Goldman Sachs has started a pension fund buyout business led by Addy Loudiadis, its former co-head of European investment banking.

News of Goldman's plan, given to investment consultants this month, follows rapid progress for a rival initiative led by Edmund Truell, former chairman of Duke Street Capital, a UK private equity group. His Pension Insurance Corporation has won support from backers, understood to include reinsurer Swiss Re. The new businesses will offer to buy out the pension scheme liabilities from the companies that sponsor them. Sponsors are keen to leave the business because liabilities are often higher than the assets they own. New accounting rules have dragged net pension liabilities on to sponsors' balance sheets and there are fears an accounting standards review that is under way will tighten the rules. The UK Pensions Regulator also wants to see funding gaps filled in less than 10 years. Other European regulators are toughening their stance and will this week warn that UK pensions schemes have underestimated their liabilities. The Goldman business would buy pension scheme liabilities and is prepared to put large sums at risk, using its derivatives skills to achieve the closest possible match between the assets and liabilities it takes on. The US bank employs the largest pension advisory group of any investment bank in Europe. While other banks such as Deutsche Bank and Royal Bank of Scotland have backed similar funds, Goldman is unusual in that it will run its own fund – raising concerns over potential conflicts of interest that it has seen with its private equity business. Truell's Pension Insurance Corporation confirmed recently it had raised £400m (€592m), although expressions of interest could more than double the money. Swiss Re agreed to back his operation after agreeing to let its finance director, John Fitzpatrick, head Truell's organisation. Mark Weinberg, former chairman of St James's Place Capital, has agreed to be a director. David Norgrove, Pensions Regulator chairman, will warn companies this week that they could be underestimating the longevity of their scheme members. "Getting it wrong could mean nasty surprises," he said. He added that governance in the public sector was too weak. An actuary said: "Buyouts are being talked about quite a lot these days, although sponsors are reluctant to hand over large sums to cover funding gaps to finalise deals." Partly covered liabilities within public and private funded schemes in the UK total £1.5 trillion. Neil Record, chairman of Record Currency Management and a pensions specialist, said last week unfunded UK government liabilities were £1 trillion, or twice as high as official estimates. State funding gaps in continental Europe are higher. The UK's Prudential and Legal & General have been putting together pension buyouts for years. Mark Wood's Paternoster Capital recently won £500m backing from Deutsche Bank and Eton Capital Management, led by former Goldman trader Eric Mindich. Isabel Hudson's Synesis Life is supported by Royal Bank of Scotland and Warburg Pincus. Wood and Hudson used to work at Prudential. Truell said pension schemes are obligations that should be reinsured with specialists, leaving companies to concentrate on their mainstream business, and that deals with the public and private sectors are possible. Loudiadis has been put in charge of the new operation. Born in Greece, she is regarded as one of Europe's most powerful women in investment banking. She recently went on sabbatical following Goldman's decision to appoint Yoel Zaoui as sole head of European investment banking.