Pensions watchdog gives green light to mammoth superfund deals

June 17, 2020

The UK’s pensions watchdog is to give the long-awaited green light to the consolidators of defined benefit pension schemes, paving the way for tens of billions of pounds of retirement funds to start being pooled together.

Sky News has learnt that The Pensions Regulator (TPR) will on Thursday unveil an interim framework for supervising so-called pension superfunds.

The new vehicles, which are primed to become some of the most prominent players in Britain's pensions industry, have been agitating for more than two years to gain regulatory approval.

Recent talks between TPR, the Department for Work and Pensions and the Treasury have resulted in an agreement to begin authorising firms such as Clara-Pensions and Pension SuperFund.

The first substantial transactions with retirement scheme trustees are expected to be struck within months.

A permanent regulatory regime is expected to require legislation and may still be some way off, according to insiders.

Potential candidates for pension consolidation include Thomas Cook, which collapsed into liquidation last autumn, and Debenhams, the struggling department store chain.

In total, tens - if not hundreds - of billions of pounds of pension liabilities could be pooled in this way.

Edi Truell, the City financier, has set up Pension SuperFund, which will offer companies a cheaper alternative to insuring their pension schemes with a private sector player such as Legal & General or Rothesay Life.

Mr Truell has long been an advocate for defined benefit pension consolidation in the public and private sectors, arguing that such combined pools benefit from significant cost savings and avoid the duplication which curtails returns for thousands of individual schemes.

Clara's model is expected to see it acting as a bridge by taking on pension schemes with the aim of selling them onto a specialist insurer within about a decade.

The idea behind such superfunds is that they offer more certainty to pension scheme members because they are part of a larger, dedicated organisation with expert managers and the capital required to meet pension obligations.

Sky News revealed earlier this year that Clara-Pensions was in talks about securing hundreds of millions of pounds of new capital from investors.

The advent of superfunds has been a protracted process, with some sceptics such as the Pension Protection Fund - the UK's pensions lifeboat - arguing that strong regulation of the new vehicles would be essential.

The Pensions Regulator, Pension SuperFund and Clara-Pensions all declined to comment.

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