In the wake of the COVID-19 pandemic, trustees of pensions schemes will need to adapt to new pressures and restrictions on normal day-to-day operations. The Pensions Regulator (“TPR“) has published a number of statements and guidance regarding the pandemic on the risks faced by employers, trustees and administrators. One key issue is the need for an adequate business continuity plan (“BCP“), to ensure that scheme business continues to be conducted efficiently in these unprecedented times. In addition, in order to ensure the proper operation of trustee boards and their committees, including the timely delivery of scheme benefits and overseeing of scheme administrators, virtual trustee meetings are likely to be the norm for the foreseeable future.
Virtual Trustee Meetings
Whether virtual trustee meetings are conducted by telephone or video conference will differ depending on the technology available, but preparation is key and dry-runs should be encouraged in order to ensure that all trustees are comfortable with any new technology. The role of the Chair will also be vital in making sure that virtual meetings are effective and efficient. Laying down some ground-rules before meetings commence is imperative. For example: having a clear agenda; strict timings; determining which advisers are virtually present (and when), in order to reduce the number of voices speaking at any one time; removing distractions and placing phones on a ‘do not disturb’ setting; setting time aside for questions; and generally encouraging participants to treat a virtual meeting in the same way they would treat a formal face-to-face meeting.
Trustees should also be mindful of the following tips which may help virtual meetings:
- keep meetings short and breaking down normal agendas into shorter meetings of 1 or 2 hours to avoid fatigue;
- circulate reading materials well in advance of meetings, allowing trustees sufficient time to familiarise themselves with the material to avoid any key items being missed or misunderstood and to make best use of valuable virtual meeting time;
- make use of video-calling software for trustee meetings to allow for greater interconnection;
- assist others to connect to virtual meetings, including potentially by having trial meetings to smooth out any possible issues in advance of the main meeting;
- encourage the Chair to ask questions more frequently, in order to ensure that all trustees feel comfortable with the progress of the meeting; and
- ensure that action points are voiced clearly, allowing the Secretary to summarise the meeting and next steps effectively.
Trustee boards may also wish to insist that any virtual meetings maintain an aura of formality, in accordance with the usual pre-pandemic procedures, to ensure that all individuals are given a proper opportunity to voice their views and concerns. Trustees should also keep in mind procedural requirements of their trust deed and rules and/or articles.
Business Continuity Plan
TPR expects schemes to have in place appropriate measures to ensure that the scheme can continue to operate if normal day-to-day methods are interrupted. On that basis, trustee boards should ensure that their internal BCPs (or equivalent) are suitable for widespread business interruption as a result of COVID-19, and whether that requires those trustee boards to conduct internal stress testing or seek appropriate assurances from their third party administrator (or both) will depend on the nature and structure of the scheme’s current administration.
As per the TPR guidance, trustees of both defined benefit and defined contribution schemes (as well as employers and administrators) should ensure that they have due regard to the key risks for scheme members. This will include focussing on: benefits which need to be paid; avoiding potential scams in this time of greater vulnerability; ensuring that employers continue to contribute (for which, see Part 3 of this Pensions Compass Issue – Continuation of Contributions); and supporting scheme members to make good decisions. TPR has acknowledged that some administrative breaches of the law may occur in these challenging circumstances and has suggested that it will take a fair and proportionate approach to any action arising therefrom.
Points to Note for Defined Benefit Schemes
Trustees and sponsors of defined benefit pension schemes should be aware of the TPR statement on COVID-19 published on 20 March 2020 and TPR’s subsequent guidance for defined benefit schemes published on 27 March 2020. TPR issued further guidance on 9 April 2020 relaxing to some extent contribution rules and other requirements. Trustees should ensure that they maintain regular contact with their advisers and administrators to discuss the potential impact of the pandemic on their scheme, and should be liaising with their sponsors, advisers and administrators to consider the scheme’s position in respect of funding, investment and covenant. Please see also Part 4 of this Pensions Compass Issue – Key Points for Defined Benefit Schemes.
Member Communications
Communicating with members may be more difficult if more restrictive lockdown measures are implemented by the Government, and it would be prudent for trustee boards to ensure that scheme members are kept fully informed in respect of the scheme’s BCP. If applicable, trustees should consider updating the scheme website to address any anticipated change in procedures, as well as setting up telephone helplines and sending regular update emails and announcements to members.
Protecting Members from Scams
In light of market volatility, TPR is concerned that scheme members are increasingly looking to transfer their pension. As a result, scheme members may be lured into ‘safe haven’ scams. Trustees should urge members to exercise extreme caution and visit free financial advice services, such as the Money and Pensions Service – particularly those approaching retirement who may have suffered losses to their pension fund value.
Administration Understandably, perhaps the greatest challenge faced by trustees will be the administration of their schemes. TPR has suggested that trustees and administrators should report to TPR immediately if there are any concerns that members’ benefits may not be paid. In addition, TPR has suggested that administrators (including trustees, if appropriate) should have particular regard to the payment of benefits, retirement processing and bereavement services, as well as any ancillary administrative functions required to support the same. After this, administrators should focus on ensuring accurate benefits are provided and focus on the investment of contributions