Wave of pension mergers looms amid reforms

Charlie Conchie

A WAVE OF consolidation is coming in the UK’s pension sector as bigger master trusts guzzle up smaller peers and the government pushes reform, a top UK pension chief has predicted.

Jamie Fiveash, the UK chief executive of pension firm Smart Pension, said the firm was actively scoping out a range of deals among its smaller employer-led schemes and other master trusts.

Smart last week announced it had snapped up its smaller master trust rival Evolve Pension, which ran the £750m Crystal Master Trust, to take its overall assets to over £4bn and total members to 1.1m.

The deal was a boost to Chancellor Jeremy Hunt and pensions regulators as they embark on a drive toward consolidation in the hope of unlocking fresh pools of capital and a wave of funding.

Earlier this month, Hunt announced plans to merge more pension schemes to allow funds to benefit from scale.

Smart Pension’s Fiveash told City A.M. that the sector was now poised for a flurry of mergers and acquisitions.

“You’ll move from around 1,800 single employee trust and 35 master trusts in the next five years, down to in the hun- dreds in total and probably only about 20 master trusts,” he told City A.M. “It’s going to massively reduce, and the government and regulators are pushing towards that.” to capitalise on the opportunities that Credit Suisse’s collapse presents. Analysts at Barclays said this should help new money generation over time.

Smart Pension has been on an acquisitive drive in recent years and has snapped up a range of defined contribution (DC) pension schemes, in which employees pay a set amount toward their pension pot and reap the returns.

The size of the schemes has swelled since the rollout of auto-enrolment in 2012 and master trusts have become vehicles for schemes to pool their assets.

Smart’s latest deal comes after it has already absorbed nine of its peers.

Fiveash said Smart was currently scoping out “between five and 10” more trusts with plans for potential deals in the next two years.

Schemes may also soon be under pressure to consolidate further. Hunt will grant powers to the Pensions Regulator to force underperforming DC schemes into mergers with successful peers.

The measures came alongside a commitment from some of the UK’s top insurance firms, which have ‘bought out’ the older defined benefit schemes, to commit five per cent of their assets to private unlisted companies.

“We are looking for the group to continue hiring, to benefit from the UBS acquisition of Credit Suisse,” the Barclays analysts said.

Deutsche Bank analyst Benjamin Goy noted Julius Baer “has the potential to be a major accelerator over the next two to three years”.

Over the course of the year its shares aretrading around 10 per cent higher.