Iain Pearce, Head of Alternative Risk Transfer Solutions, Hymans Robertson, says:“We welcome this latest guidance from The Pensions Regulator (TPR) as a crucial milestone in the industry.
“To date, TPR’s interim guidance has not allowed providers to generate ongoing returns from successfully managing the risks within a superfund. This has effectively restricted commercial superfund models to temporary “bridge to insurance” models, as seen in the first two Clara transactions. Having closely scrutinised the Clara structure and those two transactions, this latest evolution in the guidance is less restrictive and signals that the superfund market is truly open for business and innovation.
“Having perhaps understandably taken a cautious approach for the first steps in the development of this market, TPR’s guidance is now better aligned to the wider messaging of the Annual Funding Statement and beyond. TPR has become increasingly vocal in confirming it supports a wide range of suitable endgames for schemes. It clearly sees scope for a range of solutions to play an important role in the pensions landscape to support positive outcomes for members and other stakeholders. This is clear from the deliberate inclusion within this guidance of references to the wider capital backed solutions that do not meet the definition of a superfund. Whilst we expect TPR to take a cautious approach here we believe it is crucial that TPR demonstrates an openness to innovation if it is serious to encourage a range of commercial providers to make available new solutions. With this in mind, we welcome the sentiment that invites stakeholders to engage with TPR where there is a strong belief that deviating from the central guidance leads to much better outcomes. Schemes backed by a distressed sponsor that cannot quite afford to transact with a superfund, could benefit from this.
“Whilst we look forward to the day when superfund legislation is passed, that does not feel imminent as we wait for the pensions review from the new Labour government. We therefore expect the market to operate under the latest form of guidance for some time. Whilst the perimeters of that review are unknown, this guidance looks to tick all the boxes from the prior signalling from Labour, which has emphasised a desire for consolidation among pension schemes and the pursuit of policies that support the wider pro-growth agenda.
“We support this policy ambition, and echo TPR’s sentiment that superfunds can have a clear and active role in the market. Consolidation, however achieved, can play a vital role within our industry to drive efficiency and positive outcomes for members and sponsors alike.”
Patrick Lloyd, Senior Consultant and Head of Alternative De-risking at XPS Group, said: “More clarity on DB superfunds is helpful at a time when trustees and sponsors of many DB pension schemes are considering their end-game strategies. The recent Clara transactions demonstrated a viable end-game alternative for trustees and sponsors looking to deliver better outcomes for members and the new DB superfund guidance will enable more flexibility around how this is provided and potentially widens the universe of schemes who might now consider these solutions.”
Matt Cooper, Head of Pension Risk Transfer at PwC UK, said: “The updated guidance and changes proposed by The Pensions Regulator will be welcomed by the industry, particularly by superfund providers who can act on the new developments to enhance their propositions.
“One of the TPR’s key objectives remains the protection of members’ benefits, but these changes clearly demonstrate that they are also committed to embracing innovation. For example, enabling capital release earlier may improve existing and new provider pricing while continuing to provide enhanced member security - creating conditions where protection remains paramount but with increased flexibility.
“The extent to which these new flexibilities are commercially viable in practice will need to be tested as the market digests the updated guidance. More providers in the superfund and capital backed arrangement space will give trustees and sponsors a greater range of options to compare and decide on the right solution for their situation. We see this as a positive development, albeit one which requires careful consideration from decision makers.”
Simon True, CEO of Clara-Pensions, said: "Clara-Pensions welcomes The Pension Regulator’s (TPR) latest guidance update. This is an important step forward for the superfund model, enabling more schemes to access consolidation, ensuring greater security for more members and deriving more benefit for the UK economy.
We particularly welcome the Regulator’s dynamic approach by updating the guidance for the second time – responding effectively to market need in a way that will support the growth of the sector. We look forward to working with the Regulator and the government in the coming months through the Pensions Review to create more secure pensions for DB members"
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