UK roundup: HMRC, PwC, Aegon, Cinven, Hachette

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  • UK roundup: HMRC, PwC, Aegon, Cinven, Hachette

UK - HMRC's proposed tax rules for asset-backed pension funding could have an important effect on how companies manage pensions due to stock market fluctuations and troublesome deficits, PwC has said.

According to the accountancy firm, the use of corporate assets instead of cash to fund pension schemes is an increasingly popular way for companies to improve pension scheme security while easing cash flow.

As a result, HMRC has launched a consultation on changing the tax rules around asset-backed pension contribution, which closes today.

PwC partner Simon de Young said: "HMRC wants to ensure tax relief on asset-backed pension funding is fair and not block transactions that are helping to improve security for pension schemes.  

"Most transactions to date have been for relatively large listed companies, but clarity around the tax rules may help open up the field further, bringing in more types of companies and mid-market and private businesses."

De Young said there was no reason why service industries, for instance, could not use amounts owed to them by customers to give more security to their pensioners."

"As well as creating investment returns, assets could also be used to hedge against inflation, a perennial problem for pension schemes," he said.

"Employers and pension trustees are facing unprecedented problems. They have a common interest in resolving them, and we are finding a big appetite for innovative solutions that don't tie up scarce cash resources."

According to De Young, HMRC's first proposal - allowing tax relief only when cash is received by the pension scheme - seems at odds with a key driver of these transactions, which is to reduce cash demands on the employer.

De Young also said the second proposal - which uses the structured finance tax regime - makes "better sense" and that a revised version of this could "prove very effective".

In other news, Dutch insurer Aegon has agreed to sell its UK-based Guardian life and pension business to European private equity group Cinven.

The deal, worth £275m (€312m), will see Aegon Asset Management managing Guardian's £7.4bn in assets as part of the agreement signed with Cinven.

Jan Nooitgedagt, Aegon's chief financial officer, said: "Consistent with actions over the past three years to dispose of, or run-off, certain businesses deemed non-core, Aegon has concluded that managing the closed business of Guardian companies no longer fits with our strategic objectives."

Last week, Aegon said it was on track to reduce costs in the UK by 25% before the end of this year.

The deal is expected to close in the fourth quarter, subject to regulatory approval.

Finally, Hachette - publisher of the most recent James Bond novel - has announced the closure of two defined benefit (DB) schemes in an effort to tackle a combined £35m deficit.

The proposal to close both the Hodder and Orion schemes to new accrual from the end of September was put out to consultation in May.

Members will shift to the company's defined contribution outlet, to which employers will contribute as much as 15% of salary.

Under a new funding proposal, the DB scheme hopes to eliminate its deficit by 2017.

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