In part 1 of this 3-part blog series we took a look at what was anticipated for the pensions industry in 2020 due to legislative changes mainly from the EU, and both domestic and international political developments.
In this part, we will examine the more unexpected developments which occurred in 2020 and the consequences that need to be considered.
Amid this hectic period of change and development came the global COVID-19 pandemic. The first restrictions and lockdowns in March coincided with or gave rise to a significant drop in investment markets. The pensions industry, along with every other industry, therefore faced challenges it had not dealt with before. The immediate impact and response fell mainly into two areas:
- Providing essential services while facilitating ‘work from home’ practices by service providers. In normal circumstances, such a change in working arrangements would take months of planning and implementation; and
- Ensuring that benefits continued to be paid and assets kept secure, while contributions could still be paid and invested.
Once the immediate actions were taken to ensure that services could be provided remotely, other items had to be considered for the short to medium-term operation of pension schemes and the provision of benefits.
- The Pensions Authority’s announcement on 27th March and its subsequent update on 24th April. These announcements covered several topics, such as:
- The prioritisation of pension and other benefits payments, and the collection of contributions
- Considering changes to investment strategy, if necessary
- Dealing with requests to cease or suspend contributions, ensuring the remittance of deducted contributions, checking contracts of employment, scheme rules (and, in some cases, legislative requirements), funding commitments for defined benefit schemes, and interaction with the Temporary Wage Subsidy Scheme (TWSS)
- Obligations on disclosure requirements (annual reports, member benefits statements, communicating changes etc.)
- The Emergency Measures Act, which didn’t mention pensions. The TWSS payment could not be reduced, so it was assumed pension contributions could not be deducted from it. Business continuity plans for service providers, employers, and pension schemes had been implemented and needed to be reviewed, updated and, in some cases, documented
- The ability to hold meetings, both in terms of hardware/software and the power or authority to hold them. Meetings had to be held to deal with the usual cycle of trustee meetings, which covered administration, service, compliance, and investment. COVID-19 response meetings were also necessary
- Employers’ and members’ current circumstances in terms of employment, remuneration, and contributions
- Notwithstanding the Pensions Authority’s caution against unnecessary investment decisions, trustees needed to consider the implications of the fall and subsequent rebound in asset values, the impact on their investment strategy, and the performance of the funds against their benchmarks and expectations. Were changes required? Would the funding of the scheme be affected? Was there a need to communicate with the employer and members? The results of Mason Hayes Curran (MHC) and Irish Institute of Pensions Management (IIPM) survey found that 71% of schemes had not adjusted their investment strategy as a result of the pandemic
- The ability to maintain risk benefits for members and employers, where employment or contributions are temporarily suspended. Insurance companies were supportive in providing cover in most cases; and
- The information to share with members to reassure and assist them and how to issue those communications.
In the final part of this series, we will look at Covid 19’s impact on pensions, the general outlook for the pensions industry and the effect of 2020’s expected and unexpected changes. Make sure to check it out!
ITC’s Trustee Services Director
*Please note this content is the view of the author and not of Independent Trustee Company