UK - Asset-backed pension scheme contributions could exceed £10bn ($16bn)in the next five years, latest research finds.
The KPMG report Asset-backed funding for pensions found that schemes had already pumped £5bn of contingent assets over the last two years - accounting for about 20% of total deficit contributions in the period.
The report said half the FTSE100 companies could implement asset-backed funding strategies but added that the option was going mainstream as the range of sponsors involved and assets contributed expanded.
KPMG pensions partner Mike Smedley (pictured) said: "When this type of financing first began to be used, it was only really large retailers using their property assets. What we have seen more recently is that many more companies are looking at asset-backed financing to help reduce their pensions liabilities and they are using a much wider range of assets."
These funding arrangements usually involve sponsors placing assets into a special purpose vehicle where they will generate an income for the scheme. If the sponsor becomes insolvent the scheme generally has security over assets in the SPV.
Smedley said property remained the most common asset used in these arrangements because of its readily available income stream and perceived high level of security for the scheme but highlighted some alternatives.
"In addition to property, we are now seeing intellectual property such as brands being used and even whisky," explained Smedley, referring to deals agreed by TUI Travel and Diageo.
HM Revenue and Customs consulted on tax-relief for asset-backed contributions this summer in a move which was welcomed as giving the clarity needed to make the option accessible for smaller schemes.
The Pensions Regulator (TPR) has granted 11 master trusts extensions to apply for authorisation, as it confirms it has received 22 applications ahead of the 31 March deadline.
Aegon Master Trust, Fidelity Master Trust and Ensign have sent off their authorisation applications to The Pensions Regulator (TPR).
Self-administered pension funds spent £15bn on payments to pensioners in Q4 2018, but received just £12bn in contributions (net of refunds), Office for National Statistics (ONS) data reveals.
Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.