UK Company Garners £400M to Take On Final Salary Plans

June 9, 2006 ( - One UK company has raised £400 million and is moving to buy out final salary pension funds.

According to the Times, Duke Street Capital founder, Edmund Truell has already gained the approval of the Financial Services Authority for his new corporation, and has raised an amount of money that would allow the company to take on an estimated £4 billion of pension liabilities.

Truell has lured names such as London financier Lord Rothschild and Sir Nicolas Montague, former chairman of Inland Revenue, as non-executive directors, the Times reported. He has also recruited his brother, who was former director of Goldman Sachs Asset Management.

According to the Times, Truell’s company is just one of the mounting number lining up to take over the plans from employers wanting to get rid the schemes in favor of plans with more predictable future liabilities.

In April, UK firm Paternoster Ltd., made public its plans to acquire the assets and liabilities of some DB plans, raising £500 million toward the venture. The company was started by the former head of the UK life insurance arm of Prudential, Mark Wood, who said the “corporate defined benefit pension market is one that has been overlooked and underserved.” (See UK Firm to Buy DB Plans).

Unlike the US, where the Pension Benefit Guaranty Corporation (PBGC) provides private-sector pension insurance, the responsibility for ailing DB plans in the UK has fallen on both the government, in the form of the Pension Protection Fund, and the corporate sector.

However, some UK companies which are not able to hold up their pension obligations have been given some additional help by the government. In April, telecom giant BT Group said that the British government would guarantee 75% of the company’s £4 billion deficit, as part of the government’s “Crown Guarantee,” which would underwrite the retirement benefits of 262,000 pensioners if the firm goes bankrupt (See UK Government to Guarantee Portion of BT Group Pension Deficit).