TPR launches interim regime for DB superfunds

Adolfo Aponte, managing director of Lincoln Pensions, said: “The drive towards greater innovation comes at a time when employer covenants and funding levels are being challenged by myriad factors, not least Covid19, so this has to be done cautiously. 

“We expect today’s guidance to open the flood gates on the sale of the employer covenant links in exchange for a defined pot of capital, which could be transformational in the way that benefits are secured and how they are delivered to members.

“As with any innovation however, there is ample room for unintended consequences and the emerging regulatory regime should ensure members are not left wearing the innovation risk.” 

Meanwhile Pensions Management Institute (PMI) president Lesley Carline wants further clarification from the regulator regarding the restrictions in this market.

Ms Carline said: “The regulator has made no secret of its concerns about the standards of governance associated with small legacy DB schemes, and the consolidation of such arrangements would be a pragmatic route to addressing a long-standing issue.

“However, it would be a shame if TPR were to thwart its own objectives by creating a regulatory culture which were to disincentivise the creation of consolidators. Whilst safeguarding members’ benefits is an obvious priority, this should not be allowed to prevent commercial organisations from being sufficiently profitable.

"Consolidators should be able to remunerate investors without undue regulatory restriction if the superfund concept is to succeed. We believe this aspect of today’s announcement requires further clarification.”

Adam Saron, chief executive officer of Clara-Pensions, said the provider would push ahead with its own superfund “as soon as possible”.

Mr Saron said: “This is a significant and positive step for pension scheme members and the companies that have supported them. We look forward to being fully approved under this new guidance and to welcoming the first members into Clara later this year.

“Businesses across the UK are facing unprecedented challenges and pension scheme funding is under pressure. Risk remains a significant challenge both for schemes and their members. Although pension consolidation is a small piece of the wider economic picture, Clara looks forward to playing our part in supporting businesses and making pensions safer.”

TPR will be providing more information for trustees and employers in the coming months and as the superfunds market evolves, it plans to develop the guidance accordingly.

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