"The current scheme funding regime is flexible enough to cope with the impact of a severe economic downturn. However, we are actively considering what additional support and guidance we need to provide now so that those who manage and contribute to people's savings can take the right steps to ensure adequate protection, recognizing the challenging situation some scheme sponsors are in," David Fairs, executive director of policy at TPR, said in a new release.
The industry largely welcomed the flexibility that the regulator's guidance has given to plans.
"At this very difficult time, it is reasonable for trustees, after undertaking the due diligence and scrutiny specified in the regulator's guidance, to consider allowing the use of these flexibilities in the case of sponsoring employers that clearly cannot afford to pay them," Nigel Peaple, director of policy and research at the Pensions and Lifetime Savings Association, said in an emailed comment.
"Suspending transfer values could help schemes manage cash flow needs at this time, as well as easing the administration burden and reducing scam risk," Susan McIlvogue, head of DB pensions at Hymans Robertson said in a separate email comment.
However, there may be hidden implications of suspending contributions, including the risk that pension funds become forced sellers of assets at depressed prices, Ms. McIlvogue warned.
"Some schemes will need more cash due to COVID-19 impact, including extra collateral calls and extra benefit payments if more members look to draw benefits early or take transfer values," she said.
Ms. McIlvogue warned pension funds could also be faced with a deterioration in funding levels and sponsors' financial ability to pay out pension benefits, known as covenant strength, as a result of the virus.