Green light for DB commercial consolidators

More than two years after the Government signalled support for superfunds, The Pensions Regulator (“TPR”) has released detailed guidance for superfunds, setting out an “interim regime” that should enable initial transactions to occur ahead of a longer-term authorisation regime coming into force. 

What comes next?

Superfunds are working hard with TPR to gain ‘pre-authorisation’, confirming they comply with the guidance for the interim regime. Only then will TPR begin considering clearance applications for individual transactions. TPR has also signposted further guidance to come for trustees and sponsors considering consolidation.

While there are a number of schemes in advanced discussions with the superfunds, the need for providers to achieve ‘pre-authorisation’ and for individual transactions to then obtain clearance means it may be some time before the first transactions occur.

Only time will tell what these first transactions look like, but in our view, it remains the case that early transactions need a “burning platform”, meaning it is in members’ best interests to transact now rather than waiting for an authorisation regime. 

Interestingly, the guidance also covers capital backed solutions that do not initially sever the link to the employer covenant at the point that capital is provided, but which could result in the employer covenant being severed at some future point. This may well impact the structure of new capital backed solutions coming to market. Indeed, TPR appear to have issued this guidance now in part to capture these new capital backed solutions.

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