INTRODUCING THE STREAMLINED ESCROW FOR PENSIONS
A cost-effective, time-efficient way to set up an escrow.
“Many of our clients want something quick, easy and cost effective to set up. Our Streamlined Escrow for Pensions is just that.”
Katie Peto
LCP Partner
Escrows have become increasingly popular contingent funding options thanks to their flexible nature and ability to satisfy many different objectives. Not only could an escrow be used to provide additional security whilst potentially allowing a scheme to take greater investment risk and to reduce the technical provisions and therefore cash contributions paid directly into the scheme; it can also be a useful tool for schemes approaching the end game, helping sponsors to avoid the hefty 35% tax charge due on a refund of surplus at wind up or to hold a deferred premium during data cleanse.
Whilst some situations will merit and require the time and resources to set up a more complicated (and by definition more expensive) structure, many of our clients want something quick, easy and cost-effective to set up.
We have therefore worked with BNY Mellon as Escrow Agent and Travers Smith for legal advice to design the Streamlined Escrow for pensions.
The Streamlined Escrow provides the following advantages for sponsors and trustees over approaching the open market directly:
- Quick and efficient set-up: the pre-designed contract helps you get a competitive deal without the lengthy negotiations that would be required to secure similar terms in the open market.
- Certainty on fees: the one-off fixed set-up fee includes all initial set-up costs with the escrow agent BNY Mellon, as well as a general memorandum from Travers Smith on the key legal terms of the escrow agreement and tax implications.
- Flexible investment options: there are no minimum or maximum contributions, or limits on the number of contributions or withdrawals that can be made to / from the escrow. There are choices on whether to invest the escrow assets in cash-based or gilts-based funds.
Read more about Escrow accounts and reservoir trusts here.
"Travers Smith are delighted to have worked with LCP on the development of this innovative yet straightforward and user-friendly escrow product, which will no doubt be of interest to many clients in this space."
Jonathan Gilmour
Travers Smith
"I expect that in five years’ time there will be three times as many pension escrows as there are now."
Katie Peto
LCP Partner
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