Defined Benefit  

Pension Superfund agrees terms on first transaction

Pension Superfund agrees terms on first transaction

The Pension Superfund, one of the defined benefit (DB) consolidators launching into the market, is preparing to submit its first transaction to The Pensions Regulator (TPR).

In response to Friday's (December 7) consultation published by the Department for Work and Pensions (DWP) on DB consolidation, Luke Webster (pictured), chief executive of The Pension Superfund, announced the deal.

He said: "There is nothing in the guidance that is incompatible with our initial transaction and, having successfully agreed commercial terms with the sponsor and trustees, we can move to submitting this first transaction for regulatory clearance.

"Our proposal will greatly improve the funding of that scheme, whilst also giving its members the opportunity to participate in any future surplus over and above the buffer funding we will maintain."

He did not reveal which scheme was subject to this transaction.

TPR will be in charge of not only approving consolidators coming into the market, but also oversee transactions of schemes choosing this route.

The watchdog is expected to undertake a basic triage check of schemes that wish to join a DB superfund, and to identify transactions where there are significant risks, and where a more detailed assessment is warranted.

TPR would then notify those schemes within a "reasonable period" where it feels further investigation is appropriate.

But the DWP is asking the industry whether the regulator should oversee each individual scheme transfer or merely act when it considers the principles for a transaction aren’t being met.

Despite The Pension Superfund announcement, there are concerns transactions can go ahead at this point.

Matthew Arends, head of UK retirement policy at consultant Aon, said: "The DWP’s consultation brings much-needed clarity on the direction of travel that the DWP anticipates for these new consolidation vehicles.

"Having said that, in a number of key areas, the DWP has put forward several options for the future, which means there remains considerable uncertainty over the regime under which consolidators will operate. This in turn will make transactions difficult in the short term."

The consultation follows a DB white paper published in March in which the government revealed plans to promote consolidation in the DB pension market, in which two thirds of the 5,600 schemes have funding shortfalls.

Since then, two consolidators have been announced – The Pension Superfund and Clara Pensions.

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 Mr Webster to chief executive, after chief executive Alan Rubenstein, and one of its main investors, Warburg Pincus, announced their departure

FTAdviser reported in September that The Pension Superfund was in "well-developed conversations" with a dozen pension funds.

maria.espadinha@ft.com