New ‘superfunds’ gear up to manage Britain’s deficit-ridden pensions
Britain’s company pension schemes, grappling with ageing former employees and low investment returns, may start to transfer their assets into new so-called superfunds in the coming weeks, according to people involved in the process.
There are around 2 trillion pounds ($2.6 trillion) in more than 5,000 UK private defined benefit, or final salary pension schemes. Nearly two-thirds are in deficit, putting a burden on companies looking to strike merger deals or restructure debt.
Although most companies have closed these generous pension schemes to new members, they still need to pay them to long-serving or former employees. Firms with large pension deficits include former nationalised industries such as British Airways and BAE Systems.
The problem is Europe-wide, as people live longer and years of central bank quantitative easing have depressed interest rates, leading to gaps between the fixed sums the pension schemes pay out and the income they receive from their investments.
But through superfunds, Britain has come up with a new way for companies to get those pensions off their books.
Read more @Reuters
