26 March 2020

It goes without saying that COVID-19 has had a catastrophic impact on the markets around the world. Trustees need to urgently ascertain the impact that this is having on their investments and how this is affecting their funding position. Trustees should also seek advice from their investment adviser as to whether or not any adjustments need to be made either to their investments or to the Scheme’s Statement of Investment Principles (for example if the balance between the different kinds of investments they hold has been altered as a result of the impact of COVID-19). If the impact of COVID-19 is such that a significant change in investment policy is required, trustees must revise their Statement of Investment Principles without delay (after having taken advice and consulted with the scheme’s employer).

Member communications

Member communications may be appropriate, particularly in the case of DC schemes. Such communications may seek to reassure members that Trustees are monitoring the developing situation, considering implications and acting accordingly, and working with providers to ensure continued provision of services. Trustees may also wish to send specific communications to members who have requested transfer requests.

Other considerations

Other investment-related issues for trustees to discuss with their investment advisers include:

  • how ISC meetings can effectively take place (especially if urgent decision-making is required);
  • ensuring practicalities for signing documents have been considered, for example when disinvesting, including back-up plans if current authorised signatories become incapacitated;
  • the extent to which their fund managers are able to provide services as required under their investment management agreement (and, if not, it may be necessary to consider how widely any force majeure clause is drafted in your existing investment management agreements and fund documents to see if managers might invoke these);
  • ensuring there is sufficient cash-flow to pay benefits (ideally without having to disinvest at a sub-optimal time);
  • whether any funds could be suspended: as with the last recession where redemption gates of many property funds were closed, there have already been several funds that have suspended trading where they have said that they are unable to accurately value the underlying property; and
  • whether to consider putting on hold or phasing any planned fund switches/asset transitions.

If you would like to discuss the issues outlines above further, please contact Susannah Young or your usual Burges Salmon contact. Our pensions team is ready to assist all clients during these testing times.

Key contact

Susannah Young

Susannah Young Partner

  • Pensions Services
  • Trustee Advice and Training
  • DC Expertise

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