LPFA develops risk-based contributions approach

The London Pensions Fund Authority (LPFA) has developed a new risk-based approach for setting employer contribution rates following the 2013 triennial valuation process. The approach used different discount rates dependent on the credit risk posed by the scheme employer.

The LPFA has announced that it is now able to offer this service to other pension funds in collaboration with Eversheds. The service, called Covenant Checks, gives an assessment of a contributing employer’s strength and reliability through an independent and objective view of the employer’s financial strength. LPFA employer services manager, Tony Williams, said: “The partnership with Eversheds has created an expert staff body, experienced in conducting Covenant Checks for over 170 fund employers. With a proven track record of identifying those most at risk, we have developed a process for monitoring and reporting to boards and pension committees on a regular basis, providing fund members with the risk assurances that they require.”