Employer Covenant Assessment
- What is covenant? The covenant – as defined by the Pensions Regulator – is the employer’s legal obligation and financial ability to support their defined benefit scheme now and in the future.
- Easy to understand: We assess the strength of covenant using a tried-and-tested methodology, so that you know what supports the strengths and presents risks to your covenant
- Widely recognised: The results of our assessment are easily interpreted by actuaries and fully aligned to the Pensions Regulator’s own approach
- Clear results: We focus on communicating the results at the right level for your needs, in a clear ‘traffic light’ system that is easy to understand
- Linked to advice: This concise assessment translates into clear advice to you, so you know what actions are needed
M&A, raising finance or corporate restructurings all have potential to disrupt pension schemes.
- All angles covered: In addition to the technical/financial advice we provide to corporates and trustees, we believe understanding the regulatory or moral hazard implications of corporate activity on a scheme is fundamental for a successful outcome.
- Unparalleled regulatory insight: Many of our people have seconded to the Pensions Regulator so we understand the Regulator's perspective and its key considerations.
- Achieving consensus: Providing our clients with clear advice and committed support in negotiations where needed has proven to facilitate better corporate/trustee relationships and resulted in mutually beneficial outcomes.
Whether in distressed situations or for strategic reasons, proceeding with a scheme structuring can be challenging and complex for trustees and corporates, we’ll help navigate you to a successful outcome.
- Proven track record: We have led more scheme compromises with the PPF via Regulated Apportionments (‘RAAs’) than anybody else. Our experience best places us to deliver the result you need.
- Investment in stakeholder relationships: We believe early engagement with the regulator and collaboration with all stakeholders is key to reaching cost-effective and improved structuring outcomes.
- Honest representation of facts and risks: Imposing solutions on stakeholders often leads to resistance. Success stems from clear transparent knowledge and this sits at the heart of our advice.
Other examples of services include guidance through flexible apportionment arrangements (“FAA”), the set up of escrows and trusts and considerations of the Pension Regulator’s moral hazard powers.
- Close PPF relationship: Having supported the PPF in developing their latest levy methodology, and keeping abreast of developments means our team specialists are best placed to help corporates and trustees understand how the PPF levy rules apply to them.
- Understanding your levy bill: PPF levy calculations can be difficult to understand but by simplifying the rules underlying them, we can help you identify the key drivers affecting your levy.
- Minimising insolvency risk: Lower insolvency risk can drive a reduced levy on schemes. Among other things, we’ve successfully identified suitable PPF guarantees and contingent assets which have reduced our clients’ insolvency risk and therefore levy bill.
- Simplifying Integrated Risk Management (‘IRM’): Understanding how your covenant strength interrelates with the pension deficit and the investment strategy is an area we have refined so it is easier to implement. This allows you to easily monitor and flag key risks to covenant and scheme funding over time and determine how you’re doing compared with market norms.
We work closely with the rest of our Pensions colleagues within the actuarial, investment, regulatory and accounting space and would be happy to discuss how we could support you in these fields.