Rise in pension scheme acquisitions
by Gill Montia
Story link: Rise in pension scheme acquisitions
Aon consulting has reported that the value of closed pension schemes sold by employers to specialist insurance firms rose sharply at the end of 2007.
The number of schemes sold in the last three months of the year stood at 75, a similar figure to the previous nine months.
However, a few large sales meant that the value of the schemes sold in the fourth-quarter rose to £1.86 billion, more than double the value sold in the previous nine months.
The market for acquiring pension schemes is expected to continue strong growth because employers are increasingly interested in shedding liabilities for their final-salary schemes.
Before a scheme can be sold it must be fully funded. A new owner can then make a profit by managing the scheme more economically than its original owner, while at the same time improving long-term gain from the underlying assets of the scheme.
Legal & General and Paternoster are currently most active in the sector and it can be argued that a large insurance company is a safer home for accrued pension scheme liabilities than a small company.
However, the Pensions Regulator can act to prevent a pension scheme being sold.
Last year the regulator intervened when the electronics firm Telent’s attempted to sell its scheme to Pensions Corporation, asserting that surplus money that had previously been set aside for the benefit of the pension scheme was in danger of being redirected.