An Employer Covenant Review
Trustees are now required to provide an employer covenant review of all pensions.
Since the Pensions Regulator was established, Trustees must now ensure that the financial strength of the sponsoring employer can meet the promises made by the scheme contract.
The pension scheme Trustee will need to carry out an employer covenant review in order to establish whether or not the scheme is viable – and an independent covenant review is the best way to proceed.
It is vital that an employer can meet their financial obligations to employee pension funds. Carrying out a employer covenant review ensures that the employer understands what is expected of them and employees know where they stand financially.
An employer covenant review allows the trustee to:
* work out the financial strength of a pension scheme and whether the scheme is going to hit the funding target and associated contributions schedule.
* put together a pension recovery plan if the scheme is running at a deficit – helping the scheme to get back on track to reach the target level.
* assess the risk against the Pension Protections Fund (PPF) levy and enable the Trustee to better protect the scheme.
* Approximate the affect on the scheme should the employer become insolvent.
An employer covenant review is the only way to find out whether an employee pension fund is sound. An independent employer covenant review firm will speak to actuaries, accountants and lawyers to provide Trustees with the most comprehensive covenant strength review and valuation. They will also work on recovery plans with the Trustee if the pension fund is running at a deficit as well as assessing the likely risk to the fund.