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Liquidity preservation: managing social housing pension schemes during the Covid-19 outbreak

With the onset of the Covid-19 outbreak, sponsors have been looking at ways to preserve cash and maximise future liquidity including how they fund their pension obligations. The Pensions Regulator has issued detailed guidance noting that pension scheme trustees should be open minded to requests from sponsors to defer the payment of pension contributions if there is a genuine business need for them to do so.

The Regulator has understandably indicated that any period of suspension should be as short as possible (initially no more than 3 months). However, if there is a genuine business need for a longer period of deferral, pension scheme trustees should consider what additional protections they can obtain eg: parent company guarantees, letters of credit, charge over assets etc.

Aside from the current circumstances, we are increasingly seeing sponsors use a range of contingent assets to manage their contribution levels and to extend the period over which exit debts can be paid.

Please see the audio recording from May 5, with guest speakers, to discuss the dynamics of the current social housing pensions landscape.

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