The trustee of the Church Mission Society Pension Scheme has opted to join Clara-Pensions, the member-first consolidator for defined benefit pension schemes in the UK.
The agreement, Clara’s fourth, marks another milestone for UK superfunds, as both the first transaction to make use of a ‘connected covenant’ structure and the first involving a not-for-profit employer.
“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,” said Alastair Bateman, Chief Executive Officer at Church Mission Society.
“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,” added Richard Hubbard of Capital Cranfield, Chair of Trustee for the CMS Pension Scheme.
“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. With the Clara trustee taking over our responsibilities in a seamless manner, we are confident our members are in good hands. I have been impressed with how all the parties worked together and would like to pass on my thanks to all the advisors for their collegiate behaviours,” added Hubbard.
Under the agreement, 730 members of the scheme and £55m in assets will transfer to Clara’s management. Scheme members will continue to receive their full pension entitlements, with the transaction backed by significant financial contributions from both CMS and Clara.
“This marks Clara’s fourth transaction and a landmark for the not-for-profit sector. 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. This transfer is not only the first involving a charity, but also the first to use a connected covenant structure – an important new layer of protection for members. With a strong and growing pipeline that includes several other charitable schemes, we are proving that Clara is accessible to all types of sponsors, regardless of sector,” said Matt Wilmington, Chief Transactions Officer at Clara-Pensions.
The transaction also marks the first use of Clara’s connected covenant structure, expanding the potential number of defined benefit schemes able to access consolidation and increase member security. This feature allows a continuing contingent guarantee from the original sponsor – in this case, CMS – alongside Clara’s capital commitment. The connected covenant provides an additional layer of long-term security for members, strengthening the financial safeguards in place as the scheme progresses towards an insured buy-out.
While CMS is the first charity to complete a transaction with Clara, the consolidator says that there are approximately £10bn of unsecured defined benefit liabilities in the wider charitable sector, reflecting the potential for significant increases in member security through consolidation. This reflects the growing recognition of consolidation as a viable route for not-for-profits seeking to secure pension obligations while prioritising their charitable work.
Hymans Robertson led the advice to CMS who also received legal advice from Gunnercooke.
“This transaction represents a fantastic outcome for members of the scheme and Church Mission Society. The innovative “connected covenant” structure means that the capital protection from Clara is in addition to the security the scheme already has from the CMS. This covenant enhancing, rather than covenant replacing, structure is a real breakthrough in the superfund market, which is now gaining significant momentum,” said Harry Allen, Alternative Risk Transfer Specialist at Hymans Robertson.
The trustee of the scheme was advised by Barnett Waddingham and Burges Salmon.
“We’re delighted to have led the advice on this groundbreaking transaction and to have delivered a solution that meets everyone’s objectives,” said Jack Sharman, Principal and Senior Risk Transfer Consultant at Barnett Waddingham.
“The CMS scheme is a longstanding client of BW, and we have worked collaboratively with the trustee and sponsor over many years to improve the scheme’s security. It’s therefore extremely pleasing to have completed this journey by putting members on a clear path towards a full buy-out. 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.”
