The Pensions Regulator (TPR) has urged trustees to "promptly" engage with TPR if they are concerned their sponsor is struggling, or are already involved in discussions about a restructuring plan, company voluntary arrangement (CVA) or other form of insolvency.

In a blog post, TPR executive director of frontline regulation, Nicola Parish, said that TPR welcomed the news that the trustees of the two Arcadia Group pension schemes have agreed a buy-in with Aviva, securing benefits in excess of Pension Protection Fund (PPF) levels for 8,800 members.

“This is of course a positive result for those who not only lost their jobs when the Arcadia group collapsed into administration in 2020, but also faced uncertainty about their pensions,” she stated.

However, Parish also highlighted the deal as a "strong reminder" of what can be achieved when trustees of defined benefit (DB) schemes, whose sponsoring employer is struggling, engage with TPR, the PPF and other key stakeholders, at an early stage.

She continued: "The message is simple: the sooner we are involved, the more benefit we can bring to achieving robust settlements with other creditors, and ensure the best outcomes for savers is achieved.

"At TPR, our job is not only to use our powers when things go wrong. While trustees are the first line of defence for savers, through an open dialogue with them, their advisers and company boards, we are skilled at supporting trustees where necessary to negotiate the right security and other protections for pension savers when companies are struggling or failing.

“The latest data from the Insolvency Service shows that the number of registered company insolvencies in January 2023 was 1,671. This is 7 per cent higher than in the same month in the previous year (1,567 in January 2022), and 11 per cent higher than the number registered three years previously (pre-pandemic; 1,502 in January 2020).

“So we know companies are struggling, and we are alert to the problems that may cause trustees.”

In particular, Parish highlighted a number of specific lessons for trustees where their sponsor is challenged.

"The first is the importance of having a comprehensive financial information-sharing package that includes detailed forward-looking forecasts and how these may vary, which is assessed regularly (ideally quarterly) by appropriately qualified independent covenant advisers, with costs borne by the sponsoring employer," she stated.

"The second is the need to involve us at an early stage when it becomes clear that trading for a sponsoring employer is challenged, when the viability of a company is uncertain or if there are issues or defaults with other key financial creditors."

In addition to this, Parish said that it is important to ensure scheme trustees have the right skills to deal with a distressed situation and have access to expert advisers.

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