LONDON, November 14, 2023 – Following the first superfund transfer between Clara Pensions and Sears Retail Pension Scheme last week, more pension scheme trustees think that superfunds are now providing a viable alternative for pension de-risking journeys.
In a poll of pensions scheme trustees conducted by WTW, nine-in-ten (90%) agreed that a superfund transfer is a viable solution for schemes, in the right circumstances. Nearly two-thirds (62%) also cited strengthened covenant and better member outcomes as the main benefits to be had from a superfund transfer, while one-in-five (20%) said increased choice of de-risking solutions was the main benefit of superfunds.
In addition, all of the pension schemes polled as part of WTW’s industry webinar thought that now the first superfund transfer had taken place it was very likely (85%) or quite likely (15%) that more schemes would follow.
Suzanne Vaughan, senior director in WTW’s pensions risk transfer team, and lead adviser to the Sears Retail Pension Scheme Trustees in its superfund transfer, said: “The most important part of the Sears transaction with Clara Pensions was the way it was structured to improve security and enhance protection for members. This guiding principle provides a benchmark for all subsequent superfund transfers to follow.
“Trustees can now evaluate a new viable option as a means of achieving their long-term scheme objectives.”
Suzanne Vaughan | WTW
“We know that interest in superfund transfers has grown significantly since the first transaction completed last week. Trustees can now evaluate a new viable option as a means of achieving their long-term scheme objectives. But, of course, pursuing a superfund transfer is not suitable for all schemes. Currently it is best suited to those schemes that have a weaker sponsor covenant and fall short of the funding levels required to achieve an insurance-led buyout at this stage.
“Under Clara’s business model, the longer-term objective for schemes that do transfer is to achieve an insurance buyout within the medium term. Through a transfer to Clara they can achieve strong protection for members’ benefits to support them on this journey.”
Pensions schemes entering into a transfer agreement with a superfund will remain under the protection of the Pensions Regulator and scheme members interests will still be stewarded by a board of Trustees appointed by the superfund.
“Preparing for a superfund transfer shares many similarities with preparations for an insurance-led bulk transfer,” said Vaughan. “Having transaction-ready scheme data is important to avoid unnecessary delays and access to live insurer pricing is important in order to maintain alignment with market value. Additionally, early engagement with the Pensions Regulator in order to develop an open and collaborative approach is vital in order to achieve a smooth clearance process.”
WTW was the lead adviser on Sears Retail Pension Scheme’s superfund transfer to Clara Pensions, as well as Scheme Actuary, pensions covenant adviser and member communications consultant.
WTW polled 63 UK pension scheme trustees on 9th November 2023, as part of its industry webinar analysing the opportunities and challenges associated with the superfund transfer market, following the completion of the UK’s first pension scheme superfund transaction.
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