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UK pension funds' use of 'contingent assets' up by 20%

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  • UK pension funds' use of 'contingent assets' up by 20%

UK - The use of contingent assets to fund UK pension schemes has increased by 20%, according to new data released by the Pension Protection Fund (PPF).

According to the latest issue of the lifeboat scheme's Purple Book, examining the defined benefit pension landscape, the number of recognised contingent assets has grown by around 150 to 900 for the financial year 2011-12.

One of the transfers conducted last year was a deal between Tui Travel and its scheme trustees for the pension fund to assume ownership of the Thompson and First Choice brands, to compensate for a £400m (€454m) deficit - a move that was predicted to be copied at a time when patents and trademarks were becoming increasingly important to the overall value of a company.

According to the 2011 edition of the PPF's Purple Book, most newly recognised contingent assets were categorised as type A, with the asset serving as a guarantee by the parent company to fund the scheme to a pre-arranged level of liability.

The publication also showed a continuing shift away from UK equities to global listed stock, with 52.7% of equity investments now in UK stock, compared with a 46.2% exposure to overseas equities - an almost 7 percentage point increase since 2008.

Unquoted equity also remained of interest to a small number of schemes, almost doubling in two years from 0.7% to 1.2% of the overall equity allocation.

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