Paternoster forecasts strong growth in pension buyouts

by Gill Montia

Story link: Paternoster forecasts strong growth in pension buyouts

Paternoster, the company that acquires pension schemes, is expecting strong growth in the pension buyout market, during 2008.

The firm’s chief executive, Mark Wood, is forecasting that acquisitions in the sector will at least double in value during the year.

The total market for 2007 is estimated to have been between £3 billion and £3.5 billion but Mr Wood believes this could increase to around £6 billion in the next 12 months.

During 2007, twenty-one acquisitions were completed by Paternoster, amounting to £1.4 billion worth of final salary-pension schemes.

Activity was heightened when a number of schemes operated by FTSE 100 companies moved into surplus, allowing Trustees to offload their liabilities.

Purchases made by Paternoster included a £170 million retirement scheme from Emap, the media firm.

Companies that buy pension schemes take on the risk-management associated with paying members’ future final-salary or defined benefit pensions.

Businesses are often keen to sell their expensive end-salary pension schemes because of the impact of such liabilities on their balance sheets, plus uncertainties over stock market performance and increased life expectancy.

Paternoster and Legal & General are expected to acquire the bulk of the business during 2008; AIG and Prudential are also active in the sector.