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PwC comments on completion of TPR’s assessment of the first commercial DB Superfund

Today the Pensions Regulator (TPR) announced the completion of its assessment of the first commercial Defined Benefit (DB) Superfund - Clara Pensions (Clara). This paves the way for pension schemes to transfer to Superfunds, with the first transactions expected during 2022. 

Matthew Cooper, Pensions Advisor at PwC, said:

Defined benefit (DB) superfunds have an important role to play in the UK pensions industry. Through the benefits of consolidation and additional capital for pension scheme funding, transferring to a superfund should give members a greater certainty of receiving their pension benefits in full, where there are concerns over the health of the sponsoring employer. 

“Our analysis shows that up to one million pension scheme members and £170bn in assets could transfer to superfunds within the next 10 years. Therefore, a significant number of individuals could be reliant on these vehicles for receiving their retirement income and they will rightly expect robust regulatory oversight of the providers.

“The decision to transfer to a DB superfund by sponsors and trustees will require careful analysis of a wide range of areas given the need to meet TPR’s prescribed tests, referred to as the ‘Gateway Principles’. Sponsors and trustees will be looking for a streamlined way to assess these requirements so that transactions can be implemented in a timely and cost effective manner.”

Lauren Baba, PwC Pensions covenant advisor, added:

“This announcement represents a significant milestone for the DB superfund market. Superfunds will be an increasingly viable endgame option as more pension schemes face greater uncertainty over the longer term strength of their sponsor’s covenant due to the challenging economic environment. Sponsor covenant visibility is an important consideration under TPR’s guidance for trustees and sponsors considering transacting with a superfund.”

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