Alternative financing solutions have come of age and are no longer that 'alternative', with around half of under-funded pension plans now having some form of non-cash funding, contingent asset or guarantee. Although cash is preferred by Trustees it is often not the most efficient solution for the sponsor. Alternative financing solutions are often used to bridge a gap between the trustees and sponsor, to help towards pensions stability.
There are a wide range of alternative financing solutions including:
- Parent / Group Company Guarantees
- Special Purpose Vehicle / Asset Backed Contributions
- Surety Bond / Letter of Credit
- Charge Over Assets
- Positive Pledge
- Negative Pledge
Alternative financing can solve a variety of problems including trapped surplus concerns, covenant concerns, company cashflow issues, PPF levies, impact of business restructuring, or difference of view on investment strategy.
Trapped surplus is one of the key barriers to reaching pensions stability and Aon Hewitt has undertaken research into the benefits of escrow to solve this. To find out more download our White Paper for free.
Reducing the risk of a trapped surplus – download information on the Pensions Stability Buffer here
Comparing different alternative financing solutions to solve pension deficits – download more information here
Aon Hewitt can look at the problem you are trying to solve and provide you with a comparison to show the best addition to net present value but also pragmatically about which might suit the governance structure of your pension scheme and sponsor. Aon Hewitt can also assist you with implementing a wide range of alternative financing solutions.
Aon Hewitt Limited is authorised and regulated by the Financial Conduct Authority.