Vattenfall, the Swedish energy group, has taken the highly unusual step of winding up its SKr7bn ($1bn) pension foundation and transferring the scheme assets and liabilities on to its own balance sheet.
The move will see Vattenfall sell its portfolio of bonds and equities and instead invest the money in its own business.
Johan Gyllenhoff, its head of treasury, said the decision was driven by an impending “tsunami wave of regulation” of pension funds, such as proposals by the European Insurance and Occupational Pensions Authority to create a Solvency II-like regime for pensions, as well as a view that Vattenfall could generate better returns for the money in its own operations.
“We feel more comfortable putting money into our core business rather than the financial markets. That is where we should have a competitive advantage. We can use the pension obligations as natural long-term funding for our business.”
The foundation, Vattenfall Pensionsstiftelse, was created in 1999 and has generated an internal rate of return of 6 per cent a year over the past decade. Members of the scheme will be protected by an insurance contract with PRI Pensionsgaranti in the event of Vattenfall failing.