U.K. plans warn regulator not to lift contribution leniency too soon

The Pensions Regulator should not end deficit recovery contribution holidays too soon, despite the outlook for 2021 looking stable, U.K. retirement executives warned.

A survey of 55 executives by the Pensions and Lifetime Savings Association, published Thursday, found that 81% said COVID-19 had little or no impact on the day-to-day running of their plans, up from 67% in April and 42% in March. But while plans are optimistic about the near-term, 59% of them would still support an extension of regulatory easements and flexibilities from the regulator beyond early 2021.

In March the regulator said plan sponsors can reduce or suspend deficit recovery contributions for a three-month period due to the outbreak of the coronavirus pandemic. DB plan trustees could have also suspended planned transfers of participant retirement pots to defined contribution or other arrangements for up to three months. In June, the regulator updated its guidance, stating that employers may continue to seek to delay deficit contributions but the trustees were required to resume reporting to the regulator about any suspended, reduced or missed contributions.

The PLSA survey found that 91% of executives including all multiemployer plan executives — known as master trusts — and local authority fund executives said that they are running their plans smoothly in the current economic environment.

Since the outbreak of the coronavirus pandemic, 85% of plans have not seen an increase in participant inquiries and only 8% have seen a substantial increase in inquiries, which related to new participants retiring, changes in employment or transfers out of the plans, the survey found.

According to the survey, 37% of respondents have not seen any changes in participant behavior, while around 27% have seen more participants visiting plans' online portals. Almost two-thirds or 63% of master trusts and local authority plans surveyed said that they do not have concerns about meeting pension obligations with the current situation for the whole of 2021, while a further 25% of them said they could cope for between six months to a year. Only 12% reported they would struggle to cope in the first six months of 2021, the PLSA said.

"The pension industry has proven to be extremely robust in dealing with the massive disruption and unpredictability of COVID-19 and it's pleasing to see so many of our members coping well and looking optimistically towards 2021," Nigel Peaple, director of policy and research, said in a news release. "Yet it is important that policymakers and regulators take into consideration the forthcoming difficult economic and investment environment, and make sure that the decisions they take next year support schemes in helping savers achieve a better income in retirement," he added.

The survey was conducted Nov. 20 to Dec. 7.