughout the crisis, neither employers nor trustees should underestimate the work, and evidence, that is "appropriate to make use of the concession".

He added: “Trustees are in a challenging position as they seek to respond positively to the latest official guidance whilst honouring both the law of the land and the rules of their scheme”.

These concerns were echoed by PwC senior pensions adviser and partner, Stephen Soper, who stressed that trustees and sponsors alike should consider restructuring very carefully, even if it's for less than three months.

He continued: “Trustees who have been asked to release security are in a very difficult position, especially as information is often limited and insight into the coming months less so.

"TPR is clear that there will be a very high bar for trustees to agree to such requests, and it stands ready to support trustees in these detrimental situations.

“Well advised sponsors and trustees will be better able to navigate these situations quickly, as time will be of the essence when cash flow and confidence is strained.”

The regulator took a similar approach in making recent changes to late payment reporting, again emphasising that there has been no change to employer’s responsibility to pass on contributions.

The approach is in line with the “proportionate and risk-based approach” outlined by the regulator in its initial covid-19 guidance.

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