Assessing the employer covenant is now an expected pre-requisite of the Pensions Regulator and an established requirement of the scheme funding regime albeit who carries it out and how it is carried out is a matter for each scheme recognising the size and complexity of the scheme and the level of knowledge and experience of its Trustees.
The covenant assessment underpins the assumptions on which the technical provisions should be based recognising both the ability and willingness of the scheme employer to continue to support its pension scheme.
Guidance from the Pensions Regulator makes clear the sort of information the Trustees need to know and understand about the employer’s current and prospective financial strength, of its ability to meet ongoing financial contributions to the scheme and of the possible outcome for the scheme in the event of the scheme employer becoming insolvent.
Our team has a combined experience covering many decades of assessing all forms of businesses current and ongoing viability and the likely outcome for creditors in the event of insolvency.
We are therefore exceptionally well placed to assist Trustees in undertaking covenant assessments allowing them to focus on setting appropriate and prudent assumptions in complying with their scheme funding obligations.