COVID-19 and pensions: practical steps for UK trustees

13 March 2020

In China, Italy and Iran, everyday life has been severely impacted by the spread of the COVID-19 illness caused by a virus called coronavirus. In much of the rest of the world, governments, organisations and individuals are taking steps to mitigate the spread of the illness and ensure the continuity of essential services.



Pandemic illnesses are amongst the highest impact events that exist on the UK's National Risk Register of Civil Emergencies. Employers and trustees who have already taken steps to manage risk and put in place business continuity and disaster recovery plans may now see this preparation put into practical effect.

There is plenty of general information on COVID-19 available through reliable government and NHS sources. This update is focused on practical and proportionate steps that trustees can take now to mitigate against a future interruption to the provision of acceptable minimum levels of service to members.

What practical steps can trustees take now to plan and prepare for interruption to business as usual?

Business continuity

1. Ask service providers to confirm that they have business continuity plans in place

Trustees are reliant on third parties such as administrators to provide many day to day services to members. Most professional service firms will have well developed and tested business continuity plans in place to ensure an acceptable minimum level of service is provided. If they haven't already volunteered this information, ask your contacts at key third party service providers to confirm that they have plans in place for dealing with:

  • spikes in staff absences;
  • remote working; and
  • holding meetings by telephone or video conference.

2. Put in place steps to mitigate against the disruption of time sensitive or business critical projects

There are certain projects that need to be completed by hard deadlines or which are business critical to the employer and/or trustee. An example this month is the submission of contingent asset documentation to the Pension Protection Fund. Trustees and their advisers should look ahead to the coming quarter and:

  • determine if there are any time sensitive or business critical projects;
  • consider delaying projects which are not time or business critical. This will provide more capacity to complete tasks that do need to be completed by a specific deadline or which are strategically important to the trustee;
  • identify if there are any critical milestones or roles and plan for dealing with these being missed or unavailable;
  • consider if there are practical mitigations which could avoid challenges in the future (e.g. could documentation be submitted to the PPF earlier than the end of month deadline?); and
  • put in place contingency plans to deal with projects that need to meet deadlines or continue through an escalation of the outbreak.

Trustee meetings and decision making

3. Check that trustee meetings can be held remotely

Trustee meetings do not necessarily have to be held in person. There do, however, have to be provisions in place in relevant governing documents that allow meetings to be held by electronically or by telephone / video conference. The relevant powers will usually be set out in:

  • the trust company's articles of association (for corporate trustees); or
  • the scheme's trust deed and rules (for individual trustees).

4. Ensure that the trustees can continue to take decisions

A sharp rise in the level of cases raises the prospect of 'key person' risk. In particular, trustees may need to consider whether:

  • they should designate a reserve chair for main trustee meetings and sub-committees;
  • meetings will be quorate in the event of widespread illness and how this will be handled;
  • powers are suitably and clearly delegated to allow the trustees to function without being too reliant on individual trustees;
  • authorised signature lists are up to date and suitably flexible to permit authorisation of instructions;

In addition, trustees might want to pre-agree actions such as the formation of an emergency response committee and having stand-by trustee-candidates ready to fill vacancies (whether on a temporary or permanent basis).

Member communications

5. Get ready to deal with a spike in member queries

After seeing the world's equity markets fall sharply, many people are worried about the immediate and longer term impact on their finances. In addition, some members may be concerned that there will be an interruption in the payment of their benefits and seek reassurance. In both cases, this could lead to a spike in member queries. Trustees can take several practical steps to help deal with an increase in member queries:

  • prepare a statement dealing with anticipated frequently asked questions and make it available to administrators who are fielding member queries. There may need to be a specific section dealing with concerns from members approaching retirement who are concerned about the impact of lower defined contribution / AVC fund values;
  • this statement could also provide reassurance to members in terms of short-term turbulence in the markets versus the trustees' focus on investing for the long term; and 
  • direct members to information pages set up online where trustees can provide relevant information without placing additional strain on administration teams.

Scheme funding and investment

6. Consider the impact on the strength of the strength of the employer covenant

Certain sectors are being severely impacted by the restrictions arising from attempts to tackle coronavirus. Even sectors that are not immediately impacted will have to deal with the financial shock caused by the sudden slowdown in world trade. They will also have to deal with unanticipated costs of materially higher employee absences, putting in place business continuity plans and complying with regulations issued under the government's emergency powers legislation.

Trustees should discuss the potential impact on the employer covenant with their covenant advisers and liaise directly with their scheme's employer to understand its contingency planning and business impact assessment and/or the mitigating steps it has taken. This will inform a decision on whether trustees need to open discussions with sponsoring employers or review funding documentation. Trustees might also need to consider requests from employers for flexibility on the payment of deficit repair contributions and/or review the scheme's recovery plan and consider alternative forms of security.

7. Scheme investments

Initial muted responses from the market have been replaced by volatility, with a sharp fall in equities across the world and an increase in demand for bonds. Central banks are responding by cutting interest rates and providing additional liquidity. The fall in interest rates will negatively impact on gilt yields and this could have an impact on the discount rate used in valuations. This combination is likely to see deficits increase or, at least, not fall by as much as might previously have been anticipated.

Trustees should talk to their investment advisers and discuss whether their current investment strategy remains appropriate. In addition, if any investment changes are being planned, discuss with the scheme's investment advisers as to whether it sensible to progress at this point in time.

If you have any queries, please contact Jason Coates.


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

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