Covenant Reviews
Part of the responsibility of the trustees of your scheme is to take full account of the financial health of you, the sponsoring employer, particularly where any strategic business proposal such as raising finance or merger and acquisition activity has the potential to impact upon the security of the pension scheme.
At this point trustees can insist, and will expect to see, all confidential papers relating to business planning. As frequently happens, the documents are read by the trustees without reference back to the business and often with no opportunity for the business to present a justifiable case for the proposals.
In these circumstances it is easy to see why many trustees go on to seek the protection of the pension scheme and effectively block the plans; or request increased funding to the scheme, in shorter timescales ? which for most employers amounts to the same outcome.
The good news is there are circumstances where the company can manage the production of their own covenant review, effectively pre-empting the trustees, and can then present both the review and a business plan together, in the best possible light.
A timely covenant review can also indicate whether the levy made by the PPF can be reduced, again reduces the financial burden of the employer.
