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Superfunds

Superfunds open up a route for schemes to continue without sponsor support in order to reach their end goal – be that buyout or self-sufficient run-off. Continuing can mean that member outcomes are materially better than they would otherwise have been. Over time, superfunds should also become efficient vehicles for small pension schemes looking for lower costs and access to optimised investment strategies

The concept of superfunds (also known as DB consolidators) became a reality in June 2020 following the publication of interim guidance by the Pensions Regulator (TPR).

TPR’s guidance sets out how it intends to authorise and regulate superfunds in advance of legislation. This publication was a milestone that will enable the first superfunds to become authorised and for transactions to take place.

Who could superfunds work for and why are they relevant?

  1. Reasonably well-funded schemes struggling with a weaker sponsor covenant whose future is uncertain
  2. Schemes without scale that have extensive running costs and/or require considerable management time
  3. Sponsors who want to cease their relationship with a scheme and are prepared to make a one-off contribution to remove the scheme
  4. A parent company with no legal obligation to the scheme with the above conditions

Although superfunds can be suitable for some schemes, especially those where the covenant is not certain, one-size rarely fits all, and there are alternatives.

Willis Towers Watson’s specialist Transactions team has in-depth experience of working with clients who are looking for ways to manage their risks and liabilities and would be happy to help you consider your options.

Trustees and the Regulator will be determined that superfunds should be a way to improve member security. There will be cases where, on the balance of probabilities, it looks better to twist than to stick”

Rash Bhabra, | Head of Retirement, Great Britain
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