View more on these topics

Deals point new way for pension buyouts

Watson Wyatt believes many companies will be able to remove their pension liabilities from their balance sheets at a lower cost than would be required by a fully authorised insurance company.

The actuarial consultancy says the recent acquisition of the pension arrangements of Thomson Regional Newspapers by Citigroup is a further signal that this could be the way the pension buyout market is going.

The Citigroup acquisition follows the acquisition of Threshers by a consortium led by Duke Street where the operating capability was sold on, leaving just the scheme with the consortium.

Watson Wyatt says that while these appear quite different types of transaction, they both separate a pension scheme from its former sponsor, leaving the scheme as the obligation of a new sponsor which will take over the running of the scheme. Head of corporate consulting Andrew Reid says: “What is really interesting about these deals is the fact that the acquirer seems willing to put some or all of their covenant at risk in order to finance the pension scheme.

“This is very different to the early abandonment proposals that were suggested by some of the new participants in the buy-out market, and shows the impact of The Pensions Regulator’s warning that abandonment without access to additional capital was unlikely to be in members’ best interests.

“If financially strong institutions are prepared to use their covenant to support these transactions, the potential demand is huge. It will be fascinating to see how much market capacity there is for this sort of activity.”

Reid says that he and his colleagues are seeing a wide variety of new developments in the pension buyout market with companies starting to buy out specific tranches of scheme members, such as just those in retirement, rather than full scheme buyouts.

He says: “The main stumbling block in the past has been price. If getting liabilities off the balance sheet can be made a bit cheaper than full buyout, with the new sponsor having a top-notch covenant that keeps trustees happy, then we would not be surprised to see quite a few trades.”


Strategic withdrawal

Is it good tactics for a client to make an early exit from a pension fund?

Herbert in benefit move to Origen

Steve Herbert is joining Origen’s corporate pensions team as a senior benefits education consultant from Truestone Employee Benefits.

Richard Farr appointed director of AMI

The Association of Mortgage Intermediaries has appointed former Portman head of marketing communications Richard Farr as its new director.Farr will be responsible for the management and day to day running of AMI, and for ensuring that AMI continues to represent members to politicians, policy makers and the regulator. He will report directly to director general […]

First Actuarial wants transfer value rethink

First Actuarial has called for the Government to look again at its draft regulations on the calculation of transfer values from final-salary pension schemes.The firm says the proposal contained in the consultation to exclude employers from the process of calculating transfer values is inconsistent with the overall policy of getting trustees and employers to work […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm