Analysing covenant
strength, affordability and risk for a triennial valuation

Case studies

The background

We were appointed to advise the trustees of a pension scheme in relation to their 2017 triennial valuation. The sponsoring employer was engaged in the distribution of films and series for cinema and television across Europe, and its ultimate parent company was a listed Japanese multinational conglomerate.

Our solution

We provided a conclusion on the strength of their covenant, which involved discussion with management to understand treasury structures within the group and a review of the future earnings pipeline and investment plans of the group.

We also undertook affordability analysis on behalf of the trustees to provide advice regarding the suitable form of a recovery plan that the trustees might consider when discussing the 2017 valuation with management.

Following our recommendations on a suitable level of covenant risk to reflect in the technical provisions for their valuation and on the affordability of deficit repair contributions, we helped the trustees to develop a proportionate framework to help them to monitor the strength of their covenant in non-valuation years.

This has provided the trustees with a better view of how the covenant is evolving over time relative to key measures of funding and investment risk, enabling timely actions to be taken when necessary to protect the security of members’ benefits.

Chart your own course

Chart your own course

Your scheme, your journey

In this report we look at the key risks facing pension schemes today and set out a journey plan blueprint using examples to bring the theory to life.

Read the report

How we can help

We help sponsors of pension schemes understand and manage the costs and risks associated with supporting their current and legacy pension schemes as well as other employee benefits.

We help trustees understand and monitor the employer covenant.

We help pension scheme trustees and sponsors to determine the ultimate destination for their scheme and help them put together a plan to get there, including how to effectively manage the risks they face along the way.

We help trustees achieve their strategic goals, with solution-led, appropriate advice.