DC pension scheme trustees should talk to advisers to ensure their investments align with sanctions announced by the UK government and to manage market volatility caused by the Ukraine/Russia conflict says The Pensions Regulator.
A guidance note on TPR’s website says defined benefit (DB) schemes should be alert to the short-term liquidity needs and how those needs might be affected by margin calls and the need to meet short-term member benefit payments.
Trustees should also consider whether the employer or sponsor of the scheme has been affected, which for DB schemes may have consequences for the employer covenant. This could be through any direct impacts to employer operations, through wider trading links where suppliers or customers are impacted, or through broader macroeconomic factors such as increased inflation, rising fuel prices or foreign exchange risks.
The likely impact of these events on your scheme’s investments including short/medium-term risks should also be considered.
TPR has also highlighted the heightened risk of cyber-attacks in the current environment, as well as the potential for heightened risk of financial crime, including scams, and whether related processes and procedures should be reviewed.
Schemes should also consider whether investments remain aligned with the policies and principles set out in their statement of investment principles, including environmental, social and governance considerations.
But TPR has warned against knee-jerk reactions and has urged trustees not to make hasty, uninformed decisions about their overall portfolio.
A statement from TPR says: “You may see an increase in concerns, or requests for information, from scheme members, and so should prepare for this and be vigilant to the potential for scam activity.
“You should also consider whether to communicate with your members to let them know the steps you are taking to manage risks to the scheme. You can help them by urging them not to rush decisions and providing them with clear, relevant and timely information so they can make informed decisions.
“We would like to know more about any significant issues or challenges that you or your sponsoring employer are facing as a result of the ongoing conflict. This will help us build a clearer picture of the impact on pension schemes.
“This could be direct or indirect exposure to investments which are subject to sanctions, financial hardship or losses as a result, and employer covenant impacts, business disruptions, supply chain impacts. Please email customersupport@tpr.gov.uk, stating your scheme or employer name.”
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