Alternative financing solutions have come of age and are no longer that 'alternative', with more than half of pension plans now having some form of non-cash funding, contingent asset or guarantee.
There has been consistent messaging from the Regulator for an integrated approach combining covenant, funding, and investment. Further, the Regulator requires sponsors and Trustees to agree on a formal long-term plan and consider contingencies for adverse events.
Where possible, the contingency plans should include legally enforceable rights of recourse, e.g. against secured assets. Consequently, we believe the use of alternative financing solutions will continue to grow.
There are a wide range of alternative financing solutions, the most common of which are as follows:
- Parent / Group Company Guarantees
- Surety Bond / Letter of Credit
- Asset Backed Contributions
- Charge Over Assets
- Positive Pledge
- Negative Pledge
Reducing the risk of a trapped surplus – download information on the Pensions Stability Buffer here
Utilising intangible assets to finance pensions in the charity sector – download more information here
Aon can look at the problem you are trying to solve and recommend which solution might best suit your particular circumstances. Aon can also assist you with implementing this solution.
Aon Solutions UK Limited is authorised and regulated by the Financial Conduct Authority.