UK pension scheme trustees believe superfund transfers to be a ‘viable’ solution for schemes, according to a poll conducted by consultancy WTW.
Following the first superfund transfer between Clara-Pensions and Sears Retail Pension Scheme last week, WTW hosted an industry webinar which polled 63 UK pension scheme trustees to analyse the opportunities and challenges associated with the superfund transfer market.
The poll showed that 90% of trustees agree that a superfund transfer was a viable solution for schemes, in the right circumstances.
Nearly two-thirds (62%) also cited a strengthened covenant and better member outcomes as the main benefits of a superfund transfer, while one in five (20%) said the increased choice of a de-risking solution was the main benefit.
In addition, all of the participating pension schemes 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.”
Vaughan said that interest in superfund transfers has grown ‘significantly’ since the first transaction was completed last week.
“Trustees can now evaluate a new viable option as a means of achieving their long-term scheme objectives,” she continued.
Vaughan acknowledged that pursuing a superfund transfer is not suitable for all schemes and 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.
She added that 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 transfer to Clara, she said they can achieve strong protection for members’ benefits to support them on this journey.
This is because pension schemes entering into a transfer agreement with a superfund will remain under protection of The Pensions Regulator (TPR) and scheme interests will still be stewarded by a board of trustees appointed by the superfund.
Vaughan added: “Preparing for a superfund transfer shares many similarities with preparations for an insurance-led bulk transfer. 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.”
She said that early engagement with TPR in order to develop an open and collaborative approach is also “vital” in order to achieve a smooth clearance process.
Read the digital edition of IPE’s latest magazine