KPMG's Pensions Advisory practice has welcomed the Pensions Regulator's decision to release new guidance on Asset-Backed Contributions to Pension Schemes (ABCs), but notes that, although it is helpful, it is unlikely to herald a change in approach as many well-advised Trustee boards already reach the standards outlined by the Pensions Regulator today.
The guidance follows a period over which ABC solutions have become an increasingly common way for companies to provide financial support to their defined benefit pension schemes.
ABCs, also known as Asset-Backed Funding for pension schemes, are where a sponsoring employer uses business assets to secure cash which is then paid to the pension scheme. According to KPMG’s research on Asset-Backed Funding from publically available data on transactions to date, there have been over £6bn worth of assets placed into these structures since they were first adopted in the late 2000s.
KPMG’s Pensions practice has advised on over 40 completed or ongoing ABC implementations. David Fripp, a partner in KPMG’s Pensions practice, commented:
"We are seeing ever increasing client interest in Asset-Backed Contributions, from both smaller companies and larger organisations, so the guidance is timely."
Referring to views within the industry that the Regulator had fundamental objections to ABCs, he added:
"The guidance dispels a number of myths about the Regulator's views of ABCs and acknowledges that they are becoming more mainstream. This guidance should help sponsors who are looking to take proposals to scheme trustees.”
David Fripp continued: “The guidance on process broadly reflects our current experience of working with well advised trustee boards. We do not envisage a sea change in practice, but the guidance may promote a more methodical approach in some areas.”
According to David Fripp, the guidance is not a panacea. Raising a note of caution for users of the guidance, he said:
“There are some areas where we see scope for confusion because the guidance is necessarily generic in nature. Each ABC can be very different, and the Regulator has been unable to capture all of the nuances that may exist, so sponsors will still need to clearly set out the specific benefits of their proposal for trustees to review.”
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Margot Cowhig, KPMG Corporate Communications
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Notes to editors.
KPMG’s Asset-Backed Funding research:
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