Asset-backed contributions for pension schemes


Produced in partnership with Nick Stones of Pinsent Masons
Practice notes

Asset-backed contributions for pension schemes


Produced in partnership with Nick Stones of Pinsent Masons

Practice notes
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THIS PRACTICE NOTE APPLIES ONLY TO Defined benefit OCCUPATIONAL PENSION SCHEMES

Asset-backed contribution arrangements are a tool, which can be used to help reduce pension scheme Deficits. There are risks involved, although these can be mitigated through seeking appropriate professional advice and structuring the arrangement correctly. However, the ultimate question, which will need to be carefully considered by the scheme trustee and its advisers, is whether investing in an asset-backed contribution arrangement puts the trustee and the scheme in a better position than simply signing up to a long recovery plan.

Since Marks & Spencer led the way in 2008 with a property-backed contribution arrangement designed to reduce the deficit carried by its pension scheme by £500m, a number of other major names have followed suit, including John Lewis, Sainsbury’s and Whitbread. Today, employers use Asset-backed contributions as an efficient way to fund growing deficits in defined benefit occupational pension schemes.

What is an asset-backed contribution arrangement?

An asset-backed contribution (ABC) arrangement is a contractual Funding arrangement by which a special purpose vehicle is

Nick Stones
Nick Stones

Partner, Pinsent Masons

Nick is a partner at Pinsent Masons specialising in pensions. He advises corporate sponsors and trustees of pension schemes. Nick also has experience in the public sector, acting for contractors and central and local government. He has also built up an increasing presence in advising charitable and not-for-profit organisations on managing pension risks.

Nick is a full member of the Association of Pension Lawyers, he sits on the regional committee of the Pensions Management Institute, presents at internal and external seminars and writes for the pension press.

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Asset-backed contributions definition
What does Asset-backed contributions mean?

A system under which the sponsoring employer of a pension scheme uses its income-producing business assets (eg property) to generate a revenue stream payable to its pension scheme, as a way of dealing with any deficit in the scheme.

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