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Home / News and Insights / Blogs / Pensions / 19: COVID-19: key issues for trustees of occupational DC schemes

In the face of an unprecedented crisis, trustees of occupational defined contribution (DC) schemes may be facing difficult decisions. The Pensions Regulator (the Regulator) has issued guidance highlighting some good practice ideas for trustees of occupational DC schemes. We have summarised these ideas below together with some practical issues that may need to be addressed by trustees of occupational DC schemes.

The Regulator emphasises that its good practice ideas do not authorise or compel trustees to take a specific course of action. Trustees must do what is right in the circumstances. They will need to balance the Regulator’s advice to be flexible and pragmatic and to focus activities on the key risks to members with their fiduciary duties, the scheme rules and pensions legislation.

Employer contribution reductions

  • In the current circumstances employers may need to reduce their AE contributions to the statutory minimum. The extent to which trustee agreement is required will depend on scheme rules and their interaction with contracts of employment.
  • If a rule change is required in order to reduce employer contributions and trustees have or share responsibility for this, the Regulator states they must be mindful of their duty to act in the members’ best interests. Trustees should factor in the impact of a reduction on the employer’s ongoing viability. Legal advice may needed on such decisions.
  • Employers may also need to unwind salary sacrifice arrangements as part of any reduction exercise and in that case trustees may need to review how this interacts with their pension scheme rules.
  • Ordinarily a reduction to contribution rates to a DC scheme will require a 60 day consultation. However, the Regulator has agreed not to take regulatory action against employers if they fail to consult affected members for the full period in certain conditions, the main one being where the reduction is limited to furloughed staff to align with the Government’s Job Retention Scheme. While consultation is a matters for employers, trustees should be aware of the changing regulatory environment and their role in protecting members’ benefits.
  • The BDB Pitmans pension team has been guiding a number of clients through these types of issues and we’re here to help.


  • Trustees should consider the impact of the current crisis on governance arrangements and in particular their investment governance structures and delegations to ensure they can continue to function.  This should include assessing whether rule changes are needed to enable virtual meetings; reviewing signing authorities and electronic signature facilities; considering online portals for document storage; and amending quorum requirements, schedules of delegated responsibilities including sub-committees.
  • Consideration should be given to how governance activities are funded – if the current crisis will put a strain on the governance budget, the Regulator advises that priority should be given to benefits payments, retirement processing and bereavement services, and to the administrative functions required to support these.
  • The Regulator is temporarily relaxing some trustee reporting obligations. Those especially relevant to DC schemes are:
    • chairs statements: These must still be completed but while the Regulator has no discretion about whether to issue a fine for non-compliance, it has stated it will not review statements or issue penalties before 30 June 2020;
    • charge caps: While caps on charges (such as investment and administration costs) that can be deducted from member pots will continue to apply and must be reported if breached, the Regulator has said it will take a proportionate response to enforcement where trustees takes steps to remedy the position as quickly as possible;
    • annual benefit statements: the Regulator requires trustees to comply with existing obligations, ie remedy any breach within three months and not have a negative impact on savers; and
    • late employer contributions: trustees are being asked to report late contribution payments to the Regulator and members at 150 days late, rather than the 90 days. The extension will give trustees time to work with employers to bring payments up to date.


  • Trustees should review any previously agreed investment and risk management decisions to be implemented in the future. This is to ensure they remain appropriate, efficient and do not introduce risks or crystallise losses. This could include reviewing the approach for members who have automatic switches built in to a lifestyle investment strategy.
  • Current investment strategy and investment mandate rebalancing requirements should be reviewed with advisers. In some instances, trustees may feel it is appropriate to suspend or refine these requirements.
  • The degree of diversification and the levels of any concentrations of risk should be reviewed. Trustees may feel it is appropriate to change levels of exposure to specific investments or sectors.
  • The level of exposure to certain counter-parties may also warrant review in the context of diversification of security risk.
  • Trustees should also bear in mind unusual market conditions can present opportunities and should consider with their advisers and explore value enhancing investment opportunities or value preservation activities.

Member communications

  • Trustees should consider how individual members might react in the current environment to headline market / fund value falls or reduction / loss in earnings and review their communication strategies to ensure that members are receiving appropriate information and signposting.
  • The Regulator suggests it may be helpful to communicate with members about the impact of current market volatility on transfers, investments and retirement options and the heightened risk of pension scams.
  • Trustees may also wish to consider providing comfort to members where possible that key benefit payments services will be prioritised. Equally if trustees are taking other steps to manage risk, they may wish to consider communicating these.
  • Payment processes and critical functions should continue as normal especially as delays could lead to claims for losses, such as in relation to fund switches or transfer payments. If there are likely to be delays, careful communication about these may help manage the risk of future complaint.

Individuals, employers and financial markets will suffer the effects of this crisis for some time, and trustees should consult with their advisers on a regular basis to ensure they are able to provide the best outcomes for their members. As well as seeking appropriate specialist advice, trustees should also review the Regulator’s guidance and updates on COVID-19, not least because this guidance will be taken into account by the Pensions Ombudsman if it receives complaints about delays caused by the current circumstances.

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