Clara Pensions to begin accepting transfers after TPR clearance

Although it does not yet operate an authorisation regime, TPR’s new online list tells interested parties that the regulator has assessed qualifying superfunds and found they have met its required standards across a range of criteria, including governance and adequate capital backing.

Clara is the first name to be added to the list, leading some experts to herald a “landmark day”.

Nicola Parish, TPR’s executive director of frontline regulation, said: “We welcome the first addition to our online list of DB superfunds. The list shows where superfunds have met our expectations and is a vital tool for trustees and employers who may be considering transferring to such a scheme.

Adding Clara Pensions to its website signals to the pensions world that TPR is now willing to accept clearance applications for individual transfers, and is a massive confidence boost to an industry which has been waiting a long time for further developments after the superfund guidance was issued in the middle of 2020

Iain Pearce, Hymans Robertson

“We are determined to protect savers, and so potential customers of a superfund on our list can have the confidence that the scheme has been through a rigorous assessment process to show they are fit for purpose.

“It is vital, however, that trustees and employers still carry out their own thorough due diligence to ensure they are confident a superfund is the right option for their particular scheme and members, and only consider a superfund which is on our list. We expect employers considering a superfund to come to us for clearance,” she added.

TPR has been operating an interim regime for superfunds since June 2020, and published guidance in October of that year for employers considering a transfer to a superfund. Under the interim regime, superfunds may approach TPR for assessment and, should they pass, they will be added to the online list. 

Adam Saron, chief executive of Clara-Pensions, said: “This has been a remarkable team effort. Clara was founded more than four years ago on the belief that consolidation could make pensions safer and support UK businesses.

“Today’s confirmation that Clara has completed TPR’s assessment process marks an incredibly important step forward in our journey to provide safer pensions. Clara’s member-first model is ready for transactions.”

He continued: “We now turn our attention to our first transactions and our first pension scheme members. We’d encourage trustees, employers and advisers considering consolidation to get in touch to discuss their options, as we plan our transactions for the coming year.”

‘A landmark day’

Iain Pearce, senior risk transfer consultant at Hymans Robertson, hailed a “landmark day in the history of DB pensions” as Clara’s successful assessment “opens up a new endgame option for schemes”.

“This will provide more options to protect members’ benefits, especially for those schemes where there are significant doubts about their ability to be able to insure benefits in full at some point,” he said. 

“Adding Clara Pensions to its website signals to the pensions world that TPR is now willing to accept clearance applications for individual transfers, and is a massive confidence boost to an industry which has been waiting a long time for further developments after the superfund guidance was issued in the middle of 2020.

“While TPR still expects ceding trustees to perform their own extensive due diligence, the guidance for trustees and sponsors acknowledges that comfort can be taken from TPR’s own assessment,” Pearce added.

Gordon Watchorn, LCP’s head of corporate consulting, said the announcement signified a “red letter day” for pension schemes and their sponsors.

“After years of discussion and understandable caution from regulators, we should now see superfunds up and running and doing transactions in the coming months,” he said.

“Where a scheme is unlikely to reach buyout funding levels in the near future, moving to a superfund offers a potential win-win for members and employers. The member benefits from being part of a larger scheme with a potentially increased chance of pensions being paid in full, while the employer gets the opportunity to settle their pension bills once and for all.

“There will clearly need to be careful ongoing regulation of superfunds to make sure they live up to their potential, but today’s announcement by TPR marks a major step forward in the world of pensions,” he added.

First transactions imminent

Pearce suggested that the most likely candidates to be the first to transfer to a superfund “are already very well progressed and have been engaging with TPR for some time”. 

“Therefore, we’d expect those first applications to be submitted very quickly, and we may see the first transfers finalised in 2022,” he said. 

“However, the requirement to get TPR clearance for every case means that TPR’s initial assessment is not the final hurdle. We expect TPR to closely scrutinise all cases, paying particularly close attention to the first movers. Indeed, TPR notes that a number of key factors of their assessment, such as capital adequacy, will not be considered in detail until clearance applications are made.”

John Baines, partner and head of commercial consolidation at Aon, concurred, arguing that the approval comes “at the right time for trustees who are concerned about sponsor covenant, or for sponsors who need a cheaper solution to the ‘pensions problem’ than buyout,” especially following the impact of Covid-19.

“In fact, many schemes have been waiting for a positive signal from TPR and will accelerate their work to complete any remaining steps needed for them to enter the superfund,” he said.

“More widely, trustees and sponsors should consider using this market development to revisit their long-term strategy and assess whether superfunds are a viable endgame option for their scheme.”