UK - News broke today that Edmund Truell will be the latest entrepreneur to enter the UK's bulk buyout market, as experts on the burgeoning scene spoke at the National Association of Pension Funds (NAPF) annual conference.
According to a report Truell, the former chairman of private equity firm Duke Street Capital, has raised more than £400m to back the launch of his new vehicle, Pension Insurance Corporation.
The report said that like other similar start ups such as Paternoster and Synesis, the company will buy final-salary pension schemes to help medium-sized companies offload their pension fund deficits.
It added that financier Lord Rothschild and former chairman of the Inland Revenue Sir Nicholas Montague had been hired as non-executive directors.
At today’s NAPF conference, Paternoster’s chief executive Mark Wood said the UK bulk buyout was in a state of “early dawn”.
He told delegates different buyouts would have varied aims; some would be interested in money management activities while others might see look at it as a leverage buyout.
According to Wood, as the gap between FRS17 and the economic buyout price closed, company directors would increasingly see buyout as a viable solution.
Meanwhile, trustees could satisfy their responsibilities safe in the knowledge that the whole mechanic had met with public support from employees and unions in recent instances.
David Blake, professor of pension economics and director of the Cass Business School said that if a common agreement about a mortality forecasting model could be reached it might be possible to set benchmarks to trade against.
He said problems included legal, regulatory and tax conditions which limited the transfer of longevity risk to capital markets. But Blake queried whether reacting to this by moving offshore was in fact simply exploiting regulatory arbitrage.
Not all bonds were suitable as matching assets for liabilities, plus there was an absence of longevity bonds and related instruments to hedge longevity risk, he added.
Outside the conference, Con Keating, principal at The Finance Development Centre, said the accounting standard was at fault. If that was resolved the existing system, about which the new market has grown, wouldn’t look so disastrous, he commented.
By Lisa Haines
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