Comment on TPR's DB Superfunds guidance

Commenting on The Pensions Regulator DB Superfunds guidance, Iain Pearce, Head of Alternative Risk Transfer Solutions, Hymans Robertson, says:

“We welcome this latest guidance from The Pensions Regulator (TPR) as a crucial milestone in the industry.

“To date, TPR’s interim guidance has not allowed providers to generate ongoing returns from successfully managing the risks within a superfund. This has effectively restricted commercial superfund models to temporary “bridge to insurance” models, as seen in the first two Clara transactions. Having closely scrutinised the Clara structure and those two transactions, this latest evolution in the guidance is less restrictive and signals that the superfund market is truly open for business and innovation.

“Having perhaps understandably taken a cautious approach for the first steps in the development of this market, TPR’s guidance is now better aligned to the wider messaging of the Annual Funding Statement and beyond. TPR has become increasingly vocal in confirming it supports a wide range of suitable endgames for schemes. It clearly sees scope for a range of solutions to play an important role in the pensions landscape to support positive outcomes for members and other stakeholders. This is clear from the deliberate inclusion within this guidance of references to the wider capital backed solutions that do not meet the definition of a superfund. Whilst we expect TPR to take a cautious approach here we believe it is crucial that TPR demonstrates an openness to innovation if it is serious to encourage a range of commercial providers to make available new solutions. With this in mind, we welcome the sentiment that invites stakeholders to engage with TPR where there is a strong belief that deviating from the central guidance leads to much better outcomes. Schemes backed by a distressed sponsor that cannot quite afford to transact with a superfund, could benefit from this.

“Whilst we look forward to the day when superfund legislation is passed, that does not feel imminent as we wait for the pensions review from the new Labour government. We therefore expect the market to operate under the latest form of guidance for some time. Whilst the perimeters of that review are unknown, this guidance looks to tick all the boxes from the prior signalling from Labour, which has emphasised a desire for consolidation among pension schemes and the pursuit of policies that support the wider pro-growth agenda.

“We support this policy ambition, and echo TPR’s sentiment that superfunds can have a clear and active role in the market. Consolidation, however achieved, can play a vital role within our industry to drive efficiency and positive outcomes for members and sponsors alike.”