Covenant advisory services

The employer covenant is a critical factor in securing members’ benefits and making decisions regarding a pension scheme’s funding and investments. The financial strength of the employer determines the degree of prudence trustees should use in the valuation of the scheme’s liabilities and the level of risk that can be supported in the scheme’s investment strategy. Our dedicated team of experts - who are members of the Punter Southall Transaction Services group - can assist pension scheme trustees in assessing and monitoring the strength of the employer covenant, be that in relation to corporate activities or in the context of the actuarial valuation.

For further detail on the services we provide, including some of our recent case studies and information on our team providing this advice, please download our brochure.



Our covenant advisory services include:
  • detailed covenant assessments to understand the impact of major corporate activities
  • high level covenant reviews to determine the sponsoring employer’s financial position and prospects, the scheme’s security position and the level of prudence needed for scheme funding
  • regular covenant monitoring to make sure pensions scheme trustees are aware of any changes in the sponsoring employer’s financial position
  • ongoing negotiation support to guide pension scheme trustees through discussions with the sponsoring employer

Covenant reviews are triggered by either employer or scheme related activities; the actuarial valuation being the most common example. The events when covenant is a relevant consideration include the following:

  • Scheme events: triennial actuarial valuation, investment strategy review, apportionment arrangements, withdrawal arrangements, transfer value calculations, scheme merger or scheme closure
  • Corporate events: merger or acquisition, divestment, refinancing, restructuring, deterioration of trading performance, dividend payment or share buy-back
Focusing on areas of key importance, we are pragmatic, cooperative and creative in our approach. Our advice is clear and constructive.

 Insights & views

    The Railways Pension Scheme: Valuations at 31 December 2016
    6 April 2017

    The latest actuarial valuations for the shared cost sections of the Railways Pension Scheme (the ‘RPS’) are being carried out as at 31 December 2016. While there has been a plethora of recent newspaper headlines lamenting an apparently astronomical increase in deficits across DB schemes in general, the RPS is – as ever – a little different. Funding levels may therefore not be as bad as might have been feared.

    Read full briefing note here

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    The Discount Rate Debate
    14 February 2017

    One of the key assumptions in a scheme’s triennial funding valuation is the discount rate. For many schemes this has been derived based on...

    Read full briefing note here

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    EU General Data Protection Regulation
    10 August 2016

    Finally, after over four years in the making, the new EU General Data Protection Regulation (GDPR) has been published. All member states will have two years to become fully compliant with the GDPR, which will be directly effective from 25 May 2018 without the need for implementing legislation in individual member states.

    Read full briefing note here

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    Investment Quarterly Update - July 2016
    28 July 2016

    ​​In the initial paragraph of our Q1 16 market commentary we started by saying the key themes over the quarter were uncertainty and volatility caused by the EU Referendum, terrorist attacks, the EU Migrant crisis, Japan and negative interest rates and concerns about Chinese growth. 3 months later and not a lot has changed – other than the fact we actually voted to leave the EU!

    Read full investment update here

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    Corporate Bulletin: Quarter 4 2014 update
    9 January 2015

    ​Welcome to the 2014 year-end edition of our quarterly bulletin aimed at defined benefit (DB) sponsors. We provide an overview of market conditions and the range of accounting assumptions sponsors may wish to use for their annual disclosures at 31 December 2014 alongside market news regarding pension buy-outs and de-risking, and an update on PPF issues.

    View full Corporate Bulletin here

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    Pensions Bulletin September 2014
    4 September 2014
    69 AD is known to ancient historians as ‘The Year of Four Emperors’. It was a year in which four men in turn (Galba, Otho, Vitellius and Vespasian) tried their luck at the imperial throne following the death of Nero. For pensions professionals, 2014 will be remembered as the ‘Year of Four Bills’.

    Read more
    Visit the Industry Insights page for news and views on the latest industry developments
    Speak to us

    Speak direct to our specialists in this area
    Lorant Porkolab
    Head of Covenant Advisory Services
    Or call us on
    020 3327 5000