Defined Benefit  

Regulator to approve DB consolidator transactions

Regulator to approve DB consolidator transactions

The Pensions Regulator (TPR) is expecting to have a role in approving consolidation transactions in the defined benefit (DB) market.

Speaking today (13 September) at a Westminster Business Forum conference, David Fairs, executive director of regulatory policy, analysis and advice at TPR, said the watchdog has made it clear to the two consolidators coming to market that it expects them "to come for clearance on their transactions".

Both consolidators, The Pension Superfund and Clara Pensions, he said, have appeared willing to discuss their business models and to listen to the regulator’s concerns and challenges.

The Pension Superfund was created in March but has already seen a reshuffle of its leadership team this week when it promoted head of asset liability management Luke Webster to chief executive, after CEO Alan Rubenstein, and one of its main investors, Warburg Pincus, announced their departure

Clara Pensions – which will focus solely on fully-funded schemes and target smaller pension funds – plans to formally launch later this year.

It announced yesterday (12 September) that it has appointed its board of trustees, composed of Alan Pickering, chairman of BESTrustees, Michael Chatterton, managing director at Law Debenture, and Frank Oldham, client director at Independent Trustee Services.

Mr Fairs said the regulator had shaped up to prepare for the market entry of further funds. But he said it would have preferred to have a regime in place, akin to the one currently being introduced for master trusts, before further consolidators entered the market.

He said: "We did think we would have two consolidators transacting their deal before the end of the year, now we are not quite so sure.

"We are aware of a number of other [consolidation projects] that are in the wings, who also might come into market.

"In anticipation of that we have assigned resources with the right skills to manage current and future entrants."

In its recent white paper, the government revealed plans to promote consolidation in the DB pension market, in which two thirds of the 5,600 schemes have funding shortfalls.

FTAdviser previously reported that consolidation was a top priority for the DWP, which has been having discussions with the industry on this topic – a consultation on this matter is expected to be published this autumn.

Mr Fairs said: "We are supportive of DB consolidators entering the market. We think they have a useful role to play in improving levels of governance, in accessing investment platforms, and new investment opportunities - and so improving member outcomes."

Malcolm Mclean, senior consultant at Barnett Waddingham, said he wasn't surprised to hear the regulator wants to approve all consolidating transactions but said "it is not clear whether it intends this to be a permanent arrangement or just for a time whilst the initial transfers occur and the 'ones waiting in the wings' fully emerge".

He added: "Consolidation as practiced by this new breed of consolidators is a new and potentially important process, which has the potential of maintaining the continuance of private sector DB schemes and bringing them up to a level so as to facilitate a secure buy-out with an insurance company.