Pension funds should review asset-backed contributions 'urgently' – PwC
UK - PwC has advised pension funds to review their sponsor agreements "urgently" after the UK Treasury made changes to the regulation governing asset-backed pension contributions.
Addressing the House of Commons yesterday, financial secretary to the Treasury Mark Hoban said the changes had been designed to prevent "unintended, excess tax relief".
He said the Treasury had hoped to retain "as much flexibility" as possible for both pension schemes and their sponsors with the changes, which followed on from earlier revisions announced by chancellor George Osborne in the autumn.
At that time, the National Association of Pension Funds warned the government against "blocking" routes that would help guarantee pension payments.
Hoban said: "The changes announced on 29 November were intended to provide that upfront relief to an employer would not be given where the total payments to be made under an asset-backed arrangement would vary according to the future funding position of the pension scheme.
"The government has since found that there are ways in which these arrangements could be structured to gain upfront relief, even though the payments will vary," he added.
PwC said the initial guidelines were popular with employees who wanted to fund their pension scheme with asset-backed contributions, as these could return to the employer if the scheme were to recover to a surplus.
But Alex Henderson, tax partner at the consultancy, said: "The changes announced today will reduce flexibility for the future.
"Companies with arrangements in progress will need to review the new rules urgently to see how they are affected."
He said pension funds required "certainty of treatment" and that it was therefore desirable that these be the last changes to the legislation, effective immediately as part of the Finance Bill 2012.