Regulator allows three-month pension transfer and auto-enrolment freeze

The delay aims to help administrators manage their resources at a time when activity levels are very high and firms are dealing with reduced staff numbers and operational challenges. It also helps mitigate the risk of members being taken in by scams, or simply making poor financial planning decisions in response to the crisis situation.

The guidance also allows employers to delay or suspend contributions where necessary. They can also delay the submission of recovery plans where such information is currently expected by the Regulator.

The Regulator has also reminded trustees they can review the transfer terms available to members, in light of possible changes to the funding position of a scheme.

Tom McPhail, head of policy at Hargreaves Lansdown, commented: "Like the government and other public bodies, our financial regulators are pulling out all the stops to help businesses and individuals get through this time of crisis. Allowing firms and scheme trustees to agree to a temporary suspension of contributions makes sense, if it’s going to help prevent the business from going under.

"Keeping the business alive is likely to be in the long-term best interests of the members, even if it means a short-term hit to the funding position of the scheme.

"Crucially, such action is conditional upon the support of the firm’s bank and other funders and would have to be accompanied by the suspension of any dividend payments. Some accommodation towards delaying transfers also makes sense, where it is being used to protect the interests of the individual scheme members."

Jonathan Camfield, partner at LCP, added: "The current market volatility means that handling requests for DB transfers is even more challenging for pension schemes than normal, and some will welcome the opportunity to take more time to consider their approach. But the legal situation is complex, with trustees potentially facing challenge whichever route they take. If trustees hold up transfers and transfer value levels fall, or the company goes bust in the meantime, members may complain that they have lost out. But if trustees allow a transfer that they could have delayed, and client investments perform poorly, there may be a different set of challenges. Trying to do right by the members who want to stay in the scheme and by those who want to transfer out will be difficult balancing act in some cases.

“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. 

"So, whilst this latest concession is to be very much welcomed and is likely to help some companies survive during the next few months, neither employers nor trustees should underestimate the work needed to ensure (and evidence) that it is appropriate to make use of the concession. 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”.