Employers are increasingly making use of contingent support
At a glance
A recent XPS survey shows nearly 1 in 4 pension schemes are using some form of contingent support
A third have been implemented within the last few years and adoption of contingent contribution frameworks has doubled
This increase is due to the financial pressures of the pandemic and the upcoming changes to funding rules, as employers look for alternative ways to support their schemes
At the same time, the costs and time to implement such solutions have been reducing, with a range of viable options available to schemes of all sizes
Contingent support has helped to reduce contribution requirements by up to 35% and/or enable schemes to sustain higher returns on their investments
Contingent support also helped reduce Pension Protection Fund (PPF) levies
Impact, cost and governance
Whilst these factors vary in each case, a broad comparison between the different types is set out below.
Actions employers can take
1. Assess how contingent support can help you meet your objectives, especially in light of the new funding rules.
2. Consider the full range of contingent support options and which are most appropriate for you.
3. Engage with your trustees early on to ensure the support works for both parties.
4. Investigate whether the use of contingent support could reduce your PPF levy.