Scheme funding

Over the last decade, the environment in which DB schemes operate has become increasingly challenging as the effects of the financial crisis have played out.

For businesses sponsoring DB schemes as well as the trustees managing them, future funding demands have become a major concern. Trustees and employers are exploring more dynamic funding solutions and are increasingly looking towards contingent assets such as guarantees, escrow arrangements, parent guarantees and asset-backed funding structures.

Our finance and investment specialists advise on a broad range of contingent assets and funding solutions so we understand the issues that commonly arise for both trustees and employers and, crucially, how to negotiate and address them.

We also routinely advise on the valuation process, including negotiations with overseas sponsors who may not be familiar with UK pensions issues, engagement with TPR, and agreeing appropriate covenant packages.

Recent experience

  • Working closely with a set of trustees to construct and negotiate an appropriate covenant and funding package after the scheme sponsor was taken over, which resulted in a smaller funding deficit
  • Acting for trustees on a package of measures to increase the long-term funding and security of their schemes. This included a record lump sum cash injection to facilitate corporate activity by the sponsoring employer
  • Acting for the trustees of a FTSE 100 company pension scheme in relation to an escrow arrangement used as an alternative funding solution to limit the risk of trapped surplus in the scheme
  • Advising the trustee of a pension scheme with an overseas guarantor on bespoke arrangements to ensure the guarantor could meet its obligations on an ongoing basis. This included financial covenants, an escrow arrangement and specific remedies for breach
  • Helping trustees on an asset-backed funding structure involving loan notes in the context of a scheme merger
  • Advising trustees on the creation of a £300m reservoir trust with standalone investment management and custody agreements
  • Leading negotiations for an employer on an asset-backed funding structure.