Pension buyout firms eye takeovers next year

London: Pension buyout firms with strong capital backing are set to "hit the ground running" in the new year after a lull in activity in the second half of 2008, a pensions specialist at KPMG said.

Pension buyout firms take on assets and liabilities of pension schemes that are in trouble because of liquidity problems while guaranteeing future pension payments.

Earlier this month, Pension Corp completed the largest ever UK pension buyout agreeing to take on the Thorn pension scheme's £1.1 billion (Dh5.94 billion) of liabilities.

Expectations

But the deal came amid a slump in the buyout market brought on by the escalating financial crisis and the sharp reduction in liquidity.

Expectations the buyout industry would hit £10 billion in 2008 following rapid growth in 2007 have proved optimistic with total business placed for the year of £8 billion, Aon Consulting said on yesterday.

Ben McDonald, a pensions partner at KPMG, said: "In the run up to Christmas, insurers seem to have reverted to a more considered position, perhaps not to the extent seen in the early months of the year but to a level that makes pension insurance attractive once again in the right circumstances.

Disappointed

"Insurers with committed capital backing will hit the ground running in 2009, with many companies and pension schemes disappointed with what was on offer available in September and October 2008 returning to the table for another look in early 2009," McDonald said.