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TPR publishes new guidance for trustees and employers considering a DB superfund

Ref: PN20-28

Issued: Wednesday 21 October 2020

Trustees need to ensure they are confident a superfund is the right option for them and in their members' interests

New guidance for trustees and sponsoring employers of defined benefit (DB) pension schemes considering transferring to a DB superfund has been published today by The Pensions Regulator (TPR).

In June, ahead of proposed government legislation, TPR launched its interim regime for superfunds and other new models to set a high bar for the standards it expects. The regime is designed to help give savers confidence in superfunds should their pension be transferred into one in the future.

Well-run superfunds have the potential to offer good outcomes for pension savers and employers, but they will not be the solution for all schemes. Trustees and employers must carefully consider their options and TPR’s new guidance will help them understand and meet the regulator’s expectations in considering a transfer.

Nicola Parish, TPR’s Executive Director of Frontline Regulation, said: “Following the launch of our interim regime for superfunds in June, we are now providing further details about our expectations of employers and trustees who may be considering the significant step of transferring to a superfund.

“We know that some employers and trustees are keen to explore whether a superfund could provide another option for their DB scheme and for employers allow them to focus on future sustainability. However, while we await government legislation, we are determined to protect savers who may be moved into a superfund by rigorously assessing providers and then supervising them closely.

“Trustees need to ensure they are confident a superfund is the right option for their members, the transaction meets the gateway principles and only consider using a superfund named on the TPR website.”

TPR continues to assess existing superfunds against the expectations set out in its interim regime, including that they are well-governed, run by fit and proper people and are backed by adequate capital. It will only add a superfund to its planned online list of providers once the provider has clearly demonstrated, through robust evidence, that they meet the expectations.

Notes for editors

  • TPR has today published a blog by Nicola Parish, its Executive Director of Frontline Regulation, looking at the potential of superfunds and how TPR has set a high bar to help savers have confidence them.
  • Superfunds (and other models) will involve the replacement of a DB scheme’s sponsoring employer with a capital-backed vehicle or a Special Purpose Vehicle (SPV).
  • The vehicles seeking to consolidate existing DB schemes, and create a large retirement savings fund, are likely to be capital-backed. In applying the framework to SPVs, TPR is also being clear about how the regime will apply to new models, including those posing risks where they seek to continue with a pension scheme even when its employer has entered insolvency.
  • Superfunds are vehicles for the transfer of members of DB schemes. Participating employers are no longer liable for member benefits following the transfer when one of these conditions applies:
    • the employer is replaced by an employer who is a SPV, preserving the scheme’s PPF eligibility; or
    • the liability of the employer to fund the scheme’s liabilities is replaced by an employer backed with a capital injection to a capital buffer (generally created by from investor capital and contribution from the original employers)
  • Employer severance is still a ‘Type A event’ under TPR’s clearance guidance and nothing in this guidance affects TPR’s ability to use its anti-avoidance powers.
  • The Pensions Regulator is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

Press contacts

Matt Adams

Senior Media and Parliamentary Manager
01273 662086

David Morley

Media Officer (DB)
01273 662091

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