The government plans to crack down on asset-backed pension contribution arrangements.

Delivering the Autumn Statement, Chancellor George Osborne announced that legislation will be introduced in the Finance Bill 2012 to ensure the amount of tax relief given to employers making asset-backed pension contributions to registered pension schemes accurately reflects the amount of payments made, and does not give rise to unintended excess relief.

Osborne said the move would save £340 million in 2011/12 and £450 million a year for the next five years.

Asset-backed financing for pension schemes is when a sponsoring employer uses business assets to generate cash, which is then paid to the pension scheme.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said: “Many employers have used physical assets to help strengthen their pension funds. There is a case for some reworking of the tax rules around this approach. But these are assets which help guarantee staff pensions, and the government must not block this route.”

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