Covenant Assessment

Changing legislation and a shaky economic environment can challenge the financial stability of a sponsoring employer. When that happens, the strength of their covenant—legal obligation and ability to financially support a defined benefit pension scheme–can decline, putting them and trustees in a difficult position.

Due to this, it is vital to regularly assess and monitor the covenant. Doing so will help trustees decide the appropriate level of risks that can be taken when creating strategies for investments and funding and will allow sponsor employers to effectively manage pension schemes over the long term. It will also allow for the development of a sound contingency plan for mitigating eventualities that can impact the security of a scheme.

Solid covenant assessment for continued scheme support

Our team here are Millwood Accounting assists both trustees and sponsoring employers in navigating the complex legislation governing defined benefit pension schemes and in facilitating covenant assessment and monitoring. We tailor our solutions according to specific circumstances to achieve the best possible outcomes for both trustees and sponsoring employers.

We have participated in multiple covenant assessments and monitoring activities over the years. We have also coordinated with different pension regulators, giving us the opportunity to understand how they operate. Additionally, we have memberships in varied pension associations. With all these, we are confident that our team is well positioned to guide trustees in the process of covenant assessment and monitoring and aid them in:

• Working with sponsor employers’ and identifying their capacity to contribute cash to schemes in the long term
• Complying with pensions regulations
• Maintaining full funding
• Eliminating the potential for conflicts of interest
• Minimising risks
• Developing a contingency plan to mitigate risks that may threaten the future sustainability of a scheme