Miner Lonmin offloads pension risk

LONDON (Reuters) - Miner Lonmin has struck a deal to offload its pension risk to specialist firm Paternoster, joining a growing number of blue-chip firms opting for pension buy-outs to cut exposure to investment and longevity risks.

Under the deal, Lonmin (LMI.L: Quote, Profile, Research) secured the benefits of members of its defined benefit pension scheme, Paternoster said, meaning the platinum producer's balance sheet will no longer take a hit if investments underperform or employees live longer than expected.

The two sides did not disclose the size of the Lonmin pension scheme or the size of the liabilities Paternoster will take on.

The market for transferring the pension liabilities of British firms to insurers has boomed since 2006, and includes established groups such as Legal & General (LGEN.L: Quote, Profile, Research) and Prudential (PRU.L: Quote, Profile, Research) but also start-ups like Paternoster and rival Synesis Life.

Lonmin, following in the footsteps of most large UK employers tackling rising costs, closed its defined-benefit scheme to new entrants in April 2006. According to Lonmin annual reports, the group posted a $6 million (3 million pound) surplus in 2006, but that was wiped out in 2007 by the rising cost of interest and an actuarial loss.