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Trustee checklist to reduce scheme risk of sponsor distress – transcript

Annex 4: Trustee checklist to reduce scheme risk of sponsor distress

This is a transcript of the graphic intended as supporting material for funding and investment detailed guidance – protecting schemes from sponsoring employer distress.

Options to improve scheme outcome reduce as the sponsor becomes more distressed and moves towards insolvency.

Trustee best practice to mitigate scheme risk

Relevant to: A1, A2, B1, B2, C1, C2, D1, D2, E1 and E2.

Trustees should consider:

  • legal obligations
  • IRM
  • governance
  • covenant monitoring
  • advice

Actions when sponsor is showing signs of financial distress

Relevant to: C1, C2, D1, D2, E1 and E2.

Trustees should consider:

  • regular sponsor engagement
  • increased covenant monitoring
  • scheme security structures
  • investment strategy
  • equitable treatment
  • corporate activity / transactions
  • IRM triggers
  • specialist advice

Actions when insolvency is likely

Relevant to: E1 and E2.

Trustees should consider:

  • PPF contingency planning
  • scheme administration
  • security arrangements
  • investment liquidity
  • seek specialist advice

See The Pensions Regulator’s Annual Funding Statement 2023 for more information about scheme group types.