The Pensions Regulator (TPR) has published a statement to trustees of all work-based pension schemes setting out its general position in relation to current market conditions.

The statement highlights that:

• recent developments in the financial markets will be of great concern to pension scheme trustees, sponsoring employers and scheme members;
• trustees need to remain vigilant and to keep the position of their schemes under review;
• the regulator's current codes and guidance cover the relevant issues and allow sufficient flexibility for trustees;
• trustees should continue to focus on making sound decisions in the long term interests of scheme members.

TPR's essential message is 'don't panic'. Vigilance instead is the watchword. The main issues faced by DB schemes are likely to be firstly the more general fall in asset values, and secondly the emerging pressures on company covenants and ultimately solvency. TPR's contacts with larger pension schemes suggest a relatively limited direct exposure to so called 'toxic' assets and limited involvement in derivative trades with counterparties that are in difficulty.

Trustees should not assume that the sudden fall in asset values means they must immediately ask employers to pay more, or that TPR will necessarily expect such action. The statement anticipates that some recovery plans arriving in 2009 will show larger deficits and weaker covenants, due to the current economic difficulties. TPR acknowledges this is likely to imply higher technical provisions and may result in longer recovery periods being proposed, recognising the emerging pressures on company cash flows and thus affordability. Trustees are reminded that TPR's funding triggers are not rigid: the particular circumstances of each scheme will always be taken into account.

Some additional paragraphs are directed specifically at trustees of DC schemes. For them, the key issues lie around member communications. Trustees are urged to pay attention to TPR's published guidance, which in particular states that trustees of DC schemes should have clear and appropriate processes in place for members approaching retirement.

Trustee training update

Earlier this month TPR launched a consultation on a draft revised code of practice and scope guidance, designed to ensure that the TKU (trustee knowledge and understanding) framework remains relevant for trustees.

The consultation comprises four documents:

• The code of practice; plus
• Guidance on the scope of the TKU requirements for trustees of
  • Defined benefit schemes (including those with a DC element),
  • Defined contribution schemes (with no DB element), and
  • Small, fully insured DC schemes.

Changes reflect:

• the importance of good administration;
• the forthcoming introduction of registration and auto-enrolment requirements;
• emerging buyout issues, including abandonment and inducement; and
• pension scheme wind-up and appropriate preparatory steps.

The code of practice came into force in May 2006 and TPR undertook to review it after two years. The scope guidance covering what trustees need to know and understand (a statutory obligation under PA 2004 ss.247 - 249) has been available since 2005. While inevitably the sheer volume of relevant pensions legislation and guidance has since grown significantly, TPR says it is "seeking to lighten the load wherever possible".

The twelve-week consultation period ends on 31 December 2008.

TPR's free e-learning programme the Trustee toolkit will be updated in due course to reflect the changes in the code and scope after the consultation is complete*. TPR emphasises it will not be necessary for those who have already completed the toolkit to redo the whole program.

* The Aries Trustee & Administrator Training System will also be updated accordingly. Aries TRT is a flexible, user-oriented CD-ROM course which some find easier to follow.