On the go: Employers that transfer their defined benefit pension schemes into consolidator vehicles such as Clara-Pensions and The Pension SuperFund could make savings of up to 10 per cent, according to new Hymans Robertson research.
At the end of last year, Clara became the first commercial consolidator to officially enter the market when it gained clearance from the Pensions Regulator. Hymans Robertson is the scheme actuary and administrator of the Clara Pension Trust.
The Pension SuperFund, meanwhile, is still waiting for clearance from the regulator to begin operating. Earlier this week, it reshuffled its executive structure, appointing former Shell global head of pensions Michael Clark as its new chief executive.
The superfund concept sees scheme assets and liabilities transferred into a new DB scheme, which is backed by more capital from the ceding employer and external investors.
Moving a scheme into a superfund gives a clean break for employers at a lower cost than insurance buyout, according to Hymans Robertson.
This can help secure savings of as much as 10 per cent, helping reduce the corporate cash injection required when carrying out the transfer. If the scheme is 70 per cent funded on a buyout basis, the value of the necessary top-up cash would drop by a third, the consultancy said.
It added that there has been a surge of interest among trustees in superfunds, with an almost 50 per cent increase in transfers to consolidators being considered.
“When deciding whether to transfer, trustees need to be confident that members would be more likely to receive their benefits and understand the implications of severing the link to the sponsor as part of the ‘gateway tests’,” Iain Pearce, Hymans Robertson’s head of alternative risk, said.
“To support these decisions, there is a need to quickly and efficiently build understanding of how alternative risk transfer solutions can help protect members’ benefits.”
