Understanding Employer Covenants
- Author Jennie Wallace
- Published January 11, 2010
- Word count 332
It is important to understand your employer covenants and the level of security offered on your pension scheme.
The Pensions Regulator says that it is essential for the trustees of the pension schemes to 'form an objective assessment of the employer's financial position'. The trustee then has the task of reviewing the prospects of the scheme as well as the employer's willingness to continue funding such a scheme.
What is an employer covenant review?
An employer covenant review involves an independent and totally impartial assessment of the overall financial viability of an employer’s pension scheme.
Within the pension scheme you need to look at the investment strategy and funding levels as well as a covenant governing the scheme.
Questions need to be answered:
-
Who is in control of the scheme?
-
Who will find the scheme if there is a deficit?
-
If the company is made insolvent, then would the buyout debt be paid in full?
-
What is the recovery period?
-
What legal obligations does the employer have to find the scheme?
-
What will happen if the employer can no longer fund the scheme?
-
What happens if a bad investment is made by the scheme?
-
What is the security of the scheme?
A scheme is approached differently by employer covenant assessment trustees, depending upon the level of detail that they need to acquire to arrive at their advice.
It is important that the trustee consider:
-
The position of the employer, their financial strength, corporate group structuring, company policies, their management record and any future plans that they might have, that could affect the schemes.
-
The industry in which the employer covenant operates and their position.
-
How the company is positioned with the economy as a whole.
Every eventuality has to be planned for within an employer covenant review, including the possible insolvency of the company, especially as circumstances can change almost overnight for businesses. Understanding your employer covenant will help you to manage your pension scheme and look after the scheme members.
Understanding your employer covenant is the first step to successfully managing your pension scheme. Undertaking a employer covenant review will give you the information that you need to move forward and ensure that you are prepared for every eventuality.
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- 3 Great Passive Income Ideas for New Moms and Dads in 2024
- Avrex IO Redefines Real Estate Investment with Innovative Tokenized Ownership Approach
- Panama City's Real Estate Market: Top Neighborhoods for Investment
- Investing in a Condo or Villa in Pattaya, Thailand
- Tabania Group Rings in the New Year with a Powerhouse of Financial Services, Unveiling a Comprehensive Suite for the Digital Age
- To What Extent Has Economic Growth Improved Quality of Life?
- How to Manifest Wealth in Your Life
- Unlocking the Potential: Making Money Online with Your Phone”
- Blue economy of the world
- This Financial “FORMula” Will Help You Plan Around What Matters Most
- Losing a Parent: A Checklist and Timeline of the Financial Aspects to Address
- How to Avoid Lifestyle Creep: Try this 50/50 Rule for Saving & Spending
- (Money) Date Night: Why You Need One and 5 Topics to Discuss
- Private Placement Life Insurance (PPLI) in Offshore Trust More Useful Than Ever
- Indexed Insurance Policies Hedge against Inflation
- Should You Invest Abroad? A Complete Guide to Buying Investment Properties in Thailand
- What Are Your Retirement Planning Options?
- Daily Income Opportunity With U-Farm
- Building a Comfortable Retirement: Tips and Strategies for Investing in Your Future.
- Revocable Living Dynasty Trust (RLDT)
- Key Retirement & Estate Planning Tools
- Captive Insurance -- Details
- INDEXED UNIVERSAL LIFE INSURANCE (IUL) ADAPTS TO INFLATION AND HIGH INTEREST RATES
- GRANTOR ACCESS TO IRREVOCABLE TRUSTS -- EASE THE STRESS OF COMPLETED GIFTS
- CASH BALANCE PLUS PLAN
- Tax-Free Income Making More Sense in Global Financial Crisis
- Dynasty Trusts Guard Personal Autonomy in Hierarchic Society
- Captive Insurance Company, CIC -- Reduce Taxes and Build Wealth
- What is an RESP?
- Private Placement Life Insurance, PPLI