UK - Paternoster has agreed a deal to take responsibility for the £400m (€499m) in assets belonging to the Powell Duffryn (PD) Pension Plan in return for providing individual annuities to around 7,000 members.

The sponsoring employer of the PD Pension Plan - Powell Duffryn - is currently owned as a portfolio investment by Citigroup, which is also involved in the pension buyout market.

Citi bought out its first pension scheme in August 2007 - the £200m Thomson Regional Newspapers scheme - through its Insurance & Pensions Structured Solutions Group. (See earlier story: Citigroup signs first full pension buyout)

However, Citi said in this instance its insurance and pensions team acted "in an advisory capacity" to the PD Pension Plan, although it also implemented the inflation and interest rate hedging involved in the transaction.

The deal with Paternoster will see £400m assets transferred to the insurer in return for insuring the plan's liabilities for 7,000 members, all of which have been notified of the development by trustees.

Nick Buckland, chairman and independent trustee of the PD Pension Plan, said: "Our primary concern has always been to ensure as far as possible that our members' benefits are secure and can be paid in full."

As a result, Mark Wood, chief executive of Paternoster, said the trustees and Citi had conducted a "rigorous" buyout process focusing on criteria such as financial security and operational expertise.
Francis Fernandes, head of pensions actuarial for Citi's Insurance & Pensions Structured Solutions Group, said: "Now that the benefits have been secured with Paternoster, the trustees are finalising with Citi the interim arrangements for the PD Plan prior to the issue of individual insurance policies to members."

"We foresee even stronger activity in the UK pension market and are stepping up our role in managing pension risk for sponsors and trustees," Fernandes added.

Confirmation of the buyout follows the release of Paternoster's first quarter results, which showed the firm now provides annuities to 37 schemes, representing approximately 33,000 members.
In addition, figures revealed in the first three months of the year Paternoster secured overall buyout business valued at £2.5bn, including the transfer of £2.1bn of pension scheme assets.

Wood said: "In 12 weeks, the total business written is the same as that written in the previous twelve months. The market appears to be growing very rapidly." 

Elsewhere, Legal & General confirmed it had been chosen by M-Real Corporation - a European paper supplier - to insure the liabilities of its £180m UK pension scheme.

The deal will see £180m assets transferred to L&G, which will then provide insurance for all current and future pension payments, including scheme wind-up risks to allow the company a "clean-break" from the UK Paper Employee Benefit Scheme.

Simon Gadd, managing director of L&G's annuities business said: "The agreement means that M-real effectively removes the risk in relation to this pension scheme from its balance sheet and that both existing and future pensioners have the comfort of knowing their pensions have been secured."

M-Real confirmed in March that it had reached a deal on its pension liabilities in the UK, relating to the sale of the New Thames paper mill, and the closure of another site at Sittingbourne, which it claimed would benefit its financial results by €24m.

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