Employer Covenant Consulting Service – Introduction
The strength of the Sponsor’s covenant impacts on every funding and investment decision Trustees make. The Pensions Regulator recognises this, stating that Trustees should “...form an objective assessment of the employer’s financial position and prospects.”
LCP’s Employer Covenant Consulting Service (ECCS) has been designed directly to meet Trustees needs in this difficult area whilst also taking account of funding and investment implications.
The covenant includes the employer’s willingness, ability and legal obligation to stand behind the pension scheme, and the ECCS considers each of these aspects.
In particular the ECCS helps trustees to understand their employer’s corporate structure, financial position and creditworthiness and assists them in:
- Understanding how likely it is that their sponsor will continue to be able to make contributions on an ongoing basis
- Planning for deficit recovery where relevant
- Assessing the possible use of contingent assets to address any deficit
- Understanding the balance between what the scheme requires and what the company can realistically afford. This takes account of three competing demands for cash; pension scheme funding, the capital expenditure needs of the business, and dividends to shareholders.
LCP has created its own credit team to provide this service, which is fully integrated into LCP’s Trustee Consulting Practice to ensure that funding and investment decisions are made in a joined up way. David Poynton heads the credit team, bringing to LCP his extensive experience in head office credit functions at investment and clearing banks.
For more information about the service, please view our Briefing Plus.
