Sponsors and trustees of defined benefit (DB) schemes with 31 March valuation dates need to discuss their options given the clash with Brexit, according to Aon.
As many as 15% of UK schemes have a valuation date of 31 March 2019 - which is a Sunday this year - but their funding position will likely be impacted by the UK's planned departure from the European Union (EU) on 29 March.
Valuations on 31 March will therefore be driven by market conditions at the close of markets on ‘Brexit Day', which could be an "atypical day on the financial markets".
The firm warned that if no action is taken now, then this could lead to more difficult valuation negotiations.
Aon partner Lynda Whitney noted that there are "plenty of levers" that can be used within the legislative framework for valuations - but ultimately it is a matter of sponsors and trustees having a "grown-up conversation" ahead of the end of March.
"If markets do react significantly on 29 March it will inevitably be to the benefit of one side or the other - to the company sponsor or to the trustees," she said.
"Therefore, both sides should hold an ‘in principle' conversation as soon as possible, which will allow them to agree to use levers they may have ruled out in the past."
These could include a one-off adjustment in the level of prudence or in outperformance in the recovery plan period, or formally taking into account post-valuation experience.
She further pointed out that the aim here would be to avoid potential friction after 31 March - especially as nobody yet knows which side any market movements could favour.
"We all hope that whatever might happen on 29 March will cause the minimum of disruption to both the economy and to pension schemes too, but it's best for schemes to build in some tolerance ahead of the event if they have an imminent valuation date."
The warning comes on the condition that the UK does leave the EU on the proposed date. There is a possibility that Brexit will be delayed if prime minister Theresa May's revised deal is rejected by MPs, with a vote expected by 12 March.
It follows on from news that the Treasury Select Committee has launched an inquiry into the future of the UK's financial services once it has left the EU.
In January, The Department for Work and Pensions amended draft no-deal Brexit regulations to remove a provision which would have made illegal scheme investments in EU-regulated markets.
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