LONDON, UK — Hewitt Associates, a global human resources consulting and outsourcing company, has welcomed the additional guidance released today by the Pensions Regulator (tPR) on monitoring the employer covenant.

Aidan O'Mahony, principal consultant at Hewitt Associates and head of the sponsor covenant consulting team, said:

"The strength of the employer covenant is an increasingly crucial element in protecting members' benefits and monitoring it should be a top priority for trustees. This consultation paper provides both additional guidance and sets out revised best practice which we expect trustees to welcome. 

"Greater emphasis has been put on including more detailed guidelines and case studies, which suggests that the Pensions Regulator is looking to emphasise the importance of risk management by toughening the standards."

Aidan O'Mahony continued:

"Covenant monitoring is valuable because it gives trustees a risk assessment of their sponsor which can be linked to the other risks associated with their funding and investment strategies.

"The tPR guidance sets out a framework for assessing the business issues, Key Performance Indicators (KPIs), economic factors, operational and financial forecasts, as well as risk management, all of which are clearly addressed in Hewitt's approach to covenant monitoring."

The consultation also lays out the following points:

• There is a need for covenant monitoring to be seen as part of the overall risk management programme for pension schemes. 
• Funds with weak sponsors should review their asset allocation in order to avoid compounding sponsor risk with investment risk.
• When trustees elect to use an external covenant assessor, they need to ensure the assessor has the appropriate financial and legal expertise. 

Aidan O'Mahony is available for briefings on this topic, please contact Capital MS&L on 020 7255 5197 to arrange an interview.

About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visitwww.hewitt.com.