TPT Retirement Solutions has announced its intention to launch a new Defined Benefit pension superfund designed to support run-on.
Both The Pensions Regulator (TPR) and the Department for Work and Pensions (DWP) have expressed their support for superfunds, which offer schemes an alternative endgame solution.
Superfunds are designed to take on the obligation of meeting the liabilities of corporate DB pension schemes from their original sponsors. They are particularly suitable for schemes that don’t have large surplus funding positions and cannot afford alternatives such as a full buy-out with an insurer.
Currently, there is only one superfund, Clara-Pensions, that has been assessed by TPR in the UK market, and it targets buy-out as its end goal. TPT’s superfund proposition, designed to run-on, will broaden the range of endgame solutions available to employers and trustees. TPT has secured capital to fund the first £1bn of transactions which it anticipates will be sufficient to support a number of deals subject to scale, regulatory approval and market conditions.
“We’re very excited to announce our plans to launch a superfund that targets run-on rather than a bridge to buy-out. There is real opportunity here, and our intention to launch a superfund forms part of a broader ambition to offer a full suite of consolidation options to schemes to suit their bespoke needs,” said Nicholas Clapp, Chief Commercial Officer at TPT Retirement Solutions.
“At TPT, we believe consolidation vehicles such as this provide better outcomes for members. They benefit from economies of scale supporting TPR’s ambitions for fewer, larger, well-run schemes which provide better value for money. By design, superfunds also come with big pools of capital for investment – the creation of which aligns closely with the Government’s ambitions for economic growth,” added David Lane, Chief Executive of TPT Retirement Solutions.
Pension superfunds present a significant opportunity for choice in the broader consolidation market. With many schemes experiencing improved funding levels over recent years, superfunds represent a viable route for those schemes that still fall short of full funding on a buy-out basis.
“It’s great to see TPT’s announcement today that it intends to develop a new DB superfund, building on the other consolidation options it already offers. This is an exciting development for DB schemes considering their appropriate end game. It offers schemes further choice in finding the endgame that best aligns with their objectives,” said Richard Wellard, Head of Alternative Risk Transfer at Hymans Robertson.
“We welcome TPT’s plans to operate a run-on superfund and give material member augmentations over time. This differs to other superfund transactions to date, which have acted as a bridge to buy-out, so it is good to see the innovation in the development of the superfund market. Clara-Pensions led the way in creating innovative solutions for schemes – including their “connected covenant” structure with the Church Mission Society. It’s clear to see that TPT aim to continue this trend with the member augmentation model, and we anticipate further innovation in this space will continue as the superfund market goes from strength to strength.”