The Pensions Regulator

AbandonmentAbandonment of defined benefit pension schemes

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Replacement employer's covenant

33. The term ‘replacement employer’ is used to refer both to a new employer to the scheme (or section of the scheme or membership) and to the existing employer following a restructuring.
34. Trustees should carry out a similar analysis of the covenant of the proposed replacement employer to that carried out for the current employer. In practice, where a nominal employer is being proposed, it is likely that no value can be assigned to the covenant.
35. Trustees should compare and contrast the respective covenants. The aim should be to form a view on the change in the exposure of the scheme and members and the loss of any support provided by the employer to the scheme. Carrying out such an analysis is important for all transactions affecting the pension scheme, not just abandonment.

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