UK Company Offering Partial Pension Buyout Service

September 26, 2007 ( - A new U.K. company Occupational Pensions Trust (OPT) has set out to capitalize on the trend of corporations unloading their pension schemes by offering partial buyouts and claims it is making the offering for a cheaper price than full buyout services.

According to a news report, OPT wants to set up a national pension confederation that will allow companies to remove pension schemes from their balance sheets, but still maintain operation of the scheme under existing arrangements. However, the scheme will be overseen by a team of professional independent trustees at OPT.

“OPT expects to offer a price that will be around 10% – 20% cheaper than a full buyout,” said Ben Shaw, the development director of OPT, in the news report. “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.”

The schemes will run on a 30- to 50 year timeframe but the OPT will take an annual management fee. The company predicts that, in that period of time, an actuarial surplus will have accrued in the scheme. If not, it may sell the scheme to an insurance company.

The management team at OPT is mostly from Telereal, a property company set up to buy British Telecom’s telephone exchanges and other properties in a £2.2bn deal.

OPT has no immediate profitability requirements, funds can be invested across a wider range of asset classes to better match liabilities and does not have any onerous capital adequacy requirements, according to Shaw. He also says OPT will regularly review its investment management strategies with the Pensions Regulator, according to the news report.

OPT’s business is no surprise, as the trend of pension buyouts is gaining steam in the U.K. Anticipating large demand in the pension buyout market, U.K. companies announced last year they had raised substantial capital to acquire pension schemes (See
UK Firm to Buy DB Plansand UK Company Garners £400M to Take On Final Salary Plans).

Citigroup was the most recent to do this, with its takeover of the pension scheme of the U.K.’s Thompson Regional Newspapers, which includes 2,800 retired and 800 deferred members (See Citi Buys DB Plan of UK Newspaper Publisher ).