The continuation of pension deficit contributions is unattainable during the Covid-19 pandemic, Mercer has told The Pensions Regulator (TPR).
In a letter to TPR chief executive Charles Counsell, the global consultant urged the regulator to support and facilitate an "emergency adjustment" to schedules of contributions.
Mercer outlined an alternative to current expectations and stated it should be a "straightforward matter" to agree that contributions should be halted for the next year "provided they are added back" at the end of the schedule of contributions.
The letter (dated 19 March) said: "Trustees are able to review their schedule of contributions and revise them if they believe it to be appropriate; there is a process that needs to be followed. However, given our regulatory framework and previous TPR guidance in this area, we believe such necessary revisions would be simpler if TPR is able to issue a supportive statement.
"In particular, we are calling on TPR to support the principle that trustees can agree to companies requesting a change to the schedule of contributions if the company can provide evidence to satisfy trustees of the temporary threat to their business posed by the effects of Covid-19."
Mercer's suggested information for trustees to consider before agreeing a change in the schedule of contributions was outlined as follows:
- Estimates of the employer's current balance sheet and financial position.
- Information on what easements the employer's other creditors are being asked for and whether easements have been agreed.
- Information on company dividends and services payments if the employer is part of a group.
- Information on potentially covenant reducing payments including dividend or share buybacks.
- Outlines of an employer's expectations for future cash flow.
- Information on the employer's parent group if it is a subsidiary.
Mercer added its suggestions for TPR did not require a policy change and that "ignoring short-term affordability constraints" would "make the difference between a company surviving of becoming insolvent".
The letter concluded: "We believe this is a compelling basis for TPR to issue a statement supporting these temporary amendments to schedules of contributions."
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