This document summarizes RSM Tenon's pension covenant advisory services. It discusses how most UK defined benefit pension schemes are in deficit, representing an involuntary creditor risk for companies. RSM Tenon helps trustees understand sponsors' ability to fund deficits and schemes, and helps sponsors navigate regulatory requirements during corporate events. The company provides independent covenant assessments involving sponsor financial reviews to help trustees and sponsors make informed decisions.

1. Pensions Covenant
Advisory Services

2. RSM Tenon
Pension scheme deficits Trustees
There are over 6,000 defined benefit pension schemes in the UK of which We help trustees to understand the sponsor’s ability to meet
most are in deficit. These deficits are often the largest creditor of the contributions and eliminate a deficit. Our covenant assessments inform
companies which fund them. They represent an involuntary creditor of the trustees’ decisions on the level of technical provisions and on
a changing value for which payment terms are uncertain. investment strategy.
We are experienced in helping trustees navigate corporate events such
What is an employer covenant?
as financial and operational restructurings, acquisitions and disposals
The employer covenant is “the employer’s legal obligation and its and scheme events including apportionment arrangements.
ability to fund the scheme now and in the future. As scheme sponsor,
Our restructuring background means we have the experience to
the employer underwrites the risks to which the scheme is exposed,
understand the implications of the financial pressures which many
including underfunding, longevity, investment and inflation.”
sponsors face. This allows us to provide trustees with robust
(The Pension Regulator)
support through negotiations and commercial advice as to risk
For many defined benefit pension schemes, the financial strength and mitigation strategies.
trading performance of the corporate sponsor is the most significant
risk to which the scheme is exposed. Understanding this risk and its Sponsors
implications is of critical importance to both Trustees and Sponsors. Scheme sponsors face difficult decisions with regard to scheme funding
in order to manage competing demands for cash. Corporate transactions
Why instruct a professional covenant assessment?
can result in material detriment to the scheme and need careful
A professional covenant assessment: management to avoid the risk of regulatory action.
n Minimises the personal risk of the trustees Our team is experienced in advising corporate sponsors of pension
n Reduces time spent in understanding the financial covenant schemes to help them navigate the regulatory environment particularly
n Provides an independent and objective basis for discussions through corporate transactions and clearance applications.
n Allows a realistic approach to scheme funding to be adopted
On-going covenant Impact of Impact of scheme
n Ensures potential strategies to mitigate risk are identified assessment corporate events events
Our covenant advisory services Triennial valuations Mergers and acquisitions Scheme mergers
RSM Tenon provides clear advice to pension scheme trustees and Affordability Capital restructurings Scheme closures
sponsoring employers in relation to all aspects of the employer covenant to
Recovery plan Financial distress Apportionment and
ensure informed decisions can be taken with confidence. withdrawal arrangements
We have an experienced covenant advisory team supported by a On-going monitoring Clearance applications Scheme transfers
national business advisory team within RSM Tenon’s restructuring
Negotiation support Mitigation strategies
practice. Our team has access to sector expertise covering a wide
range of industrial sectors and draws upon the experience of our wider
pensions practice.
Our wider pension services include investment and consultancy advice
for pension scheme trustees and corporates, pension scheme audit and
risk management advice for schemes. We provide advice and services to
c.250 schemes with which we have on-going relationships.
“We were all very impressed
by the quality of RSM Tenon’s
report in the time available.”
Corporate client
2 Pensions Covenant Advisory Services

3. “This is a personal thank you to you for helping me understand
the Covenant Assessment. With your help guiding me through
the document I feel a little more confident in understanding the
numbers. I am very grateful for your help.” Trustee client
Our approach to covenant assessment
Cash flow Illustrative
Earnings Balance sheet Overall grading
covenant Insolvency Options, advice
covenant covenant of covenant
(affordability and analysis and next steps
(viability) (ongoing) strength
liquidity) (default event)
n We provide a focussed report which includes: - grading of earnings, cash flow and balance sheet strength
A
- A robust assessment of recent and forecast financial information - overall covenant grading taking account of the likelihood and
An
- helpful executive summary which explains how we have reached
A impact of insolvency
our conclusions - Options and clear recommendations
Covenant Grading
Weak Negative Moderate Positive Strong
n We grade each aspect of the employer covenant based on n We explain our grading in terms that can be understood by all
consistent criteria trustees
Our advice
Why RSM Tenon
Our report will contain clear advice including as appropriate:
n An experienced and senior led team
n an appropriate level of deficit repair contributions n A joined up approach working with legal and actuarial advisers
n potential strategies to mitigate risk n Clear robust and commercially focused advice
n the impact of specific events n Competitive and transparent pricing
n High quality report in short timescales
n negotiation strategy
n regulatory considerations and next steps
We can provide competitive quotes in all situations which are normally
fixed or capped based upon scope, complexity and the quality of
financial information available.
Connect to rsmtenon.com 3

4. Lead Contacts
Willie Duncan, Partner
M 07794 693104 E willie.duncan@rsmtenon.com
Willie is a Chartered Accountant with over 30 years of experience of working
in professional practice. He has extensive experience in advising Pension
Scheme Trustees and Employers in relation to all aspects of the employer
covenant. He is also a licensed Insolvency Practitioner with experience of
restructuring, business reviews and formal insolvency appointments.
Richard Leach, Senior Manager
M 07532 038 973 E richard.leach@rsmtenon.com
Richard qualified as a Chartered Management Accountant over eight years
ago and has been involved in advising pension schemes for over six years.
Richard joined RSM Tenon in 2010 from a ‘big four’ accountancy practice
where he gained a wealth of Pensions Covenant Advisory experience. In
addition to Pensions Covenant advice, Richard also advises banks and other
lenders in relation to their exposure to corporate clients in financial distress.
David Hodgson, Director
M 07921 840023 E david.hodgson@rsmtenon.com
David is a Fellow of the Pensions Management Institute and has been
involved in advice to trustees and sponsors of pension schemes for over 20
years. Having joined RSM Tenon Financial Management in 2011, he is a senior
member of the team leading the delivery of service to clients with a range
of pension and employee benefit needs.
About RSM Tenon
RSM Tenon is one of the most progressive and entrepreneurial professional services firms in the
UK and is the 7th largest, with 35 offices, 230 partners and more than 2,600 people. We are the UK
member of RSM International, the 6th largest global accounting network with over 730 offices in
more than 70 countries, and in excess of 30,000 people.
www.rsmtenon.com
Restructuring and Insolvency services are provided through RSM Tenon Limited and our Insolvency Practitioners are authorised to act in
this capacity by their individual licensing bodies. Partners and staff acting as Administrative Receivers and Administrators act as agents
of the company over which they are appointed and contract without personal liability. RSM Tenon Limited is a subsidiary of RSM Tenon
Group PLC. RSM Tenon Limited is an independent member of the RSM International network. The RSM International network is a network
of independent accounting and consulting firms each of which practices in its own right. RSM International is the brand used by the
network which is not itself a separate legal entity in any jurisdiction. RSM Tenon Limited (No 4066924) is registered in England and Wales.
Registered Office 66 Chiltern Street, London W1U 4GB. England. BWF02930113