Jurisdiction(s):
United Kingdom

Key definition

Employer covenant definition

What does Employer covenant mean? In pensions practice, employer covenant describes the sponsoring employer’s legal obligation, financial ability and practical willingness to support a defined benefit pension scheme now and over the long term, including meeting deficits and funding risks. It is not defined in statute, but is central to the UK scheme funding regime under the Pensions Act 2004 and The Pensions Regulator’s Codes and guidance; usage is broadly consistent across England & Wales, Scotland and Northern Ireland. In Ireland, the concept is applied under the Pensions Act 1990 and Pensions Authority guidance, usually as “employer/sponsor support”. Key features assessed by trustees (often...

Managing DB Pension Scheme Deficits: Contributions, Asset-Backed and Escrow Arrangements, Incentive Exercises, LDI, Swaps, Buy-ins and Buy-outs

Published by a LexisNexis Pensions expert

Practice notes

Defined benefit (DB) pension scheme deficit

A defined benefit (DB) pension scheme is in deficit when the value of its assets falls short of its Liabilities.

There are several ways to assess the shortfall, for example:

on the scheme funding basis — required by the Occupational Pension Schemes (Scheme Funding) Regulations 2005, SI 2005/3377, and used to determine future contributions. If a shortfall is identified on this basis, the trustees and sponsoring employer must agree a recovery plan to clear it. For further information, see Practice Note: The scheme-specific funding regime — Recovery plan
on a solvency basis — liabilities measured as the premium an insurer would need to secure the scheme benefits in full (the ‘buy-out basis’)
on the Pension Protection Fund (PPF) basis — assets and liabilities valued using standard assumptions and the benefit structure set by the PPF
on an accounting basis — assets and liabilities measured as required by an accounting standard

For further information, see Practice Note: Methods of valuing DB pension liabilities and related funding concepts...

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Alison Fleming

PWC

Alison Fleming is Head of Pensions at PwC in Scotland. She has a wealth of experience advising employers and trustees on a wide range of pensions-related issues....

Web page updated on 21/05/2026

Popular documents

Using the Judicial College Guidelines to assess general damages in personal injury claims

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

Tomlin orders in England and Wales: CPR guidance on drafting, confidentiality, approval, variation, enforcement, limitation, CCA issues, court-specific requirements, sample wording and precedents

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Precedent: Deed of Surrender of Lease with Optional Premium, Settlement and Release, Landlord, Mortgagee and Guarantor Consents, Reimbursement and HM Land Registry Provisions (England and Wales)

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

Precedent Statutory Declaration: Standard Wording under the Statutory Declarations Act 1835

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...