The statement emphasises that trustees should as a matter of course be regularly reviewing the circumstances of their scheme, but they should remain focused on the longer term and not be overly influenced by short-term market fluctuations.
It is too early to assess the full impact of the referendum result, and volatility may continue for some weeks or months. TPR will continue to monitor the markets and other economic developments, and will provide more guidance to trustees of both defined benefit (DB) and defined contribution (DC) schemes as necessary.
Andrew Warwick-Thompson, Executive Director for Regulatory Policy, said: “Pension schemes plan and invest for the longer term and our message to trustees is not to over-react to the current volatility. We will provide support and clear direction to trustees and other parties to help them through the uncertainty ahead.
“Contingency planning is an integral part of the effective stewardship of pension schemes. We expect trustees to review their plans and how they interact with current circumstances on a regular basis.
“At this time we expect trustees of DB schemes to review their employer covenant to understand how the vote to leave the EU could affect it. Similarly, they should consider how market volatility has impacted on their scheme’s funding position.
“Trustees should carry out the review as part of their ongoing risk management approach, as set out in our integrated risk management guidance and DB code of practice. They should include consideration of issues relating to liquidity and cash flow management. Where their assessment results in the conclusion that the scheme is exposed to an inappropriate level of risk, we expect trustees to take a long-term view and review their investment strategy in that context.
“In time, as implications become clearer, trustees of schemes with money purchase benefits may also consider it appropriate to make changes to the investments included in the scheme's default arrangement or the investments offered to members.”
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