This guidance will help employers understand the factors they should consider when considering transferring their defined benefit (DB) scheme to a superfund.
Important
Superfunds guidance updated
We have updated our superfunds regulatory guidance.
We will update this employer guide in due course to provide more details on what schemes and employers need to consider when transferring assets and member liabilities to a superfund.
Background
The Department for Work and Pensions (DWP) is currently consulting on an authorisation framework intended to safeguard the benefits of members being transferred to superfunds. An authorisation regime will require superfunds to be authorised by us, in order to operate. You can read more about the DWP consultation.
Superfunds are DB pension schemes set up to accept bulk transfers of assets and liabilities from other DB schemes. Transfers to superfunds will usually involve an injection of capital by the employer (as well as the superfund’s investors) into a separate vehicle. This is available to meet the scheme liabilities after the employer ceases to have responsibility for the scheme. This transfer will have implications for the scheme covenant and security of members’ benefits due to the exchange of the employer covenant for increased funding with a finite capital underpin.
What you should do
If you and/or the trustees of your pension scheme are considering transferring to a superfund, we expect you to ensure your trustees have all they need – including the necessary resources and information – to consider a transfer. We expect you to pay for any professional advice the trustees need as part of their consideration of any proposed transfer.
Transferring to a superfund removes the employer covenant, and therefore we believe this is potentially a ‘materially detrimental’ event (a ‘type-A event’ for the purposes of our clearance guidance). We expect that a transfer will only proceed where any top-up payment or other mitigation agreed as part of the transfer into the superfund will mitigate this detriment fully.
We also expect the employer to apply for clearance.
Clearance is the voluntary process of seeking a clearance statement from us. A clearance statement can give assurance that, based on the information provided, we would not consider it reasonable to use our anti-avoidance powers to issue a contribution notice or financial support direction against the applicants in relation to the transfer.
As part of the clearance process, we will assess whether any detriment to the scheme has been adequately mitigated and ensure the scheme could not achieve a better outcome through other means. We expect trustees to have considered all possible sources of value for the scheme.