Trustees depend on contributions from the sponsor to fund new benefits and to remove deficits. Given sponsors can only make contributions while they are solvent, the financial strength of the sponsor is a key consideration for trustees in their funding and investment decisions.
The Pensions Regulator's Code of Practice "Funding Defined Benefits" also requires trustees to have an understanding of their sponsor's financial strength. This is particularly important in determining a recovery plan where the scheme is in deficit as the trustees will want to be confident the sponsor will remain solvent to fulfil its funding obligations.
Information on the financial strength of a company has until now not been readily available for trustees. SCA provides the trustees with a cost-effective assessment of their sponsor's financial strength, together with the necessary information to incorporate this into funding decisions.
Benefits
Allows trustees to take account of the credit strength of the sponsor in their funding decisions
Enables trustees to control the exposure of the scheme to the credit strength of the sponsor
Improve member security
Allows trustees to demonstrate they have obtained appropriate information before making funding decisions
Helps trustees to comply with the funding Code of Practice
Cost-effective and accessible to all schemes regardless of size
Features
A credit assessment of the sponsor (where sponsor does not already have a rating)
The prospects for the industry in which the sponsor operates
The susceptibility of the sponsor's financial strength to changes in the scheme's funding level
Availability of additional funding from the corporate group and other sources
The impact of the above factors on funding plans
Provides trustees with the additional information on the sponsor they require to make coherent funding decisions in the new environment.
