Asset Backed Contributions: PPF Concern On Levy Reductions

Summary and implications

Asset-backed contribution arrangements (ABCs) have become an increasingly popular tool for reducing pension scheme deficits.

• The Pensions Regulator has had ABCs in its sights for some time. Its most recent guidance, issued in November 2013, warns trustees to evaluate the risks carefully on entering an ABC and to consider whether a similar advantage for the scheme could be achieved using a different, less risky, arrangement.
• Now the PPF is also treating ABCs with scrutiny. Schemes have up until now been able to use an ABC to achieve a reduction in the PPF levy; new proposals will mean that only those ABCs backed by a UK property investment can be taken into account and even then, only if strict certification requirements are met.