DB superfunds - an alternative endgame?

Clara-Pensions has become the first defined benefits (DB) superfund to complete The Pensions Regulator's (TRP) assessment process of a  new 'superfund' consolidation vehicle. 

The funding code requires trustees of defined benefits (DB) pension schemes to think even more carefully about their "long-term objectives", which is often assumed to 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 a superfund would provide an alternative route. Recent guidance suggests these could offer enhanced security for schemes that may not be able to afford an insurance transaction. 

With Clara and PSF currently leading the charge, other potential entrants to the commercial consolidation market may now begin announcing their propositions. Yet assessing whether or not a superfund is the right destination for a given scheme is unlikely to be an easy decision. 

As we wait for the final 'authorisation' regime for superfunds to be formalised in primary legislation, it remains important that trustees and sponsors weigh up all options on how to achieve their long-term objectives, taking legal, actuarial and covenant advice as necessary.