Employer asset-backed pension contributions

Asset-backed pension contributions are commercially important to many groups with pensions deficits. They allow pension funds access to asset backing of their deficit in a way that maximises the amount of cash that can be left in the sponsoring employer. The budget contained a short announcement in the anti-avoidance section announcing a future change to tax rules to limit the deduction for ‘asset-backed pension contributions’ to ensure the tax relief ‘accurately reflects the increase in fair value of pension plan assets’. Many have questioned whether such contributions are therefore associated with tax avoidance that will be countered by appropriate legislation. We do not believe this is so.