The Pensions Regulator (TPR) has urged defined benefit (DB) scheme trustees to remain vigilant to the challenges that may impact sponsoring employers' ability to support schemes, updating its guidance to reflect the “ongoing but different” challenges facing the economy.

In a blog post, TPR executive director of frontline regulation, Nicola Parish, noted that the UK economy has seen “significant” turbulence recently, explaining that increasing inflation, interest rates and fuel/energy prices have impacted both businesses and the public alike.

In addition to this, she pointed out that the Bank of England’s monthly ‘Money and Credit’ statistics showed that the level of debt taken on by UK businesses has increased during the pandemic, warning that a high level of debt among businesses can risk their ability to support DB pension schemes.

“With this continued uncertainty, we expect trustees and all relevant stakeholders to remain vigilant to further economic challenges which may negatively impact the ability of sponsoring employers to support DB pension schemes,” she stated.

“A robust employer is one of the key protections for savers and trustees should ensure they have an appropriate understanding of the employers’ financial position and potential future challenges. During times of economic challenge, it is even more important to closely monitor the employers’ financial position and to take appropriate advice.”

In particular, Parish confirmed that TPR has now updated previous guidance issued by the regulator to support trustees dealing with employer stress or distress during the unprecedented impact caused by Covid-19 to reflect the ongoing but different challenges the economy is currently facing.

Parish also reiterated that TPR expects all trustees to have appropriate covenant monitoring in place as part of their integrated risk management framework and we urge trustees to revisit this guidance and take appropriate action.

In addition to this, Parish reminded trustees whose sponsoring employer is demonstrating signs of stress or distress, to engage with the regulator and other key stakeholders, at an early stage.

She stated: “Trustees who may, for example, be concerned about their employer or who may already be involved in discussions about a restructuring plan, a company voluntary arrangement or other form of restructuring, refinancing or insolvency process should ensure they have read our guidance and are clear on our expectations.

“Employers and associated corporates should also know that we are receptive to early discussions regarding plans they are considering that may impact the pension scheme.

“Our role is not just to use our powers when things go wrong. While trustees are the first line of defence for pension savers, we can provide trustees with support so they can achieve good outcomes.”

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