The FT report on the FT through Lee Harris and Martin Arnold.
Demand for Penson Risk Transfer (PRT) deals is expected to reach £500bn by 2033, according to estimates from consultancy LCP. Insurers specialising in the arrangements have, meanwhile, become prime takeover targets for alternative asset managers, since they provide a captive customer for asset management services.
The Rolls-Royce agreement comes weeks after Athora, an insurer backed by US private capital group Apollo, announced that it would acquire PIC in a £5.7bn deal.
Mitul Magudia, chief origination officer at PIC, said that after the acquisition, which remains subject to regulatory approval, PIC “expects to have strong appetite to complete many more” transactions of this nature.
Regulators are starting to worry about the growing shift of pension assets to private equity owners.
The Bank of England warned recently that such groups could be more vulnerable to a credit downturn because they are leveraged and typically own a larger proportion of illiquid assets.
However, Liz Airey, chair of trustees at the Rolls-Royce UK Pension Fund, said its members would be “in safe hands” at PIC, which had insured 400,000 other pension scheme members in a portfolio worth £50.9bn at the end of last year.
Canadian asset manager Brookfield, which already had a presence in the UK PRT market, recently announced plans to pay a 75 per cent premium to buy Just Group, another PRT specialist, which has focused on smaller transactions.
We have seen Rachel Reeves our Chancellor welcome the purchase of Just and PIC and with it control over the pension funds it has bought into and will eventually buy-out,
I have reservation about the financing of the deals that see pension funds put in the hands of US private equity. I see congratulatory posts on social media by the various advisers , the executive and from the insurer, I can see why they are happy, they clearly have done their job well, but was it a job that Rolls Royce really needed doing? Is it a job to be congratulated on by the pensions industry. I think not.
Rolls Royce is an engineering company in good shape, quoted on the FTSE in London’s Paternoster Square. I do not understand why Britain is not wanting its pension schemes to do what their sponsors are doing and compete the world over. We are instead happy to let them be owned from a distance to the benefit of American capital managers.
That American politicians are happy to promote itself to its people through “deals” and resulting “tariffs“, we sit lamely by and applaud the dismantling of our once great pension system so that American capitalism can prosper.
This does not seem right and I hope that we start to see those in power in Westminster wake up to the folly of our feeble behaviour. We have more strong companies whose pension schemes were created at huge expense to the sponsor that are likely to be taken over by overseas private equity using insurance and the annuity buy-in/out route.
I would like to see the Treasury and DWP acting as one in promoting the pension system that we built over 75 years rather than giving it away in little more than a decade.