The Pensions Regulator (TPR) has confirmed in a recent blog its support for defined benefit (DB) superfunds as a legitimate endgame option for pension schemes.
TPR has approved the first three transfers, Sears, Debenhams, and Wates, and noted that Clara is the first superfund to meet its regulatory standards.
TPR estimates that about 40 per cent of DB schemes could qualify for a superfund transfer under its Gateway Tests. It sees consolidation, especially for smaller schemes, as a way to improve governance, reduce costs, and boost member security.
TPR clarified that, to streamline the process, schemes can use an actuary’s estimate instead of obtaining a formal buyout quote. Trustees can rely on TPR’s checks on listed superfunds and must provide a clear case for transfer, even if the employer stays involved.
The regulator also said complex financial modelling isn’t always needed to meet its tests, and it’s flexible about timing conditions in transfer agreements.
TPR is working with the government on legislation to support further growth of the superfund market.
Aon partner and lead of superfund team Andrew Grime says: “It’s great to see The Pensions Regulator continue their support of Superfunds, and the emphasis on pragmatism in the update is a particular positive for schemes considering this route. For example, schemes can rely on an estimate of buy-out pricing from an actuary with experience of the market, rather than incur the costs of seeking a quote from an insurer when assessing the Gateway tests.
“Many schemes may also welcome confirmation that those with an ongoing sponsor could still meet the Gateway Tests and be provided with Clearance from The Pensions Regulator (as we saw with the latest Wates transfer) if they have a strong rationale for the transfer. We continue to see increasing demand from a wide range of schemes considering whether a superfund transaction will deliver better outcomes for their members and look forward to the additional clarity that legislation and upcoming endgame guidance could bring.”
