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DB superfunds to be supervised by TPR ahead of authorisation

Ref: PN18-64

Issued: Friday 7 December 2018

Defined benefit (DB) superfunds seeking to enter the market need to talk to The Pensions Regulator (TPR) about their plans before opening for business, according to new guidance being published today.

To ensure pension savers are protected, TPR has set out its expectations of DB superfunds which intend to operate before any authorisation regime is put in place and whilst the authorisation framework planned by government is under consultation.

In light of the range and potential scale of emerging business models, the guidance makes clear that TPR will scrutinise all DB superfunds that enter the market to ensure any risks are identified, assessed and mitigated.

David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at TPR, said: “We believe DB superfunds are potentially a force for good and can provide a secure and safe place for pension saving and help drive up standards.

"However, as these schemes come to market, we need to give savers confidence now that these schemes are well-governed, run by fit and proper people and are backed by adequate capital.

"That’s why we have issued guidance making it clear we will supervise superfunds. They will need to seek our authorisation in due course once legislation has come into effect.

"By coming to us now, superfunds can show us how they plan to meet the standards we and government expect, and prevent possible regulatory action further down the line."

The Department for Work and Pensions consultation on consolidation of defined benefit pension schemes proposes a range of areas in which TPR will have to be satisfied. TPR’s guidance reflects the consultation proposals.

So TPR can scrutinise superfunds ahead of legislation they will need to be satisfied the superfund:

  • has a viable business model
  • is financially sustainable
  • is well governed
  • has a high probability of being able to pay members’ benefits as they fall due

TPR has also published guidance for trustees considering transferring to a superfund which makes clear the decision must be in the best interests of members. That means it should further the purpose of paying the accrued scheme benefits. TPR also expect employers to seek clearance in respect of any proposed transfer to a superfund, even if they consider any detriment is mitigated.

David Fairs added: "We’ve seen how effective the supervision and authorisation framework has been for driving up standards in defined contribution master trusts, and we fully expect the same protections to exist for DB superfunds from an early stage in this developing market. We will continue to work with government to build legislation."

Editor's notes

  1. Superfunds are DB pension schemes established to accept bulk transfers of assets and liabilities from other DB schemes. Instead of ongoing employer covenant, member security comes from a capital buffer provided by the former sponsor and investors who expect to profit from the arrangement.
  2. TPR contact details for superfunds and trustees are as follows. Phone: 0345 600 0707. Email: Address: Customer Support, The Pensions Regulator, Napier House, Trafalgar Place, Brighton, BN1 4DW.
  3. 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

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