TPR: Just 4% of schemes have agreed DRC deferrals
Around one in 25 pension schemes have made use of regulatory easements to deficit recovery contribution (DRC) payment schedules, according to The Pensions Regulator (TPR).
While the watchdog had expected somewhere between 10% and 15% in uptake, the reality has been around 3-4%, or almost 200, chief executive Charles Counsell revealed.
Speaking at the Pensions and Lifetime Savings Association (PLSA) annual conference today (16 October), Counsell said the vast majority of employers were continuing to meet both their defined benefit (DB) and auto-enrolment (AE) obligations despite Covid-19.
He said: "We have not seen a significant or unusual spike in missed pension contributions to date. The vast majority of employers are meeting their AE duties, including completing their declaration of compliance and re-enrolment responsibilities. Nor have we seen an increase in employers avoiding their DB responsibilities."
Each request to defer DRCs is considered on a case-by-case basis, he said, with the regulator prepared to ask "challenging questions", request more information, and potentially use its powers where necessary.
But he warned sponsors and the industry to not consider the "profound and long lasting" impact of Covid-19 as a "blanket excuse… to dodge responsibilities".
He said: "I want to make this clear: please do not mistake this breathing space for a softening of our stance. The easements we introduced were a necessary response to an extraordinary set of circumstances, and not a change in our approach."
Nevertheless, he recognised that the sector - and society more generally - has faced an "intensely difficult and uncertain period", adding: "We acted quickly and decisively and will continue to do what is necessary to support the industry."
The regulator anticipates a rise in insolvencies within a fairly short timeframe, agreeing that government business support - such as the furlough and loan schemes - may be hiding specific examples of business deterioration.
"I am concerned about that," Counsell said. "I think, in some ways, there's been a low level of insolvencies over the course of the summer."
He added: "We can see and we do expect to see an increase in insolvencies going forward. I haven't got a crystal ball… but we will also see an increase in restructuring of employers going forward as well over the course of the next period of time, the next quarter, the next six months, the next 12 months, maybe longer."
The regulator will keep its guidance under review and update it if necessary, he said, while maintaining a "proportionate approach".
Counsell also said TPR was in regular discussions with the Pension Protection Fund, which last week reported a deterioration in its own funding level and reserves in the year to March 2020 as the initial market shock arising from Covid-19 dented its investments.
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