Assessing Employer Covenant

Published by Barry McKay on

As the number and types of employers participating in the Local Government Pension Scheme (LGPS) grows, assessing employer covenant is becoming more important in order to manage and mitigate risks to funds. Changes to legislation may also have an effect on employer covenant.

The 2019 valuation gives funds the opportunity to review their participating employers with regard to any guarantees or security in place and the “riskiness” of each employer. A covenant analysis demonstrates good governance and risk management. It also helps funds to categorise employers with the aim of developing more tailored funding strategies for employers.

There are different levels of assessment that can be carried out and each fund will have a view of the level of detail that is required.

"The analysis and results of the covenant assessment will need to be available in the next six months to give sufficient time to feed these into an employers’ funding strategy so it’s important to start work on this soon."

We can provide support at all stages of the process.

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