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New pension scheme buyout service comes to market

Newly launched company Occupational Pensions Trust says it aims to set up a national pension scheme confederation that will enable companies to remove closed defined benefit schemes from their balance sheets.

Schemes transferred into OPT will continue to be run under existing arrangements but be overseen by a team of professional independent trustees at OPT.
In return, for the sponsoring employer being able to remove the closed scheme from their balance sheet, they will be required to provide a cash injection.
OPT’s management are mostly from Telereal, a property company set up to buy British Telecom’s 7,000 telephone exchanges and other properties in a £2.2bn deal.
It says the scheme is being run on a 30-50 year timeframe but the company will take an annual management fee. OPT says by this time, it expects an actuarial surplus to have accrued in the scheme or it may look to sell out its liabilities to an insurance company.
OPT says it will regularly review its investment management strategies with the Pensions Regulator.
OPT development director Ben Shaw says he believes the new service will be able to offer firms an alternative between 10-20 per cent cheaper than a full buyout deal through an insurance company.
He says OPT has no immediate profitability requirements, funds can be invested across a wider range of asset classes to better match liabilities and also does not have any onerous capital adequacy requirements.
Shaw adds that as an occupational pension scheme, OPT will continue to pay Pension Protection Fund levies and be covered by the scheme. But he says the risk-related element of the PPF levy will be minimised by the scheme’s higher funding levels in OPT and will look to provide enhanced member benefits above those provided by the PPF.
The OPT board of independent trustees will be chaired by former National Association of Pension Funds chairman Robin Ellison and also includes John Wigley, formerly a senior partner at Watson Wyatt.
Shaw says: “OPT expects to offer a price that will be around 10-20 per cent cheaper than a full buyout. The exact costs of becoming a member will vary from scheme to scheme depending on the sponsoring employer and the funding level of the scheme wishing to join.”


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