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Article:

Are you meeting The Pension Regulator’s expectations in your role as trustee?

31 January 2019

The importance of understanding employer covenant risk in a changing landscape

At a time of formidable challenge for defined benefit pension schemes, including increased longevity, political and economic uncertainty and an exacting regulatory environment, an essential component of good governance and integrated risk management is a robust assessment of a scheme’s employer covenant.

The high-profile failures of BHS and Carillion, which resulted in scheme members suffering a reduction in their promised benefits, underlined the importance of trustees understanding employer covenant risks and how to mitigate them.

How we can help

Our Pensions Advisory team can provide you with robust employer covenant advice, giving you peace of mind that your scheme’s employer covenant is being appropriately assessed, that you are making properly informed decisions and that you are meeting The Pension Regulator’s (‘TPR’s’) expectations in your role as trustee. 

Our relevant experience

Our Pensions Advisory team is a leading and long-established provider of independent, professional and specialist employer covenant advice that has assisted over 500 clients on employer covenant matters. In recent years, we have advised both TPR and the Pension Protection Fund in respect of high profile cases. Our advice is widely recognised by clients and other stakeholders as being clear, concise and reliable.

The team concludes on employer covenant strength with reference to a clear and transparent ratings framework, which maps easily to that used by TPR. We can also provide insightful recommendations on the affordability of contributions and practical steps as to how your employer covenant risk can be reduced.

Where we can we help

BDO’s Pensions Advisory team provides employer covenant advice to clients of varying sizes, with employers drawn from a range of sectors, complexity and corporate structures. Situations where we might be able to assist you include:

  • Triennial actuarial funding valuations
  • Corporate transactions (eg an acquisition, merger or divestment)
  • Corporate reorganisations
  • Corporate debt refinancing
  • Payment of a large dividend from the company to its shareholders
  • Consideration of potential insolvency planning options
  • Regulatory and expert witness work
  • An apportionment of the pension scheme liabilities from one company to another

How much will it cost?

The cost of employer covenant advice will vary on a case by case basis, however we will agree a capped or fixed fee, where possible, to give you complete transparency on the cost to your scheme.

One firm for pensions audit and advisory

The BDO Pensions Advisory and BDO Pensions Audit teams work together providing trustees with a single firm for audit and employer covenant advice. Clients have found this convenient, offering value for money, and providing them the assurance and insight they need.