Former head of Prudential Mark Wood has announced that his fund to buy large pension funds from companies now totals GBP500 million and is backed by Deutsche Bank.
The fund, named Paternoster, was set up with the intention to buy pension funds from companies desperate to offload schemes which have become a liability, particularly in the current climate of high M&A activity. The idea is to buy several funds, merge them and use the economies of scale to generate money.
Major investors in the fund include Deutsche Bank and US private equity group Eton Park International. Paternoster’s has the former chairman of the Financial Services Authority Sir Howard Davies and the former chief executive of Zurich’s UK business on the board.
Paternoster is still awaiting FSA approval, but the firm could meet demand from companies looking to transfer their liabilities to an FSA-regulated insurance company.
Prudential and Legal & General currently dominate the market, but other insurers are expected to enter what could be a lucrative new market. According to a January report from accounting firm Deloitte & Touche, the combined deficit of final salary schemes at FTSE 100 companies stood at GBP110 billion.