Trustees considering transferring their defined benefit (DB) schemes to a superfund should assess covenant support from the outset and engage early with the Pensions Regulator (TPR), according to LCP.
The consultancy’s advice comes as the UK superfund market expands. Clara-Pensions has completed eight transactions, the latest being a first-of-its-kind transfer of six Marelli pension schemes worth £250m, announced on 13 October. TPT Superfund has also recently passed TPR’s assessment, widening the range of providers.
Drawing on its experience advising on superfund transfers, LCP has identified five lessons for trustees and sponsors, highlighting the importance of assessing member outcomes, covenant strength and the alternatives available before deciding to proceed.
Trustees should first establish their pension fund’s position, including its funding level, the strength of the employer covenant and the risks facing both the scheme and its sponsor, LCP said.
A clear understanding of covenant support is essential both to assessing the viability of a superfund as an endgame option and to building a rationale for the transfer that is consistent with TPR’s gateway principles.
LCP also urged trustees to look beyond the assumption that superfunds are only suitable for schemes with distressed sponsors. The key consideration should be whether a transfer offers better outcomes for members than the realistic alternatives, rather than whether the employer fits the traditional profile of a superfund candidate.
Early engagement with TPR can also help trustees and sponsors address the regulator’s expectations before submitting a clearance application, reducing the risk of objections at a later stage.
LCP said that, in its experience, clearance applications had been more focused and efficient when TPR’s expectations had been understood and addressed in advance.
The consultancy also highlighted the potential impact of the Pension Schemes Act 2026 on the market.
The new framework’s onboarding conditions are expected to remove the requirement under the existing gateway principles that buyout must not be realistically achievable in the foreseeable future, potentially widening the range of schemes able to consider a superfund transfer.
However, LCP said the underlying covenant questions would remain. Trustees would still need to demonstrate that a transfer improved the likelihood of members receiving their full benefits, taking into account the existing covenant, realistic alternative options and the support offered by the superfund.
Finally, LCP highlighted the importance of collaboration between trustees, sponsors, superfunds and advisers. It cited the Marelli transaction as an example, involving six schemes, multiple employers and guarantors, Clara and advisers across an international group working to compressed timelines during a complex global restructuring.
2026 has marked a breakthrough year for superfunds, and the market’s momentum continues to build
Laura Amin, head of DB consolidation at LCP, said: “2026 has marked a breakthrough year for superfunds, and the market’s momentum continues to build. More sponsors and trustees are actively considering superfunds alongside other endgame options to provide members’ benefits for the long term.
“The early focus on member benefit security is clear across the schemes we have advised to date. We expect that to remain the case under the new regulations due to be published next year, and the covenant focus will continue to be key.”
She noted: “From our experience of the eight schemes we have supported with a superfund transfer, we have a strong understanding of TPR expectations and of supporting trustees with assessing their rationale for transfer.”
George Bassnet, senior consultant at LCP, added: “Overall, the lessons are clear: superfund transfers demand a strong covenant focus from the get-go to inform the trustees’ decision-making, not to justify it afterwards.
“Covenant is also vital to understand the suitability of a superfund as an endgame option, how it compares with other realistic endgame options and where trustees have decided a superfund is the right endgame for their scheme, in building a rationale to TPR for the transfer which is consistent with the gateway tests.”
