TPR has been encouraging trustees to take formal, external covenant advice now for more than 10 years, however this should not just be a triennial valuation exercise. An ongoing monitoring of the financial position and prospects of a pension scheme’s employer is key.

Many trustee boards have used the uncertainties caused by the Covid-19 to request further and more regular financial information from their employer, whether easements on Deficit Repair Contributions were requested or not. This sharing of information should be continued and used to monitor and prepare for any reduction in covenant strength.

In the last few weeks, we have seen Covid-19 restrictions increase, with businesses facing cliff edges in government support and an undetermined outcome for Brexit there is the expectation of a sharp rise in corporate restructurings. Where there’s a threat of insolvency for the employer, trustees need to ensure that they have plans to run the scheme on a stand-alone basis.