Opinion: Getting back on track

15 Jun 2020
Woman at work in discussion with colleague

Despite the uncertainty, there is plenty within the control of Trustees and sponsors that they should be getting on with to improve outcomes for members.

Most schemes adapted rapidly as the crisis hit, coping well with the overnight shock. Many paused activities to ensure they were not overwhelmed and have reached a new state of business as usual.

Trustees and sponsors must now challenge themselves to refocus on strategic priorities. Schemes have passed the first test and proved that they can operate successfully in lockdown. Now, they must apply the same energy to improving outcomes for the millions that rely on pension income.

Getting back on track graph

Five things that should be top of your agenda

  1. Take control of your long-term funding plan

For most DB schemes, the biggest change will be the sponsor covenant. We will not know the impact on the UK economy for some time. But clearly some sectors have suffered badly. Short term easements such as reducing deficit contributions have been implemented in at least 10% of cases. This is a blunt response and a smarter, more sustainable approach will be needed that protects members but supports businesses as the economy rebuilds.

  1. Resume any operational activity that was paused

We do not know when and how we will return to offices. Short term measures such as suspending transfer values should be reviewed, and restarted as soon as feasible. Further changes to processes will inevitably be necessary, such as the TPR requirements on scams.

  1. Keep communicating with members.

These are still very worrying times for your members. You may need to provide further reassurance, or update members on changes to procedures as these become less temporary and more a feature of a new way of operating.

TPR has highlighted the need to alert members to the risks of scams. For active members furlough arrangements will be phased out. And for DC schemes, the risk of further market volatility will be a concern.

  1. Continue longer term important projects

Most schemes have now reached a steady state and are ready to resume important projects. This may include GMP equalisation and improving data quality. Any work will not be wasted and will help schemes achieve their long-term objectives.

  1. Be alert to opportunities

Market conditions have created challenges for many schemes, but also create opportunities. There are tactical investment opportunities that might improve outcomes for members if they can be realised quickly. Changes to sponsor structures and financing might enable the scheme to negotiate an improvement as creditor.

Insurers are very much open for business and pricing is more attractive than before. Guidance from TPR on regulating consolidators is imminent, and we expect the first transactions to take place quickly thereafter.