UK – The Pensions Regulator today issued guidance on the use of contingent assets.

“This is aimed at trustees who are considering including contingent assets as part of their funding strategy, and is also likely to be useful to employers and advisers,” the body said in a statement.

“The guidance explains that contingent assets can either support the calculation of technical provisions or underpin a recovery plan, and provides examples of where they might be used.”

It also explains how trustees might use the flexibility of contingent assets in a way that can: improve the security of benefits for members, support investment in return-seeking asset classes and help the employer remain viable.

It said the guidance “encourages trustees to understand the employer’s financial position and why the use of the contingent asset might be advantageous”.

“It also seeks to help trustees identify those aspects of contingent assets on which they should take advice, and to ask appropriate questions of their advisers.”

The regulator received feedback on the use of contingent assets during consultation on its approach to scheme funding, which highlighted to us that they had an interest in the possibility of using these securities and that they would welcome guidance from the regulator.

“We have listened to calls from industry for guidance on the inclusion of contingent assets in scheme funding,” said the regulator’s head of policy and guidance, Sue Rivas.

“The new guidance provides a framework for uses of contingent assets in scheme funding likely to be acceptable to the regulator.

“We hope that the flexibility provided by contingent assets in appropriate cases will help trustees and employers find mutually acceptable solutions to some of the more difficult funding issues they may currently be facing”.