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Coronavirus: advice to pension scheme trustees

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Flexible and pro-active decision making has long been a challenge for pension scheme trustees, something that will be tested by the developing global response to the COVID-19 pandemic.

Trustee boards typically meet a handful of times each year with meeting dates fixed long in advance. This is not an ideal structure for dealing with matters which evolve so fluidly. A typical trustee board which met in January would have been unaware of the extent of the problems that would emerge over the next few months and could not conceivably have planned to deal with them. 

Whilst the specific issue of COVID-19 is not something that will have been considered in advance by pension trustee boards, well governed pension schemes should have procedures already in place which allow them to respond effectively to these challenges.

Whatever arrangements are in place, trustees’ responses should consider four key areas:

1. Decision Making

Trustees may need to make decisions quickly and flexibly over the coming weeks. This could include delegating powers to sub-committees or holding meetings at short notice by telephone or video conference. Many schemes’ governing documents may still retain historic inflexibilities so trustees should ensure that they are able to make decisions as flexibly as required in the current environment.

2. Operational Continuity

The immediate priority for any pension scheme is to ensure that it pays its pensions and can deal with queries from members. Trustees should work with their scheme administrators to ensure that business continuity plans are in place and pensioners continue to receive their pensions even if, for example, administration teams are forced to work from home.

3. Risk Assessment

Recent developments will impact on schemes in a variety of operational and strategic ways. Trustees should focus their attention on the areas of highest risk and should take appropriate advice to understand the impact on their schemes. Effective risk registers should help trustees to focus on the most urgent issues and enable them to test and re-evaluate their contingency plans.

4. Communication

As more businesses are disrupted and the effect of containment measures becomes more intrusive on society, it is important for members of pension schemes (and pensioners in particular) to understand that their benefits are protected and that their payments will continue. Trustees should work with their administrators and may wish to reassure pensioners that matters are under control. Some schemes, particularly large schemes with active members, may wish to work with their employers to co-ordinate messaging across the workforce.