Asset-backed contributions for defined benefit pension schemes grew by nearly £2bn in 2013 and this rate of implementation is likely to increase in 2014, according to a KPMG survey.
Its Asset-backed funding survey, published yesterday, revealed that the total value of ABC transactions grew to over £7bn. A total of 23 ABCs were made in 2013, nearly doubling the total number in the market.
David Fripp, pension partner at KPMG in the UK, said: 'Growth in the use of ABCs during 2013 was largely driven by challenging market conditions over recent years. These conditions have persisted into 2014, and we're finding that increasing numbers of companies and trustees are turning to ABCs to fund part or all of their deficits.'
The firm said it expects to see a continued uplift in ABCs because of pressure for companies to fund large deficits as quickly as possible as well as the peace of mind and security an ABC can bring.
Property remained the most popular asset for ABCs, although 2013 saw a significant increase in the use of intra-group loans, the survey found. It also highlighted that smaller firms are increasingly using ABC's, with the average size of a deficit met falling to around £80m from around £100m in 2012.
An asset-backed contribution involves a sponsoring employer to use business assets to secure cash, which is paid into the pension scheme.
In November, The Pensions Regulator issued guidance on ABCs and urged trustees to consider them carefully.
Fripp said this guidance largely reflected existing best practice and provided a helpful framework for companies and trustee boards to assess ABC proposals.
