Pension payments are being deferred or delayed by hundreds of businesses in the UK because of Covid-19’s impact on the economy.
According to research by Lane Clark & Peacock (LCP), more than 500 businesses will use emergency measures to stop paying Defined Benefit (DB) scheme deficits.
This could mean that more than £500 million is deferred if 10 per cent of schemes experience a delay.
The Pensions Regulator (TPR) has responded to the pandemic by permitting businesses in financial distress to defer DB payments with firms including Debenhams already delaying pension payments.
Whilst the Payment Protection Fund (PPF) will protect those with DB funds which offer a guaranteed income for life upon retirement, their assessment process can take up to two years.
The fund are clear that any retirees who have officially retired or passed retirement age will receive their full pension payments up to £40,020 per annum.
Those aged over 65 and still working or have retired early may face a 10 per cent loss and will be paid up to £36,018 per year.
Jill Ampleford, partner at LCP, commented:
“Some firms that are fundamentally sound are nonetheless facing huge short-term cashflow pressures during the present crisis. The ability to agree with trustees a delay in making pension contributions will help them to weather the present storm and continue their support to the scheme in the long-term.
“But it will be vital to get things back on track once the crisis is over so that a realistic plan is put in place to deal with the shortfall in the pension scheme, particularly as this could have materially increased due to changes in financial markets.”
