Edi Truell, founder of private equity group Disruptive Capital, is winding down the Pension SuperFund, a commercial pension consolidator, after failing to get regulatory approval for the business, it has been reported.
According to an article in the Financial Times, Truell said his decision came after The Pensions Regulator (TPR) failed to produce guidance on how profits generated by superfund investments could be distributed.
Luke Webster, chief executive officer of Pension SuperFund, is quoted as saying that the lack of regulatory guidance made the market “uninvestable”.
“Were you running a pension superfund today, there would be no line of sight for an investor as to how they might get their money back,” he said.
TPR published amendments to its superfund guidance last month, but left what was described as “an obvious gap” by not updating its stance on allowing superfunds to extract profits prior to securing members’ benefits with an insurer.
Louise Davey, TPR’s interim director of regulatory policy, analysis and advice, said it wanted to engage further with the pensions industry on how this would work and that an update would arrive in “due course”.
The Pension SuperFund was launched in 2018 having lined up £500m (€571m) largely from private equity firms Warburg Pincus and Truell’s family office. In 2020 it set up a new occupational pension scheme at the request of TPR, for the benefit of the UK tax authority.
Unlike Clara, a rival superfund, the Pension SuperFund had not yet been given the green light to operate. According to the FT article, it had tried three times to get approval. Clara’s business model is to act as a “bridge” to buyout for pension schemes while the Pension SuperFund was out to administer pension benefits in perpetuity.
There is no legal framework for the regulation of superfunds yet. The government consulted on an approach in early 2019 but primary legislation is required to establish the regime. In the meantime, TPR has established an interim regulatory regime for assessing and supervising superfunds.
Steve Webb, partner at LCP, praised TPR for “playing a blinder” but said that the lack of legal certainty was an issue for both trustees and investors.
“The government has had long enough,” he said.
A spokesperson for TPR said: “We have supported innovation by creating an interim superfunds regime, and recently revised our guidance to make it easier for schemes to transfer to a superfund. We’re now considering how best to go forward on profit extraction, but our primary focus has to be ensuring that savers’ interests are protected.”
As background, the spokesperson also noted that the Regulator will be engaging further with industry on the issue of profit extraction and will update its guidance where necessary.
The spokesperson stressed that TPR assess superfunds, it does not authorise them, adding that it recommends schemes considering transferring to such an arrangement choose one that has demonstrated to the Regulator that they are following its guidance and have met its expectations.
IPE was unable to reach the Pension SuperFund.