Iain Pearce, Head of Alternative Risk Transfer, Hymans Robertson, says: “We are really pleased to see Clara and the trustees successfully complete their first transaction. This is a positive day for members of the transferring scheme. They’ll benefit from the additional loss absorbing capital provided by Clara’s backers which will be locked away until Clara delivers on its “bridge to buy-out” promise to insure benefits in full in the future. In line with TPR’s guidance, the trustees of the transferring scheme will have carefully considered a range of strategies and concluded that the transfer improves the likelihood of members receiving full benefits.
“It’s also an important day for the industry. The conclusion of this first transfer to a superfund is a historic milestone and paves the way for other pension schemes to do the same. Other schemes that follow can also gain from external loss absorbing capital in new ways, where doing so increases the chance that members receive all the benefits they were promised.
“As with any new structure or solution, it will be necessary for additional due diligence and steps as the parties involved build their knowledge and understanding of these offerings. This will help them decide whether or not a transaction is right for their own members. As Clara seeks to write more business, we would expect that understanding within the industry will grow. This will mean that the implementation process is increasingly better understood and could help to develop a degree of standardisation, as we see with bulk annuity transactions. Future superfund legislation can help provide more clarity and execution certainty, and may become more pressing as more transactions are announced.”
Calum Cooper, Scheme Actuary to the Clara Pension Trust: “It’s been a privilege and a personal highlight to advise the Trustee of the Clara Pension Trust since 2020. We’ve been part of a team working tirelessly to establish the Scheme and lay the necessary groundwork to improve the security of members pensions from day 1. Improving member outcomes is at the heart of Clara and our pensions purpose at Hymans Robertson. With Clara there is now more proven diversity in the pensions solution space and we believe that diversity of solution is at the heart of better outcomes for members.
“We’re proud to have played our modest part in bringing Clara to life, alongside a number of very talented people that share our values and purpose to improve member outcomes, going all the way back to 2017. We really look forward to looking after the future pensions of each and every one of the 9,600 Sears members as they join the Clara Pension Trust. And we’re excited and committed to working with the Trustee and wider Clara team to ensure that every member’s pension promise is delivered as we cross the bridge to buy-out.”
Andrew Grime, partner at Aon, said: This is extremely welcome news to schemes which have been exploring superfunds as a potential destination. The journey to this first transaction was long and challenging with many regulatory, financial and practical hurdles to overcome. Clara will hope that the certainty this transaction brings can help pave the way for other suitable schemes to follow.
Suzanne Vaughan, WTW's lead Pension Risk Transfer adviser to the Trustees, said: “This transaction marks the start of a new chapter in pension scheme de-risking, with the Sears Retail Pension Scheme becoming the first to transfer to Clara, the UK pension superfund.
“Clara will provide £30m of additional, ring-fenced capital, to increase the security of Sears members’ benefits, making it more certain that the Scheme’s future pension promises will be fully met via a buy-out.
“In a de-risking market that has experienced ever-increasing insurer-led buy-in and buyout activity, this validation of an alternative path is incredibly helpful for those sponsors, trustees and members of schemes where buyout is currently out of reach.”
Adolfo Aponte, Managing Director, Cardano Advisory, comments on alternatives to buyout: “Clara’s announcement this morning is a significant milestone for the pensions industry. Trustees and Sponsors have shown consistent interest in executing consolidator transactions in the right circumstances, but the absence of a completed case led to uncertainty around executability. This deal however moves the goalposts and gives another alternative to buyout.
“Another option, where we now also have a first case completed, includes capital-backed journey plan solutions which offer DB schemes additional security, in the form of capital for a period of time, while the providers run the scheme’s asset to an agreed target return or funding level.
“These alternative solutions do offer vital de-risking options for schemes but they are still relatively new to the market. It’s important that trustees and sponsors select the right solution that addresses a scheme’s unique circumstances and demonstrably evidences how it would improve its scheme’s members’ outcome.”
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