The employer covenant is a sponsoring employer's willingness and financial ability to support its defined benefit pension scheme, both now and in the future.

Understanding the employer’s financial position and prospects allows trustees to make well informed decisions on scheme funding and investment strategies. This is at the heart of defined benefit integrated risk management.

Not only is it importance for trustees to have an understanding of the covenant to make better decisions on risk, there is also a regulatory requirement driving the need for these assessments. The Pensions Authority’s 2021 Code of Practice for trustees of occupational pension schemes and trust retirement annuity contracts states that trustees must have a documented Own-risk assessment (“ORA”) process to identify and assess material risks that threaten the achievement of the scheme’s objectives. ORAs must consider the trustees’ “evidence-based view of the strength of the employer covenant”.

How we can help

We help our clients understand their covenant. As well as undertaking covenant reviews to support ORAs, we can provide advice in the context of scheme valuations, regular monitoring, ESG assessments and advising on how the covenant may have changed as a result of corporate events.

Our client deliverables will typically be concise reports which use intuitive visuals to make key messages clear to the reader. We are always delighted to present our findings at trustee meetings so we can bring out the key points and take questions.

What sets us apart

Collaborative, proportionate and pragmatic advice - this is what our clients tell us they value most.

We tailor our work to each client’s unique circumstances and provide clear views on complex topics in a form that is easy to interpret, supported by intuitive visuals.

Working with LCP Ireland's actuarial and investment specialists, we are able to provide integrated and holistic advice on all key pensions matters. 

I have worked with Jon and the LCP covenant team on a number of cases and am consistently impressed with their ability to concisely set out the key issues and provide clear and understandable advice. LCP’s collaborative approach with trustees, sponsoring employers and advisers on both sides is a real feature of their proposition, which leads to positive outcomes for all parties.