The Pensions Regulator (TPR) must adopt a “pragmatic” approach to the 15% of UK schemes that have valuation dates within the next three weeks, Aon has said.
The consultancy warned that funding valuations would be "difficult", with FTSE 350 scheme deficits calculated to have risen by £40bn over the first quarter of this year.
Against the ongoing coronavirus crisis backdrop, Aon said the valuations would be driven by the prevailing market conditions and the atypical scenario would lead to "more difficult valuation negotiations and additional pressure on UK plc just when it does not need it".
However, the firm said there were plenty of levers within the legislative framework to provide additional flexibility when needed.
Partner Lynda Whitney said: "There are plenty of levers that can be used within the legislative framework for valuations - but ultimately it's a matter of sponsors and trustees having a grown-up conversation, preferably ahead of the end of March.
"Both sides should hold an ‘in principle' discussion as soon as possible, which will allow them to agree to use levers they may have ruled out in the past."
These could include allowing outperformance in the recovery plan, using the 15-month valuation timeline to account for post-valuation experience, and considering recovery plan structures that contain a step up in deficit contributions.
Head of UK retirement policy Matthew Arends said: ""Given the levels of volatility we are seeing in asset values, we call on TPR to be pragmatic when reviewing 2020 valuations.
"In support of this, it also needs to be clear in the 2020 annual funding statement that latitude is available within the funding regime and that it can be used by trustees and sponsors to reach reasonable valuation outcomes, and that pragmatic amendments to existing recovery plans are acceptable if the sponsor has short-term affordability constraints."
As the regulator continues to consult on the principles behind its revised funding code, Arends said the current situation demonstrated the need to ensure the fast-track approach was constructed with sufficient flexibility.
Similarly, Lane Clark & Peacock called for the funding system to show flexibility with a priority placed on the "bigger short-term issue" of ensuring sponsors survive the crisis.
Partner Steven Taylor said: "In past crises, the system has shown flexibility, with sponsors able to adjust recovery plans to deal with short-term pressures. We now need companies and trustees to work together to come up with plans that help the company to survive whilst retaining a credible approach to pension scheme funding, and provide appropriate protection for scheme members.
"Urgent clarity from TPR would be welcome to help trustees and schemes understand their options and how the regulator is likely to respond."
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