DB Superfunds - an alternative endgame?

Published by Jack Sharman, Tom Hargreaves on

The Pensions Regulator (TPR) is consulting on a new funding code, which will require trustees of defined benefit (DB) pension schemes to think carefully about their “long-term objectives”.  It is often assumed that this will involve either:

  • targeting a “buy-in” or “buyout” transaction with an insurance company; or
  • achieving full funding on a “low dependency” basis.

However, entry into one of the new “superfund” consolidation vehicles might provide an alternative route.  TPR’s recent guidance on the interim regulatory regime for these superfunds suggests that they could offer real security to the trustees and sponsors of schemes which might not be able to afford an insurance transaction. 

Despite the protections offered by TPR’s interim regime, we do not expect assessing whether or not a superfund is the right destination for a given scheme to be an easy decision.  Our briefing note sets out in more detail the factors that trustees and sponsoring employers will need to consider before pursuing the superfund option.

This briefing note (updated in June 2020 to reflect recent developments) covers:

  • the background to consolidation
  • the current superfund providers and what they offer
  • the risks
  • the schemes likely to pursue consolidation
  • and what’s next
     

It remains important that trustees and sponsors weigh up the options on how to achieve their long-term objectives (potentially including the superfund option), taking legal, actuarial and covenant advice as necessary.

DB Superfunds - an alternative endgame?

Recently, the Pensions Regulator published the eagerly-awaited details of the interim regime for superfunds. In our recent blog, we explore what the new rules will mean for PSF and Clara, and any other new entrants into the market.

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