Please find below Mercer's initial thoughts on the Chancellor’s Autumn Statement concerning the changes to asset-backed pension contributions (ABCs):
Dr Deborah Cooper, Partner in Mercer’s Retirement, Risk and Finance business:
“Mercer welcomed the consultation into 'Employer Asset-backed Pension Contributions' (ABCs) as a constructive step towards bringing this valuable funding tool into the mainstream. The ending of the practice of claiming double-tax relief is likely to help ABCs shed their 'dark' image and allow them to become part of the mainstream toolkit available to trustees and employers considering how to finance their schemes. The ABC market is developing and, as with any new financial structure, it’s appropriate for HM Treasury to review how they work.
“Asset-backed contributions can be a good funding solution for trustees and employers alike. The pension scheme has its deficit addressed up front and the employer’s cash flow requirement is less onerous than under a typical cash-only recovery plan. This is particularly important in the current economic climate. However, we agree that, in terms of tax liability, there needs to be a level playing-field between different structures for making contributions.”
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