The massive pension fund liabilities of UK companies, which some analysts believe exceed £1.14 trillion, could soon be opened to new types of asset managers.
The Pension Regulator, the body that oversees UK pensions, said that alternative asset managers including hedge funds and other operators of special finance vehicles are looking at the viability of taking over company pension fund liabilities.
A spokesman said: "We are aware of these proposals. It is something we are watching very closely."
A source at the Financial Services Authority added t hat it has "meetings planned with TPR for all these issues".
Several top UK financiers are examining the market, which is dominated by two pension providers, as they see an opportunity to improve efficiency of the industry and generate higher returns on capital.
Some are former senior executives with Prudential, which with Legal & General currently operates the tight duopoly in providing annuities to British pension funds.
Roman Cizdyn, analyst with Oriel Securities, says a new market in annuity provision "is very likely to develop".
He added: "The size of the market is extremely large. Many ex-Prudential people are having a sniff at this and there is plenty of room for all of them."
Hugh Osmond, the entrepreneur who chairs the investment vehicle Sun Capital Partners, has expressed interest in UK press interviews in offering annuity provision.
Other potential buyers of pension funds could include a fund vehicle being set up by Mark Wood, a former chief executive of Prudential and various insurers such as Canada Life and Aviva.
Transferring pension fund provision to new financial vehicles is complicated by several factors.
One issue is the operational complexity of annuity provision, while another is the expected cost of likely regulatory and solvency strictures.
For example, annuity guarantors would be required to obtain European Union insurance licences with correspondingly high solvency ratios.
This would require the fund operators to have an additional tier of capital in addition to sufficient funds to guarantee their annuity obligations.
Industry watchers say that this raises the cost of capital. However, high rates of return on capital could still make financing such vehicles attractive to outside investors seeking to boost returns.
The involvement of hedge funds in providing annuities is, in the immediate future, likely to be as suppliers of capital to special financial vehicles in exchange for a set rate of return.
Such schemes could appeal to some hedge funds looking to lock in a set level of return for a portion of their financial assets.