Pension schemes are probably facing the “ultimate stress test” at the moment given the number of different areas affected by the coronavirus situation, it was suggested during a panel discussion at the Pensions & Lifetime Savings Association (PLSA) investment conference today.

Brian Henderson, director of consulting at Mercer, said there was more to follow than just how markets were being affected by COVID-19 and that the consultancy had identified nearly 50 actions its clients could be taking.

The message for trustees dealing with financially stressed covenants, for example, was “speak to the sponsor company and get the dialogue going”.

Another action was for defined benefit (DB) trustees to take a look at their cashflow policy.

“Yes, there are market opportunities but a lot of DB trustees will have cashflow requirements and you might be selling distressed assets at the moment,” said Henderson.

He suggested trustees may also want to consider postponing any big strategic decisions, and to check the hedging they have in place given that interest rates could be “lower for a lot longer now”.

Another item on the list for trustees could be to look up their trust’s rules or deeds to see what they say about meetings being quorate – do meetings have to be face-to-face?


Brian Henderson of Mercer speaking about Covid-19 actions at the PLSA conference

DB trustees engaged in a buy-in process should consider revisiting the pricing, according to Henderson.

“If there’s a potential increase in deaths – I know it’s horrendous to talk about it – potentially the pricing for buy-ins could be better”.

Laura Myers, member of the PLSA policy board and head of DC at LCP, said that in light of how volatile markets have been “we need to think about how robust our DC investment strategies are, especially when we know people are accessing their pots far before their target retirement age”.

Chris Hitchen, chair of the Border to Coast Pensions Partnership, suggested there may be a need for a more flexible approach to contributions for members if there was a downturn affecting people’s ability to save.

He cited the “sidecar” emergency savings option trialled by NEST as well as local government arrangements where it was possible to pay half contribution for half benefit.

“Those sorts of things could very well be necessary in the next few months,” he said.

Yesterday the UK pensions regulator published a statement on the coronavirus, saying it was engaging with the pensions industry to understand the pressure it faces from COVID-19 and to help minimise any impact on savers.

It said trustees were expected to have appropriate monitoring and contingency planning in place and to be “alive” to risks that would have a significant consequences for their scheme and members.