Goldman Sachs is set to increase the pressure on final salary pension schemes by joining the growing list of companies offering to buy them.
The banking giant has applied to the Financial Services Authority to set up a wholly-owned life assurance subsidiary in London to buy pension schemes from firms. Senior Goldman Sachs banker Addy Loudiadis will run the new company.
“Chief executives of UK companies are increasingly going to look at managing their corporate balance sheets distinctly from their pension funds,” a source told the Financial Times. “The insurance industry has not got enough capital to do it.”
Earlier this year, the birth of a company offering a similar service was heralded as the death of the final salary scheme.
The creation of Paternoster was likely to be the “nail in the coffin” of defined benefit schemes, according to Deloitte pensions partner David Robbins.
“There is hardly a boardroom in the UK that wouldn’t like to get rid of its obligation to manage schemes,” Robbins added. “If they give their defined benefit schemes to a company like Paternoster, any new scheme they offer will almost certainly be defined contribution in nature.”
Pension Commission figures show the number of defined benefit schemes open to new members has dropped from five million in 1995, to 1.5 million in 2006. Selling pension schemes is attractive to companies as it frees them from paying into the Pension Protection Fund levy.