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Law360, London (April 24, 2020, 2:00 PM BST) -- As many as one in 10 British employers have asked to delay making payments to reduce pensions deficits as they struggle with the financial fallout from COVID-19, according to a regulator.
David Fairs, executive director for regulatory policy, analysis and advice at The Pensions Regulator, said Thursday that up to 10% of employers are seeking to hold off from tackling their pension deficits amid the coronavirus outbreak. The virus has infected more than 2.7 million people worldwide.
"Clearly the longer the current situation persists then that might change," Fairs added in a webcast organized by XPS Pensions Group. He said the watchdog recognizes that some employers are having a "really tough time" because of the financial damage the coronavirus disruption is creating.
PricewaterhouseCoopers said this month that British employers had a £290 billion ($360 billion) hole in their pension plans by the end of March.
The regulator's figures mirror findings by XPS Pensions Group, a U.K.-based pensions consultancy.
XPS senior consultant Stephanie Cole said in the webcast that it found that 12% of pension schemes have asked to suspend contributions. She said most of those requests were in connection with deficit reduction payments.
"Sadly it is plausible that number will increase quite a bit further in the coming weeks and months," Cole added.
David Fairs said the pensions watchdog has decided that employers should provide clear information to trustees about their financial situation if trustees receive a request from employers to suspend contributions. This should include information about short-term sources of stress, cash flow and their plans to manage the situation.
He added that the watchdog recognizes that the information may take some time to put together, so trustees can allow suspensions of up to three months while employers compile the data.
The regulator also repeated its warning that scammers will take advantage of financial anxiety created by COVID-19 to target vulnerable savers. Fairs said investors should think carefully before moving their pension pots despite the volatility surrounding the public health crisis.
Pensions consultancy Lane Clark & Peacock also said on Monday that 10% of employers could delay making deficit recovery contributions to the 5,436 defined benefit pension schemes operating in Britain.
The missed contributions could add up to approximately £500 million, LCP said. The company examined data from 200 pension schemes for which it acts as an adviser.
--Additional reporting by Martin Croucher. Editing by Ed Harris.
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