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Employer covenant assessments and advice

The Pensions Regulator regards employer covenant as one of the cornerstones of the defined benefit (DB) scheme risk spectrum that must be considered and regularly monitored.

Volatile and increasing deficits in recent years have resulted in an employer’s ability to support its scheme (the employer covenant) coming under more intense scrutiny. Covenant strength can change rapidly, and both trustees and employers will want to ensure they have mechanisms in place for regular monitoring of the situation.

Our team provides bespoke assessments of covenant strength to support our clients through triennial valuations and give real-world views on suitable recovery plans, given the specific circumstances of both the scheme and the employer.

Our extensive experience and in-depth understanding of both TPR and the PPF means we can provide advice that reflects both the needs of our client and the regulators.

We create innovative solutions to overcome seemingly insurmountable funding issues, involving the use of contingent assets, the implementation of profit-sharing mechanisms and further forms of compromise. We also provide due diligence support to trustees where they have received proposals to implement asset-backed contribution (ABC) structures. Our experience of looking at a multitude of such arrangements provides real insight and value-add to our client.

Our services for trustees:

  • Independent covenant assessment
  • Advice on recovery plans
  • Non-cash funding solutions
  • Negotiation assistance
  • On-going covenant monitoring
  • Due diligence on ABCs and valuation of ABC instruments
  • Advising on and assisting with the management of Pensions Regulatory oversight

Services for employers and other stakeholders:

  • Proactive assessments, presenting an initial view of covenant for trustee consideration
  • Employer side actuarial advice on scheme funding basis assumptions
  • Advice in affordability discussions with trustees
  • Non-cash funding solutions
  • Negotiation assistance
  • Advising on and assisting with the management of Pensions Regulatory oversight

Partner, Head of Pensions Advisory Services

Paul Brice

+44 (0)20 7728 3423

Find out more