PwC leads completion of groundbreaking Clara transaction

As part of a landmark pensions transaction, PwC has advised Wates Group, a family-owned development, building and property maintenance business, in the transfer of its defined benefit members to Clara, a pensions superfund. 

The move to Clara, a member-first consolidator for defined benefit pension schemes, safeguards benefits and increases the long-term security for members.

The PwC team were advisers to the Wates Group and the lead transaction advisers on the project. PwC led on the commercial discussions with Clara, working collaboratively with the Wates Pension Fund trustee and its advisers to deliver the transaction. In doing so PwC drew upon the breadth of its skill sets, including actuarial, covenant, investment, risk transfer, tax and accounting.

Clara is designed to offer members safer pensions. Clara takes on the pension benefits payable under defined benefit pension schemes then works towards further securing those pension benefits with an insurance company in, on average, five to ten years.

To deliver the best outcomes for the 1,500 members required a significant investment from the Wates Group of around £19m plus additional capital from Clara, close collaboration between the Wates Group and Trustee of the Wates Pension Fund, and thorough engagement with the Pensions Regulator to achieve clearance for the transaction. 

Amy Hemmett, head of superfunds at PwC UK, said:

“Clara’s ability to deliver safer pensions for members was proven by its first two transactions, but importantly this is the first transaction with an ongoing sponsor, albeit operating in a challenging market landscape. The outcome for members has been demonstrated to be meaningfully improved by the transfer to Clara, via detailed testing of the transaction.

“This will bring the role of superfunds into new focus for a wider scope of trustees and corporates alike, who are aiming to achieve the best outcomes for their members but are not yet ready for an insurance buy-out. We anticipate that this transaction, and the demand for innovation in end-game solutions for pension schemes, will continue to drive the superfund market, including potential interest from other providers.”

Matthew Cooper, head of pension risk transfer at PwC UK, added:

“This transaction paves the way for corporates and trustees to think more broadly when it comes to the options available to improve member outcomes. Transferring risk to a third party through insurance buy-in/buy-out transactions has long been used to improve member security. 

Insurance will continue to be the right route for many schemes; however PwC analysis suggests there could be more than 200 schemes with around £150 bn of assets who could benefit from a transaction with a DB superfund like Clara. The validation of the DB superfund concept that this transaction represents could drive significant growth in this offering.”