The new efforts are trying to circumvent expensive regulatory burdens imposed on insurance companies, such as more conservative investment guidelines and tougher capital adequacy standards.
That's where UBS executives believe they can use the bank's high credit rating, its risk-management capability and its investment expertise to cut costs, Mr. Singer explained.
For example, UBS could invest the pension assets it takes on in its own "dynamic alpha" strategy, essentially a global balanced portfolio that makes bets on both markets and securities selection. That alpha-producing strategy could be combined with a fixed-income strategy that hedges out liabilities, Mr. Singer said.
Mr. Singer said UBS' credit rating could give the Swiss bank a cheaper cost of capital than private equity firms.
One way around the regulatory headache in Britain: If a firm, such as Mr. Wood's new venture, takes over the administration of the pension plan as well as the financial responsibilities, the business might be able to operate under pension regulations and sidestep insurance industry regulations, analysts said. Mr. Wood is looking to buy up to 50 small to midsize pension plans. He declined to comment for this story while still under contract to Prudential.
Other variations on the outsourcing theme are possible. For example, a venture such as Mr. Wood's could take control of a plan and run it until it reaches the size and level that would make it possible to purchase annuities from an insurer, said Ted Clack, Prudential's director of bulk annuities business. "Going forward, there's room for both of us," Mr. Clack said.
However, the new products must pass a series of regulatory obstacles, including avoiding insurance regulation. "Clearly, in the United States, (the Employee Retirement Income Security Act) is going to be … rearing its prudent head across all these types of issues," Mr. Singer said. In the United Kingdom, UBS will have to deal with the Financial Services Authority and The Pensions Regulator.