Covenant assessment services

The strength of a covenant can change if the sponsoring employer is experiencing difficult trading conditions. If the employer fails, trustees face substantial personal risk. To mitigate these risks, RSM offers independent reviews, tailored according to the scheme’s circumstances.

We understand how challenging it can be for trustees and employer companies of defined benefit schemes to navigate the complexities of pensions legislation. Our team has acted for a range of schemes, from multi-employer schemes to single employer schemes with assets of £10m and below.

Our services can:

  • enable trustees to comply with pensions regulation by forming objective assessment of scheme;
  • test employer’s financial durability and ability to meet financial commitments to the scheme;
  • monitor the covenant;
  • alleviate trustees’ possible conflicts of interest;
  • reduce personal risk for trustees ;
  • manage any potential conflicts between trustees and employers in an effective manner.

Our conclusions on the strength of the employer covenant are graded using an indicative five-level scale. This grading then feeds in to the guideline matrix of relevant actions including:

  • setting funding and investment risk parameters;
  • negotiating and agreeing affordable contribution levels and a deficit recovery period;
  • requesting and obtaining formal security or other contingent assets; and
  • establishing the level and focus of monitoring activity required.

We are part of RSM’s pensions team which acts for over 1,000 occupational schemes and is a member of numerous pensions associations.

If you feel you may be able to benefit from our services, please contact Guy Mander or your usual RSM adviser.