Pensions - Articles - LCP comment on Asset Backed guidance

 Commenting on new guidance relating to the use of Asset Backed Contributions for pension scheme funding, James Atherton, partner at LCP said:

 “The new guidance is helpful in that The Pensions Regulator acknowledges that such structures can improve a pension scheme’s security. It clarifies the regulator’s expectations of trustees when assessing any proposal by the sponsoring company to put such a structure in place, providing comfort to both parties and potentially leading to greater use of these structures in future.

 “However, the guidance does have a sting in the tail. These structures are complex and untested in the courts and The Pensions Regulator is concerned that future case law or changes in circumstances – such as Scottish independence - could identify these arrangements as illegal. Expanding on previous guidance, it states that any such structure should include a robust and certain underpin, setting out the payments to be made to the pension scheme should the structure have to be unwound. Crucially, where arrangements have already been put in place without such an underpin, The Pensions Regulator expects Trustees to rectify this as soon as possible – so this aspect of the guidance applies retrospectively. This could lead to some challenging discussions between trustees and pension scheme sponsors over the next few months.”