Since the commencement of the conflict in Ukraine, managers and trustees of pension schemes as well as pension savers have been faced with further investment market turbulence. TPR has produced guidance on what it expects trustees of pension schemes to do in these circumstances, although some of this is also relevant to employers who wish to communicate with employees on this issue.
So, what are the key points to consider?
Likely impact on investments Members’ DC pension investments will likely have been impacted by events and the impact on the wider global market. Trustees and managers should focus on their fiduciary duty to members when considering any actions, although they should also consider wider issues such as member views on ethical and social governance. Many pension funds have already taken the action to sell off their Russian exposure or value it as zero. Care should be taken when taking action to protect members.
Heightened financial crime risk Similar to what we saw during the COVID-19 pandemic, the increased pressure on an individual’s finances presents an opportunity to fraudsters and so trustees and managers should be vigilant.
Heightened cyber security risk There is a heightened risk of cyber attacks. Trustees and managers should ensure their cyber security procedures remain adequate.
Impact on the sponsor It is also important to consider the impact on the sponsoring employer if it has links to Russia. This is arguably more important in defined benefit schemes where this can have an impact on scheme funding, however the employer’s ability to continue to pay contributions will be important in DC pension schemes.
In addition to TPR’s guidance, we believe it is important to ensure that DC pension members are provided with clear, relevant information so that they can take informed decisions with regard to their pension arrangement. We have prepared a briefing note on investment uncertainty that we can provide for clients to share with employees. The key message is not to panic!
Trustees, managers and employers should consider the impact of the conflict in Ukraine on their pension arrangement. Please speak to your PS Aspire consultant if you’d like to discuss this or how best to communicate with members on this difficult subject.