Types of contingent assets
There are three types of contingent asset arrangements which – providing certain requirements are met – could have reduced the amount of risk-based levy your scheme would have paid:
- Type A: Guarantees from a parent or group company
- Type B: Cash, UK real estate and securities
- Type C: Letters of credit and bank guarantees
Type A contingent assets
These are guarantees from a parent or associated companies that may become due in the event of employer insolvency or failure to make agreed contributions.
This type of arrangement could have reduced the levy you were charged by adjusting the insolvency risk calculation if the guarantor had a lower insolvency risk score than the scheme employer(s).
Type B and C contingent assets
These types of assets are those, such as property or investments, promised to the pension scheme if the scheme’s sponsoring employer becomes insolvent or fails to make their agreed contributions.
Both these types of arrangements could have reduced the levy you were charged by reducing the scheme’s underfunding amount.
As contingent assets can reduce the risk of the scheme transferring to us, they could have reduced your levy payment. They can also reduce the impact on members if an employer becomes insolvent.