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DB superfunds


This guidance is for those setting up and running a 'DB superfund', including directors, senior managers and trustees.

Issued: December 2018


Purpose of this guidance

This guidance is for those setting up and running a ‘superfund’, including directors, senior managers and trustees. If you want to run a superfund, you will need to speak to us about your plans before launching. We will ask for information about your plans and expect you to provide it in a timely manner. This guidance will help you understand our expectations for superfunds and the areas where we are likely to ask for information to ensure we are satisfied they are met.

Terms used

Capital buffer – the capital invested by either the investors, or both the ceding employer and investors, which has replaced the employer covenant and sits outside of the fund, but is available to the trustees of the scheme in events specified in the trust deed and rules.

Corporate entity – the controlling organisation of the superfund, which has effectively taken over the role of the sponsoring employer.

Fund – the assets within the scheme.

Scheme – the pension scheme within a superfund.

Superfunds – defined benefit (DB) pension schemes established to accept bulk transfers of assets and liabilities. Instead of ongoing employer contributions, member security comes from a capital buffer provided by investors (who will profit from the arrangement) and possibly the ceding employer(s). When we refer to the superfund, this means the overall structure of the vehicle, including the corporate entity, the scheme and the capital buffer.

Trustee board – the trustees of the pension scheme within a superfund have the same responsibilities as trustees of a traditional occupational pension scheme. Trustees are required to monitor the scheme’s funding level, commission regular actuarial valuations, and supervise the scheme’s administration and payments.


The Department for Work and Pensions (DWP) is currently developing an authorisation framework to safeguard the benefits of members moving into superfunds, and the receiving superfunds will need our authorisation to operate. Further information regarding this work can be found in the DWP consultation.

The DWP consultation on consolidation of DB pension schemes proposes a range of areas of focus we will need to be satisfied with. It is likely we will ask for information about all of these areas when you approach us before launching. These areas are as follows:

  • The superfund can be supervised.
  • The superfund has a viable business model.
  • The superfund is financially sustainable.
  • The superfund is well governed.
  • The superfund has a high probability of being able to pay members’ benefits as they fall due and has contingency plans in place to protect members.

Regulation before an authorisation framework is legislated for

We will be regulating superfunds before an authorisation framework is legislated for, to ensure members’ benefits are protected. As occupational DB pension schemes, we expect superfunds to comply with all relevant codes and guidance. We will scrutinise each superfund that enters the market against the areas outlined in the DWP consultation (summarised in the bullets above) and this guidance is based on those requirements. We will update this guidance accordingly with any changes.

Regulation will be an ongoing process. We expect you to explain how your superfund addresses the areas outlined in the DWP consultation before launching, and we expect you to continue to engage with us as your superfund develops. Through this engagement, we will seek to understand fully the challenges your superfund faces, the risks you are facing, and the good practice you are developing. This is also your opportunity for regular engagement with us about our expectations and the emerging superfund regulatory framework. In this guidance, we refer to this process as supervision. Engagement with this process, including the supervision of transfers in and out of your pension scheme, will be an indication of your conduct. We will expect you to act in an open, honest and transparent manner.

Our supervision of your superfund is to ensure your members’ benefits are protected while your superfund is operating and in the event that your superfund winds up. In order to supervise your superfund effectively, we will need to have a good understanding of how it is run and organised, its place in any wider corporate group and the links it has with other persons.

We will therefore ask for ongoing information about how your superfund is being run. Following entry to the market and in line with the proposed significant events framework, we will ask superfunds to notify us of any significant changes in a timely manner and that the changes mean your superfund continues to meet our expectations. The DWP’s consultation sets out a proposed list of significant events and we would encourage superfunds to notify us if any of these occur. This list can be found in Appendix B of this guidance.

Superfund transactions

A key aspect of our supervision of your superfund will be the scrutiny of transfers in and out of your pension scheme. As part of this process, we will expect employers to apply for clearance in relation to transfers and we will expect to see evidence of trustee due diligence.

It would be inappropriate for us to issue any clearance statements for entry to your superfund before we have assessed your superfund against the relevant criteria. We would therefore encourage you to engage with us as early as possible, and co-operate with our requests for information and explanation. We may also want to see the expectations you are setting for the trustees and members of schemes transferring to your superfund. This will most likely be demonstrated by providing the following:

  • A copy of the draft presentation given to trustees, including details of any timing expectations (for example, expectations on timescales for buy-out).
  • Copies of expected communications to members on entering the superfund.
  • Details of any member options you offer or are expecting to offer within the superfund, for example transfer options, partial withdrawal, lump sum arrangements or pension increase exchange exercises. You should include copies of draft communications.
  • Contract documents showing the obligations and commitments taken on by the parties to the contracts.

The above documentation should be supported by explanations of the following details:

  • The proposed bases for members’ options, including transfer values and the policy that will be adopted.
  • The pricing policy of your superfund, including sign-off procedures for pricing and the controls you have in place to pre-empt any pricing errors.
  • The investment arrangements and degree of risk being taken within different tranches of the fund coverage and the capital buffer.

Ceding trustees may also wish to see some of this information so they can compare the degree of longer-term member benefit security offered by their current employer’s arrangements with the potential security that would be provided by the receiving superfund.

We would not expect your superfund to accept pension schemes that already have the ability to buy out or are on course to do so within the foreseeable future (for example, in the next five years). This is in line with the ‘gateway’ proposals in the DWP consultation.

Although the onus to assess whether this is the case rests primarily with the trustees considering transferring, we expect you to understand why they believe they do not have the ability to buy out and to challenge them accordingly, if appropriate.

Our expectations and information we may request regarding your superfund

We set out below the information we would expect you to provide to us before launching and when your superfund is operating.


In order to run a superfund effectively, the people who exert control or influence over the superfund should be able to demonstrate that they have integrity, are honest and are financially sound. We expect all persons involved in running superfunds to have the right level of knowledge, skills and experience to carry out their roles.

We are particularly interested in those who are key to ensuring the effective operation of the superfund. This means ensuring that it is adequately funded, financially sustainable, well-resourced and well-governed, that compliance, investment and operational risks are well managed, and that member interests are protected.

DWP’s consultation proposes that these persons are:

  • the person(s) who establish the superfund
  • person(s) responsible for overall management and conduct of the superfund (for example, Chief Executive Officer)
  • person(s) responsible for overall management and conduct of the non-executive board of the superfund
  • person(s) responsible for the overall management of financial resources (for example, Chief Financial Officer)
  • person(s) responsible for the overall management of risk within the superfund (for example, Chief Risk Officer)
  • person(s) responsible for the investment decisions and their implementation for the fund or capital buffer (this will likely include the Chief Investment Officer, but we may also ask about those responsible for setting the investment strategy of the superfund pension assets and the capital buffer, those with overall responsibility for the performance of the investment strategy of the fund, and those responsible for the systems and processes and implementation of the investment strategy)
  • person(s) responsible for overall management of internal audit and compliance
  • person(s) who can appoint or remove trustees
  • person(s) who can alter trust deeds
  • trustees

We will expect you to identify these individuals and, as part of our supervision process, we will seek to understand their role in your superfund.

We are also interested in persons who could exert influence and/or impact member outcomes not covered above. These may include those connected to the superfund such as individuals within the superfund’s parent group or those providing a significant amount of external investment.

In order to supervise your superfund effectively, we will ask you for details of the above individuals regarding their employment and professional history, honesty, integrity, financial soundness, competence and conduct. To assess the honesty, integrity and experience of the people involved in running your superfund, we will need to request personal information including date of birth, current and previous addresses and basic level criminal conviction certificates. It is therefore likely we will seek the consent of these individuals as part of our initial engagement with you to collect and assess this information. Examples of the specific information we will ask for to establish whether individuals are fit and proper is set out in Appendix A. We provide this as an indication of the sort of information we are likely to ask for.

In addition to individual information, to help us understand any conflicts of interest that may be present, we may ask to see details of any incentives that may be in place (including for managers, key decision-makers, trustees or employers) and details of any performance-related fee structures linked to assets under management and how they have been set.


As set out in the DWP consultation, decisions made by the corporate and trustee boards will have a direct impact on member outcomes. We will therefore want to see that the corporate and trustee boards are well governed, with appropriate checks and balances in place, and that the collective breadth of knowledge and experience on the boards is appropriate to govern the proposed business model.

Trustees should act as fiduciaries, and trustee boards need to act in the best interests of members at all times. We expect trustees to identify potential conflicts of interest and to be able to provide us with a transparent plan as to how they will manage/mitigate the risks. Trustees should be particularly mindful of any potential conflicts of interest that may arise due to their own involvement in the early stages of development, establishment and promotion of the superfund, and the level of influence and any other roles their advisers may hold.

We expect superfunds to be able to provide us with information that demonstrates the collective competence and experience of their corporate and trustee boards in the context of a superfund’s business model (for example, using a skills matrix), including a plan to ensure that their collective knowledge and skills are maintained. This includes details of succession planning.

We would expect the relationship between the corporate body and the pension scheme to be documented to provide clarity around the roles and responsibilities of the corporate board and the trustee board. This should include whether the trustee board is constrained by any agreement with the corporate body, and any discretion they retain over acting in the best interests of members.

We expect superfunds to comply with the UK Governance Code, as well as to consider what is best practice in structure and governance in setting-up and running their corporate and trustee boards. This will include having an open and transparent appointment process, regularly reviewing the roles of the board members as well as the boards’ composition, and having a clear process for members’ views being represented.

Systems and processes

For a superfund to run effectively, it needs robust administrative systems and governance processes.

Before launching your superfund we will likely ask you to provide details of the following:

  • The standards, functionality and maintenance of the IT systems used in scheme administration and governance. We would also expect to see information about how able these systems are to support the business as it gains (and loses) scale over time.
  • The systems, processes and controls used in scheme administration.
  • The governance arrangements and processes used to ensure sufficient oversight of the superfund’s activities.

Third party providers – it is important to retain sufficient oversight of the tasks you delegate to others, but remain accountable for. Therefore, it is likely we will ask to see any service level agreements, along with your rationale for engaging these third party providers, and an explanation of how you will monitor delivery against these on an ongoing basis.

IT requirements – your IT systems should be capable of supporting your business model, including any expansion (planned or otherwise) of your business. We would expect the support to include data security, functionality, ongoing maintenance and disaster recovery, and for it to be capable of addressing any member record errors, as well as rectifying any financial impact on members where necessary. You should also have safeguards in place to prevent unauthorised access to your IT systems.

Member records – you should be able to demonstrate that you have processes in place to ensure member records are accurate at the point of transfer, and that they will remain accurate by way of regular review.

Security – you should have processes in place to protect personal data and sensitive information, and to manage data breaches.

Member complaints – your complaints procedure should be adequate, clearly communicated and accessible to members. Complaints should be resolved in a fair and timely manner, with members being informed of their rights. We would also expect complaints procedures to include reference to root-cause analysis of member complaints. It may be beneficial for you to consider how your internal dispute resolution procedure operates and whether it is relevant to any of your member feedback processes.

Risk management – this should include the processes corporate and trustee boards have in place to assess and control operational, financial and compliance risks. You should be able to demonstrate that each board reviews and updates their risk registers, supported by accurate and timely management information, as well as how each board plans to review the overall effectiveness of the framework on an ongoing basis.

Triggering funding levels – DWP’s consultation proposes a series of superfund triggering funding levels and associated responses. We expect you to set these triggering funding levels and to have appropriate systems and processes in place to monitor your funding levels and respond appropriately if your funding reaches (or is approaching) the levels you have set.

Financial sustainability

As DWP’s consultation sets out, the financial sustainability and capital adequacy of a superfund are arguably the most critical areas. The consultation proposes that, for authorisation, superfunds must be able to demonstrate the following:

  • The pension scheme is generally financially sustainable and has an adequate capital position. The pension scheme should have a high probability of success in paying benefits in full, and should have access to financial reserves to cover the costs arising from a triggering event.1 Access to these reserves should not be impacted by the insolvency of the commercial entity.
  • The capital buffer for the pension scheme is adequate enough to protect the scheme against adverse experience and to prevent the funding level of the scheme falling to a level that threatens the security of members’ benefits.
  • The commercial entity of the superfund has access to sufficient financial resources to cover set-up costs, running costs and capital expenditure. It should also have access to financial reserves sufficient to cover the costs arising from a triggering event . This would include a comprehensive business plan, with accounts from the superfund commercial board and the pension scheme within the superfund.
  • The superfund has a planned and documented exit strategy to protect member benefits in the event the superfund does not achieve scale.

As the framework is still under development and there may be a range of business models coming to market, we will develop our assessment of financial sustainability and capital adequacy on a scheme-specific basis. However, to ensure we can supervise your superfund effectively, we will need to understand the financial sustainability and capital adequacy of your superfund, including the pension scheme, capital buffer and the financial resources and reserves of your commercial entity.

We expect superfunds to follow the most prudent of the DWP proposals as this will offer the best protection of member benefits before an authorisation framework is legislated for. This will also help ensure your superfund is in a good position to achieve authorisation once the legislation passed. We acknowledge these proposals are still open in many areas and may evolve following the consultation and the development of the authorisation framework. The following sections cover the proposals in further detail.

Commercial entity

We will want to understand the level of financial resources the commercial entity of your superfund has access to. These should be sufficient to cover setting-up costs, running costs and any capital expenditure requirements.

You should also have access to sufficient financial reserves to keep the scheme running after a triggering event has occurred, and during the period the triggering event is being resolved (including where the superfund is wound up and members transferred out). The DWP consultation makes clear that, for authorisation, the expectation will be that financial reserves should be ring-fenced and trustees have the first call on any assets. It also sets out that a proportion of the financial reserves would be expected to be held in cash or near cash, to address any short-term liquidity issues in the event of failure.

To effectively supervise your superfund before an authorisation framework is put in place, we will need to understand the level of liquidity of your financial reserves and how accessible they are to the trustees in the event of failure. Due to the inherent risks in superfund models, we consider it inappropriate for a significant proportion of financial reserves to be met by offsetting future revenue.

To support our understanding of your superfund, we would expect you to have a business plan setting out the long-term objectives of your superfund and your business strategy, your key milestones, and the implications of them being met ahead of schedule, or not being met at all. We would also expect you to consider how any changes to the cost of running the superfund will be addressed as it matures, and set out your strategy for winding up.

As the DWP consultation highlights, your superfund should have the financial support necessary to discharge benefits without cost to the members, even if support from the commercial entity has been removed. We would expect this to be demonstrated through your costs, assets and liquidity plan (CALP). This will provide key financial information about your superfund and its financial sustainability, including running costs (for business as usual and in the event of wind-up), proposed capital buffer, financial reserves (both for winding up and covering the cost of compliance) and your continuity strategy for wind-up.

Pension scheme and capital buffer

To supervise your superfund effectively, we will need to understand certain details about the scheme and capital buffer, including access to and control of assets that make up the capital buffer. This will help us understand the level of security provided by the funding position of the scheme, the level of risk you are taking and the adequacy of the capital buffer. You will need to demonstrate how these are appropriate to your superfund, and what controls and mitigations you have in place.

Following the consultation, a minimum likelihood of success of paying member benefits against key funding measures at key times is likely to be prescribed in legislation. In the meantime, we will assess each scheme’s proposed transfer on a case-by-case basis. The government consultation sets out a number of options for this area and proposes this should be at least a 99% probability of paying or securing all members’ benefits in full and we would expect this level of protection. We will also be mindful of the additional options for increasing assurance suggested in the consultation, including the setting of common long-term objectives with minimum standards and an annual balance sheet approach.

Where a superfund is structured to hold assets outside the scheme, whose purpose is to protect the scheme in the absence of a traditional employer covenant, it is essential that those assets are held securely and available when needed (not least because the assets within the buffer fund will go towards the assessment of the financial sustainability of the proposal). We will, therefore, be looking for assurance and evidence that the following key principles are met:

  • Buffer fund assets cannot be released outside of defined circumstances (for example, in line with a defined profit extraction rule).
  • The risks within buffer fund investments cannot be increased after our initial assessment without us re-assessing your financial sustainability (that is, through the significant events framework).
  • Changes in buffer fund asset allocation cannot be made without consultation with scheme trustees.
  • Evidence of a legally enforceable mechanism for the assets of the buffer fund to transfer to the scheme if there is a trigger event.

In order to allow an assessment of the extent to which these principles are met, we would expect the trustees of the superfund to obtain (and share with us) advice that tests are met. For example, we might look for a legal opinion regarding limitations on asset release from the buffer / how assets would transfer to the scheme on the occurrence of a trigger event, or other appropriate professional opinion on the risk character/specificity of initial investment strategy.

These principles will also form the basis for recognition of buffer assets in the levy that the PPF charge. We intend to work with the PPF when assessing superfund proposals, so the engagement process between our two organisations is as streamlined as possible.

To inform our understanding of the funding and risks of your superfund, we will need to see the results of your own detailed modelling of outcomes for each scheme in the superfund (and separate sections of the scheme, if it is sectionalised). We will also need to see the results at an aggregate level. This modelling will need to show the initial level of security provided to the scheme, including the capital buffer, together with analysis of the development of the funding level(s) of the scheme, the key risks you are running and how they are being mitigated. We would expect you to review and update your modelling at regular intervals.

We will require projections that show the following:

  • Progress against the agreed objectives for the scheme.
  • How the funding position of the scheme is expected to develop over time and the risks associated with it.
  • How the capital buffer is expected to develop over time and the risks associated with it.
  • Your investment strategy for assets attributable to the scheme, how it is expected to develop over time and the risks associated with it.
  • Your investment strategy for assets attributable to the capital buffer and how this is expected to develop over time.
  • Cash flows to the scheme from the capital buffer and vice versa. The development of the capital buffer should be projected separately from the scheme, to provide transparency around its investment growth, the circumstances under which cash flows are triggered and the amounts.
  • The impact of any other depletions or increases of the buffer or the scheme assets (whether in cash, an asset transfer, or some other mechanism that impacts the value of or access to scheme or buffer assets for the scheme – for example, but not limited to, profit distributions, or buying out benefits or sections of the scheme).

For example, the agreed objective for the scheme (which will have formed the basis of the ceding trustees’ decision to transfer) might be on the basis of an objective to target 100% buy-out funding within five years. We would therefore expect modelling to take the form of stochastic projections showing confidence levels which demonstrate 99% likelihood of this being achieved for the scheme. We would also expect stress and scenario analysis to be included in the modelling work, which would be able to draw out specific risks that are not necessarily captured by stochastic modelling.

The assumptions underlying these projections should be transparent and justified. The following (non-exhaustive list of) points are likely to be of key importance:

  • Key assumptions underlying the funding basis, how these have been determined and their link to the assets underlying the investment strategy.
  • Expected returns for various asset classes (attributable to the scheme and in the capital buffer), distributions of those returns around their expected levels, their assumed development over time and their correlations/inter-dependencies.
  • Member longevity.
  • Uptake of member options (for example, transfer values, cash commutation, early retirement), the current terms for these and when they will be reviewed.
  • Assumed impact of any planned future liability reduction exercises (for example, pension increase exchange, partial transfers).
  • The future course of the PPF levy, other levies and expenses, recognising that they are likely to differ than if the scheme were to remain supported by the current employer.
  • Expense allowance, attribution between individual expense components and how those individual expense components are expected to develop over time.

The information we will require from you should evidence the above points and set out the conclusions drawn from them. We anticipate that, in the first instance, summary model output will be requested, along with clear, succinct and transparent explanations for and justifications of the model and all material assumptions made. However, we will wish to explore individual elements of the output in more granular detail.

We will likely ask you for details of the adequacy of your capital buffer, and also how the funds in the capital buffer will be available to the trustees when required and the circumstances in which the funds can be drawn. This is likely to be demonstrated through providing the relevant extract of your trust deed and rules, or through appropriate legal advice.

Trigger funding levels, including wind-up

The DWP consultation proposes a series of superfund triggering funding levels and associated actions. The associated actions are as follows:

  • Wind up the superfund.
  • Pay any remaining capital buffer into the superfund scheme and enable a transfer of the superfund business to another superfund or the wind-up of the superfund above PPF levels.
  • Do not write any new business.
  • Restrict profit being extracted.

We expect these funding triggers to be part of your scheme rules and legally enforceable, with appropriate tolerances to account for short-term volatility. In respect of the wind-up trigger, we expect that:

  • the trigger is at an appropriate level
  • the trigger will act automatically
  • the rules are suitably defined and permanent, and any ability to alter the trigger is constrained
  • there are adequate monitoring arrangements

Our engagement with you will likely be around understanding how you decided on your funding level triggers and how they function.

In particular, we expect you to have a clear policy for how and when the assets and liabilities in the scheme and the capital buffer are valued and independently verified, and what access the trustees have to the capital buffer in trigger scenarios.

A key focus around your planning for wind-up will be what you will do if you do not achieve scale or if your funding levels are not maintained. We expect your plans for wind-up to be the higher of the level required to prevent a claim on the PPF or to protect full member benefits.

Protecting full member benefits could be achieved through:

  • holding sufficient funding in an escrow to buy out all benefits
  • having a wind-up trigger in place to ensure a transfer to another superfund on the basis of full member benefits

In addition, we would expect the superfund to consider the PPF levy proposals in relation to superfunds and set a wind-up trigger that reflects the risk of the funding position falling below that required to buy out the PPF level of benefits (for example, 105% of the PPF S179 funding ratio).

The triggers for wind-up should be enacted within an acceptable period which does not expose the superfund to a delay, risking further deterioration. We would expect the superfund to have processes in place that allow triggers to be recognised early and for appropriate action to be taken to prevent them being reached where possible.

We will also want to understand what arrangements you have in place for taking profit from the capital buffer, the governance and restrictions around these arrangements and the effect of any profit taken on the security of member benefits. We expect the criteria in place for profit extraction not to affect the security of member’s benefits or expose members to risk, for example through a profit trigger that:

  • is set at an appropriately higher level than that required for ensuring a 99% probability of paying member benefits, eg exceeding the requirements we expect for ongoing supervision of the superfund
  • is only met when full member benefits are secured through a buy-out

Where profit extraction is planned before full member benefits are secured, it may be appropriate to limit it in the early years or retain any planned profits in a separate contingency reserve for a period of time to ensure that short-term market volatility does not inappropriately allow for profits to be released.


As our Code of practice no.3: Funding defined benefits sets out, your investment strategy should be consistent with your funding objectives. When managing your scheme assets and the capital buffer, you should set an investment strategy appropriate to your scheme and consistent with the objectives you have set out for the superfund.

To understand your approach to investment better, we will need to see details of your investment governance, systems and processes related to investment, and your investment strategy and modelling. For the scheme assets and the capital buffer, it is likely that we will ask for the following:

  • Your investment and risk management strategies for your scheme assets and your capital buffer (and how those are expected to develop over time).
  • A granular breakdown of the assets to be held within the scheme and the capital buffer.
  • Investment objectives, strategy guidelines and risk budgets and the associated governance processes for setting these.
  • Details of your risk monitoring, management and mitigation policies.
  • The scheme’s statement of investment principles (and any similar document covering the capital buffer) and associated governance processes for setting these. We would expect these to set out how the trustees will take account of environmental and social governance (ESG) and climate change in the portfolio.
  • Details of how the investment strategy for the scheme and capital buffer will be implemented (for example outsourced or in-house), how the asset management implementation might develop over time and the associated governance structures and controls.
  • Details of any investment strategy and investment implementation modelling used to inform your investment decision-making and the frequency at which that modelling is performed and updated.

To support our understanding of your approach to investments, it is also likely you will need to set out your investment return assumptions, how you expect them to develop over different time periods, and the rationale for these assumptions. We would also expect you to set out clearly your process for setting and reviewing assumptions, and the associated governance and risk management.

Comparative modelling

In order to supervise your superfund, we will need to understand the models you are using (before launch and when you are operating). We will therefore likely ask for a clear summary (and underlying details) of all the investment and risk models you use. This is likely to include the models used for:

  • funding
  • stress, scenario or stochastic modelling projections
  • valuing investment options
  • hedging decisions, valuation and monitoring (including collateral monitoring)
  • risk monitoring
  • asset valuations, in particular any models used in the valuation of illiquid or unlisted assets

All models should be accompanied by a full model specification and details of the modelling assumptions that will be used. This should include details of:

  • how the assumptions have been derived
  • how the assumptions are expected to vary over different time periods, including path dependency
  • the extent that yield reversion is allowed for (or not) in the model and the justification for that allowance, including copies of any advice received
  • the expense allowance used in the derivation of the individual assumptions and how that is expected to develop over time
  • the written advice that has been received on the model and modelling assumptions used

You should also clarify the extent to which your assumptions are dependent on scale, and how business scale-up (and down) will be allowed for in the model.

Investment governance and management

A key area of governance in superfunds will be the governance arrangements and processes used to ensure oversight of investments, along with the processes for assessing and controlling risk in this area. We will therefore likely ask for details of the validation (and re-validation) procedures, certification of the models used, how often they will be updated, and the controls and procedures around inputs and model modifications, along with any professional advice received in relation to the modelling.

We will also likely ask you to explain what investment controls and restrictions will apply, and to provide details of your systems and processes associated with the management of superfund investments. We would therefore ask that you provide full details, including:

  • the extent to which derivatives (type, scale, etc) will be used and the controls in place in relation to their use and any counterparty limits
  • the asset allocation framework, including market and asset/sub-asset class bandwidths, together with the advice on how those bandwidths have been set
  • any asset class, sub-class or individual asset permissions and restrictions, for example the degree of restriction on illiquid investments
  • your policy on hedging overseas exposures
  • how risks will be monitored across the scheme asset portfolio and across the capital buffer
  • how trustees will take account of ESG and climate change in the portfolio
  • the governance framework, dashboards and tools used by the trustees to monitor the investments
  • any common investment fund or investment unitisation structure, including all unit pricing, allocation, cancellation and liquidity provision policies

As we explain in relation to fitness and propriety, those involved in running superfunds will be of interest to us. Given the important role the investment and risk management teams will play for superfunds, we may ask for details of the structure of these teams, including roles and responsibilities, and the key decision-makers involved in investment, risk management and liability management arrangements.

We would suggest providing an organisational diagram with an accompanying narrative explanation and the terms of reference for these teams and committees, including details of any discretion they may have. We may also request details of any incentives structure for managers, key decision-makers, trustees or employers and details of performance-related fee structures relating to any assets under management and how they have been set.

Integrated risk management

We will expect you to prepare and maintain an appropriately detailed integrated risk management (IRM) framework for your scheme at an individual scheme level and an aggregate scheme level. We will expect this framework to address the full range of risks the scheme and superfund are exposed to and, in particular, to include consideration of the impacts of scale and the pace of change of scale.

Footnotes for this section

  • [1] By which we mean the funding level triggers and responses (superfund triggering events) proposed in the DWP’s consultation.

Appendix A: Example of the information required for us to establish whether individuals are fit and proper persons

This information is aligned with our fit and proper requirements for DC master trusts and is given as an indication.

Personal identification details

This will include the following:

  • Full name and details of any changes of name. 
  • Nationality.
  • National insurance number.
  • Residential addresses for the last five years including the dates resident.
  • Contact details including email address, telephone and mobile numbers.
Business interests
  • Details of any trusteeships, directorships or businesses owned in the last five years, including the applicable reference number, type of relationship, and associated dates.
  • Details of any other roles the individuals hold in connection with other schemes or relevant entities (for example, administrators).
Employment history

Employment history for the last five years, including the following:

  • The position(s) the individual holds/held and their responsibilities.
  • The nature of the employment.
  • Name and address of employer. 
  • Nature of business. 
  • Whether the employer was regulated by a regulatory body and, if so, who that regulatory body was.
  • Reason for leaving (if applicable).
Professional status

Details of any accreditation, approval or authorisation by any professional or regulatory body including the following:

  • The individual’s registration or membership number.
  • The date of admission.
  • Any certificates of good standing or equivalent written confirmation from the professional body/regulator.
Honesty, integrity and financial soundness
  • Details of the financial soundness of the individual; for example, whether any arrangements have ever been made with creditors or whether the individual has ever been made bankrupt.
  • Details of any county court judgments, individual voluntary arrangement or equivalent judgments in other jurisdictions, including the event type, description and date of the event, the sum and the current status (for example, settled/part outstanding etc).
  • Details of adverse judgments or settlements in civil proceedings by a court or tribunal (whether criminal, civil or administrative), particularly in connection with investment or other financial business, misconduct, fraud or the formation or management of a corporate body.
  • Details of any relevant disqualifications or prohibitions, and involvement with businesses that have gone into insolvency, liquidation or administration.
  • Details of an individual’s knowledge, skills and experience relevant to their role or function in respect of the superfund, including any professional qualifications and business experience.

Details of an individual’s past conduct, including whether they have been:

  • The subject of disciplinary action taken by TPR or any other regulatory authority, government agency or professional body.
  • The subject of any investigation which has led to (or might lead to) disciplinary action by TPR or any other regulatory authority, government agency or professional body.
  • Dismissed, resigned or forced to resign from any employment, or from a role involving fiduciary duty, due to negligence or misconduct, poor management or failure to resolve a conflict of interest.
  • The subject of any ongoing criminal investigations or proceedings. 

Appendix B: Significant events proposed by the DWP consultation

The following table is taken from the DWP consultation. Superfunds who want to operate before authorisation legislation is in place need to make sure they have systems and processes in place to report these events to us in a timely manner and that the changes mean your superfund continues to meet our expectations.



Applies to

A change to an area subject to the fit and proper persons requirement


  • The appointment of a person to an area assessed under the fit and proper persons requirement at the point of authorisation.
  • A change in the circumstances of a person subject to the fit and proper persons requirement.

Corporate entity/pension scheme

An investigation by another regulator or competent authority

Where an investigation is launched into any part of the superfund, or a person involved in the superfund, including by those outside the UK.

Corporate entity/pension scheme

A change in, or failure of, systems or processes

A change in systems or processes agreed at authorisation, including a change in third party providers, as well as a failure in systems and processes which results in a significant adverse impact on service delivery and/or members.

Corporate entity/pension scheme

A change to the business plan

Any changes that require a revision to the business plan.

Corporate entity

A change in the investment strategy

Any departures from the investment strategy, (outside of ranges agreed at authorisation).

Corporate entity/pension scheme

A deterioration in investment performance

A significant deterioration in investment performance over a set time period, eg [10]% over a quarter.

Corporate entity/pension scheme

A change to the statement of funding principles

Any changes to the approach used to derive assumptions for calculating liabilities.

Corporate entity/pension scheme

A deterioration in the funding level

A significant deterioration in the funding level over a set time period, eg [5]% over a quarter.

Pension scheme

The superfund is unable or unlikely to meet agreed levels of assets or liquidity

A deterioration in the cover provided by the financial reserves within the business.

Corporate entity

The superfund is unable or unlikely to meet its liabilities on demand

The superfund is unlikely or unable to meet its liabilities on demand as they fall due or its costs (either expected or unexpected).

Corporate entity/pension scheme