Clara-Pensions has completed its fourth superfund transaction, welcoming 730 members of the Church Mission Society (CMS) Pension Scheme into its consolidator vehicle in a deal that pioneers an innovative “connected covenant” structure and marks the first such transaction involving a not-for-profit sponsor.

The transfer, encompassing £55m in assets, enables CMS to enhance long-term pension security for its members while refocusing on its core charitable mission.

It is also the first deal to use Clara’s connected covenant mechanism, which allows the original sponsor to provide a contingent guarantee alongside Clara’s own capital contribution, offering dual layers of security as members transition towards a full insurance buyout, the defined benefit (DB) superfund stated.

“This marks Clara’s fourth transaction and a landmark for the not-for-profit sector,” said Matt Wilmington, chief transactions officer at Clara-Pensions.

“We’re proud to support the Church Mission Society in securing the long-term future of its members’ pensions, while enabling the organisation to refocus on its core charitable purpose.”

The structure is seen as a breakthrough in expanding access to superfund solutions for sponsors that are well-capitalised but unable to secure an immediate insurance buyout. Clara estimates that up to £50bn of UK DB pension funds could benefit from such arrangements.

CMS is the first charity to complete a Clara deal, with the broader sector representing some £10bn in unsecured DB liabilities.

Richard Hubbard, chair of trustees for the CMS Pension Scheme, said: “This is really good news for our members. As trustees, we are focused on our duty to ensure pensions are paid, and this transaction means our members’ pensions are more secure. The new arrangement benefits from significant financial commitments from both CMS and Clara, in addition to the ‘connected covenant’ which means our members retain the long-term protection of our existing security package.”

Advised by Barnett Waddingham, CMS worked with Hymans Robertson on the commercial aspects of the deal, while Clara was supported by legal firm Cameron McKenna Nabarro Olswang and fiduciary manager Van Lanschot Kempen. Legal firm Eversheds Sutherland also supported Clara’s trustees.

“This covenant enhancing, rather than covenant replacing, structure is a real breakthrough in the superfund market,” said Harry Allen, alternative risk transfer specialist at Hymans Robertson.

Jack Sharman, principal and senior risk transfer consultant at Barnett Waddingham, added: “We’re particularly proud to have demonstrated that superfund transactions can be accessed even by smaller schemes in the not-for-profit sector, which can face unique challenges. This, together with the innovative new covenant structure for this transaction, means that it is an exciting time to find new solutions in the pension risk transfer space.”

Andre Keijsers, chief executive officer at Van Lanschot Kempen Investment Management UK, also noted: “Marking the industry’s very first use of a connected covenant structure, Clara has provided yet another solution that works to fill a key gap in the market for schemes with strong sponsors that are well-funded, while also showcasing the broadening role superfunds can play within the UK pensions market endgame environment.”

Alastair Bateman, CEO of CMS, added: “Church Mission Society is deeply committed to the wellbeing of our employees past, present and future and so I, and the rest of the senior leadership team, are pleased to be able to take this important step towards ensuring the security of our mission partner and staff pensions.”

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