Isio questioned over 380 trustee and corporate clients to gather their views and actions regarding suspension of pension deficit contributions. Following guidance from The Pensions Regulator (“TPR”) on 20 March 2020, trustees have been open to requests to reduce or suspend DRCs to help corporates alleviate the strains caused by the global pandemic.
According to Isio, in 12% of cases the sponsor company had already requested DRC suspensions, of which 6% had been accepted by trustees with another 6% under consideration In the vast majority of cases to date – over 95% of those considered - the trustees had accepted the sponsor’s request.
If 12% applies across the UK that equates to circa £200m per month of deficit contributions being unpaid. The responses indicated that a further 7% of sponsors are considering DRC suspensions but have not yet approached the trustees – which could lead to a total 19% of sponsors suspending DRCs.
The respondents of the Isio survey highlighted that the majority of suspension requests (63%) have only sought a 0-3-month suspension for temporary relief until more reliability covenant visibility is available. However, nearly a quarter (23%) requested a 6-12-month extension in situations where other creditors commit to support for longer periods and restrictions on trustee extensions would limit that support.
Further findings include:
• 80% of trustees know when deferred DRCs are meant to be paid; and
• 27% of trustee clients have suspended CETV quotations.
Mike Smedley, Partner at Isio, comments: “The findings of our client survey clearly show that trustees are heeding the advice of TPR and accepting a reduction or suspension of DRCs where required. Trustees are right to take decisive action and be flexible during the current market environment, but they need to remain diligent and monitor the situation closely.
“With two thirds of suspensions requests only seeking a short-term relief from DRCs, we expect further conversations to occur in the coming months and weeks as trustees seek to implement creative longer-term solutions.”
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