Seven key considerations following recent Covid-19 regulatory guidance

On 15 January 2020, China and the US signed a breakthrough "Phase One" deal to halt their long-running trade war and ease one of the largest geopolitical risks facing global financial markets. At that point most asset classes looked set to continue to rise until … well, we all know what happened. The Covid-19 pandemic swept the world, we’re in the midst of another global financial crisis and the relationship between both countries has strained again. How quickly things can change. Four months on and many defined benefit (DB) pension schemes have experienced collapsed funding levels due to plummeting gilt yields and investment markets.

Every crisis brings change, and with change comes opportunity. On 27 March, the Pensions Regulator (TPR) responded to the crisis by publishing its Covid-19 guidance to trustees, and public service scheme representatives, in relation to funding and investments. The guidance highlights some good practice ideas in relation to managing investment risks and taking advantage of opportunities from market dislocations.

This note summarises the key investment aspects of TPR’s guidance and explains what it could mean for UK DB pension schemes.