Stock market turbulence has sent Britain’s pension funds plunging £21 billion into the red. Meanwhile, consultants have begun advising fund trustees to hassle their sponsor companies about their borrowings, in case they have been hit by the credit crunch that sparked the global equity downturn.

It is weeks like these that no doubt make finance directors keen to consider ways to sell or wind up their company’s final salary pension scheme. The difficulties facing sponsors of defined-benefit schemes are numerous. Workers are living longer, putting financial strain on funds, which must pay their pensions for many more years than in the past. Trustees have been given more power to set the amount of money companies must contribute to their schemes.

A Pensions Regulator has been created that can halt mergers and acquisitions if it believes the company’s fund members will be compromised. And the solutions offered by bankers for covering investment risks grow ever more complex. The traditional exit from ownership of a pension fund is a buyout, which involves closing the scheme and purchasing pensions for each member from an insurance company.

Previously, the venerable British insurers Prudential and Legal & General dominated the bulk annuity market and were free to set prices. The entrance of ambitious new players such as Paternoster, launched by Mark Wood, former head of the Pru’s UK operations, has helped to reduce buyout costs.

But by most companies’ standards, bulk annuities remain an unfeasibly expensive option. The prospect that a global bank such as Citigroup, with its monster balance sheet, might want to take on their pension fund is no doubt an attractive one for companies.

It is, however, unlikely to be that simple. Citigroup seems to be looking for a specific type of fund – closed, very mature, with a relatively small number of options for members on benefits such as early retirement. Only select pension funds are likely to fit its template.

It may be too soon to start battering down the bank’s doors.

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