Changing market dynamic will see Superfunds take on more leading role in risk transfer market

Superfunds have come of age, says Hymans Robertson as the firm releases its latest report. Completed deals over the past two years have helped to build understanding and confidence for future transactions with the market perceptions of superfunds transformed. The report argues that opinions have shifted from widespread scepticism to a place where superfunds are widely viewed as a valuable addition to the market.

With future transactions expected to lead to interest from potential new providers, The Pensions Regulator (TPR) holds a key role in responding to changing market dynamics, claims the leading pensions and financial services consultancy. TPR will operate within the future superfund legislation to regulate this market, but the balance between regulation and supporting innovation must be maintained, warns the firm.

Commenting on the success of superfunds and the role they could play in the future of the risk transfer market, Iain Pearce, Head of Alternative Risk Transfer Solutions at Hymans Robertson says:

“As superfund transactions become more common, we anticipate more schemes to view these as an attractive option. This could drive a positive feedback loop that could result in additional superfunds entering this market in the years ahead.

“As the market changes, it would be remiss of us not to expect some teething issues with how new regimes are developed and applied. Endgame decisions can be complex. In our view, the tests laid out by TPR are a blunt tool and may not always be an accurate barometer for assessing the suitability of schemes to enter a superfund transaction. We expect an evolution of how these tests are conducted to ensure that these do not become a blocker when a superfund transaction would be a positive outcome for members. This would enable greater freedom for Trustees to choose their preferred DB endgame in line with their fiduciary duty.

“Overall, the success story of superfunds might just pave the way for more to follow in its path. We look forward to helping schemes if they choose to travel down this road to secure better and more secure futures for their members.”