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S&P launches tool for assessing risk of sponsor default

Standard & Poors is launching a tool to help pension fund trustees to carry out a risk assessment of their pension funds sponsoring company.

From next April, under draft guidance issued by the pensions regulator, trustees will have to decide whether there are sufficient funds in the defined pensions schemes, many of which still have sizeable deficits.

The credit agencys new sponsor covenant assessment service follows research by S&P of the UKs 500 largest defined benefit schemes.

The findings indicate trustees take little account of a sponsors financial strength, despite numerous UK cases of high profile corporate failure.

Standard & Poor head of European Pension Services Aidan O’Mahony says: Trustees are lacking independent information about one of the key risks facing their fund – the credit or default risk of the scheme sponsor. “

“This tool will better arm trustees in their negotiations with sponsors about funding levels – and it will allow advisers to factor in credit strength more accurately in their funding advice.

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