Mercer agrees to buy £50bn pension company Cardano

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Consulting group Mercer has agreed to buy pension manager Cardano, which oversees more than £50bn in assets, in an attempt to expand its business in Britain and take advantage of rising demand for workplace pensions.

Mercer, part of US professional services company Marsh McLennan, is set to announce the acquisition of the privately owned group as early as this afternoon, according to two people familiar with the situation.

The deal for Cardano, which manages pension funds’ assets and offers liability-driven investment (LDI) strategies that help defined benefit retirement schemes meet their future payouts, will expand Mercer’s footprint in the growing UK workplace pension market.

Cardano, which has operations in the UK and the Netherlands, owns Now: Pensions, a provider of workplace pension schemes whose clients include ride-hailing app Uber, which struck a deal in 2021 to offer thousands of its drivers a pension pot.

“The growth is in Now: Pensions and the shift towards defined contribution schemes,” said one industry expert.

Benoit Hudon, Mercer’s UK president and chief executive, said the deal would “position Mercer as the pension provider of choice in the UK and the Netherlands”.

Michaël De Lathauwer, chief executive of Cardano, said the two companies “share an aligned culture”, noting that Cardano would benefit from Mercer’s scale and resources.

Rules that came into force in the UK in 2012 require employers to “auto-enrol” eligible employees into their workplace scheme rather than leaving the decision up to the individual. Companies have to contribute at least 3 per cent of pensionable salary to the employee’s retirement pot, with the worker paying at least 5 per cent.  

Since 2012, more than 11mn workers have been put into a pension set up by their employer, with about one in 10 opting out.

The government had considered plans to reduce the age at which an employee’s auto-enrolment kicks in to 18 and remove a limit on how much of a worker’s salary was eligible for pension contribution. However, the reforms have faltered in recent months.

Mercer’s deal comes in the wake of former UK prime minister Liz Truss’s “mini” Budget in September 2022, which sent the value of gilts tumbling and hit providers of LDI strategies, including the pension consultants, which were heavily exposed to long-dated bonds and were left scrambling for cash to cover the shortfall.

This was particularly difficult for consultants that relied on external fund managers to run the money.

Mercer’s deal to acquire Cardano bolsters its ability to manage LDI investments internally, according to one person close to the situation.

Cardano, which was founded in 2000, employs about 500 people and services more than 2mn pension savers through Now: Pensions.