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Deloitte comments on the asset-backed pension contributions consultation document

Gavin Bullock, partner, Deloitte Pensions Advisory, comments:
“We welcome the latest consultation document issued by HM Revenue & Customs and HM Treasury yesterday seeking to clarify the tax rules governing asset-backed pension contributions. It is encouraging to see HMRC and HM Treasury recognise that these structures provide flexibility to employers addressing defined benefit pension scheme funding. The Government’s message is consistent with that of the Pension Regulator – that companies and trustees need to work together to ensure their asset-backed structures demonstrably improve their pension scheme’s position, both in terms of funding and security for all members.

“The current consultation is extremely timely, given the increasing market appetite for this type of structure. Assets as diverse as property and receivables have acted as collateral, and significantly improved the funding and security available to all pension scheme members. In 2011, we anticipate in excess of £3 billion of assets will be used in asset-backed funding structures.”

Eileen Haughey, associate partner, Deloitte Pensions Advisory, adds:
“Asset-backed funding structures are now established as a viable alternative to cash funding schemes. These arrangements increase the security of schemes, providing greater protection for members’ benefits, and can help pension schemes mitigate the risk of falling into the Pension Protection Fund as a result of company insolvency.”

In the consultation document, HMRC and HM Treasury have identified two main options for tax relief in relation to asset-backed funding structures.

Gavin Bullock continues:
“Given the complex interaction between current tax and pensions legislation, accounting rules, and Pensions Regulator guidance, it will be crucial that both options are fully considered in order to ensure that the structures can continue to meet commercial objectives and do not restrict flexibility for employers and pension schemes.”

Ends

Notes to Editors
In 2010 alone, Deloitte implemented seven of the largest asset-backed funding structures in the UK, working with firms such as Sainsbury’s, Marks and Spencer and Whitbread.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTT and its member firms.

The information contained in this press release is correct at the time of going to press.

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