Using LCP GEARS to plan collaboratively through a period of covenant uncertainty

Case studies


The trustees, in conjunction with the sponsor, had established that their ultimate objective was to buy-in the scheme with an insurer. As part of the most recent actuarial valuation, the trustees had agreed the next steps with the scheme’s sponsor for reaching this objective. However, the trustees also wanted to have plan in place to react to uncertainty with regard to the sponsor covenant.  

Our solution

We provide actuarial, investment and covenant advice to the trustee. This made it natural to use our integrated journey-planning framework, LCP GEARS, to help navigate decisions.   


The trustees and sponsor have historically enjoyed a collaborative relationship. In formulating the scheme’s strategic plan, the sponsor was invited to join the trustees’ training on journey planning, which led to detailed discussions on objectives and timeframes.    


An ultimate objective of buy-in had already been established. However, the joint session enabled both the trustees and sponsor to realise that the objective was closer than first thought. They agreed to target buy-in within 4-6 years.    


As part of the journey plan review, we identified that the main risks that could knock the journey plan off course were changes in insurer pricing and changes to the covenant afforded to the scheme by the sponsor.    


The trustees and sponsor agreed to a change to the scheme’s investment strategy, which reduced further the reliance on returns from a low risk investment portfolio given the short timeframe to a potential transaction, and was intended to provide a better match to insurer pricing. The trustees also consulted with the sponsor on a strategic portfolio which could be entered into if contributions were accelerated, or if there were significant improvements in insurer pricing. Finally, the trustees incorporated a plan for taking the steps to get 'transaction-ready' in the short term.    


The review of the scheme’s journey plan had been undertaken under the backdrop of a sale of the sponsoring employer, which had uncertain impacts on the covenant at the time of the review. By taking a collaborative approach, the trustees were able to discuss an approach for acceleration of the journey plan on a downside scenario.   

The results  

Following the initial review of the journey plan (and the above steps) it became apparent that the sponsor was planning a significant dividend to its new owner. There had also been some significant improvements in pricing in the insurance market over the same period. Having already taken the above steps, the trustees were well-prepared to propose the acceleration of contributions and undertake the further de-risking of the investment strategy that had already been discussed with the sponsor. The process has given the trustees confidence that they are well prepared for a transaction with an insurer; and have a strategy in place to achieve that objective.  

We help pension scheme trustees and sponsors to determine the ultimate destination for their scheme and help them put together a plan to get there, including how to effectively manage the risks they face along the way.

We help trustees achieve their strategic goals, with solution-led, appropriate advice.

We help trustees understand and monitor the employer covenant.

We help sponsors of pension schemes understand and manage the costs and risks associated with supporting their current and legacy pension schemes as well as other employee benefits.

We are market leaders at each stage of de-risking, including journey planning, investment strategy, transactional services and wind up.