A New Way to Control Pension Deficits 

Central Asset Reserve (CAR)

A New Way to Control Pension Deficits - Video Transcript:

Andrew Cawley: Head of Pensions, KPMG LLP (UK)
David Fripp: Partner, Pensions, KPMG LLP (UK)

Andrew Cawley:
Many companies have real issues with defined benefit pension schemes at the moment. The liabilities are often very significant compared with the company's net assets, size of business, and certainly are a threat to the cash outflow for many clients. Companies have struggled over the last 3, 5, 7 years with managing that cash outflow. CAR or the central asset reserve is a new innovative way for companies to manage their pension liabilities and costs. If companies don't have defined benefit schemes KPMG can also help in managing their defined contribution plans.

David Fripp:
CAR is essentially a way of using assets already in the business to deal with the pension deficit without having to throw too much cash at it. CAR is for anyone of the hundreds of pension schemes with deficits in excess of about £25million that want to try and deal with those deficits whilst conserving cash.

CAR is not a piece of theory, we have a number of completed deals, the largest and most complex of which was for GKN where we created an asset worth £330million and that gives us not only a smart idea but a smart execution process born out of our experience.

The response from clients where we have successfully completed these deals has been fantastic, we have in many cases wiped out the deficit or otherwise taken large chunks out of deficits that have proved quite intractable over many years.

With life expectancy increasing and market outlook uncertain, pension commitments are a growing concern for many companies sponsoring Defined Benefit (DB) pension schemes. Pension scheme valuations are showing increased deficits, requiring significant cash outflow from businesses.

The Central Asset Reserve (CAR) is a concept developed by KPMG and has now been implemented successfully for a number of UK businesses.  It is a partnership structure that uses income from company assets to pay into the scheme, the capitalised value of which immediately reduces the deficit.

A wide range of assets can be used to put into the CAR, including property, intellectual property, shares in subsidiaries and the benefit of long-term contracts. Such asset-backed structures need not impact balance sheet strength and banking covenants.  Many of our corporate clients are seeking more certainty on funding and greater control over pensions.

The CAR can help you:

 

  • Gain control of your pension costs and liabilities
  • Reduce the outflow of cash from the business
  • Accelerate corporate tax deductions
  • Reduce Pension Protection Fund levies
  • Enable wider pension risk management and cost reduction strategies

Contact

Contact

Andrew Cawley

Partner
KPMG LLP (UK)

0161 8384073 |

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How We Can Help

London
David Fairs
Partner
020 7311 3103

Midlands
David Fripp
Partner
0121 609 6005

North
Ian Warman
Partner
0113 231 3408

Andrew Cawley
Partner
0161 246 4073

Scotland
Donald Fleming
Partner
0141 300 5784

South
Andrew Coles
Partner
0118 373 1390