UBS, the Swiss bank, and Aegon, the Dutch insurer, have teamed up to target the lucrative niche of buying out pension scheme liabilities from British companies.

A joint venture between UBS and Aegon makes them the latest entrants to an increasingly crowded market in which buyout funds seek to take on the risks of a company’s final-salary pension scheme and assume responsibility for paying its pensioners in the future.

The tie-up, which comes after Aegon’s push last year into bulk annuities for smaller schemes, will target pension funds with liabilities of between £300 million and £1 billion, taking it into the territory of FTSE 100 companies. The market for schemes of such size is thought to be worth in excess of £100 billion.

However, although many start-ups – including Paternoster, led by the former Prudential executive Mark Wood, Pension Insurance Corporation, Synesis Life and a fund backed by Goldman Sachs – have sought such business, few deals have so far been struck.

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Pension consultants cite the large upfront cost of companies offloading their schemes, which normally require them to make a payment up to 40 per cent above the accounting measure of their pension liabilities.

UBS and Aegon say that their service differs from those currently available by deferring the buyout of the more expensive tranches of a pension scheme. They say that this should lower the cost and make risk transfer more affordable for partially funded plans.

UBS’s Global Asset Management division already manages £40 billion of assets for institutional pension fund clients.

Pension fund liabilities have been a stumbling block for private equity bid approaches for big British companies, including WH Smith and J Sainsbury.

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