On the go: The Department for Work and Pensions intends to set out its “vision” for the future regulation of superfunds in autumn/winter this year, according to its annual report published on Thursday.
Superfunds and commercial consolidators have been operating under an interim regulatory regime since June 2020, when the Pensions Regulator published guidance ahead of further legislation by the government.
It added to this guidance in October with a series of “gateway principles” for defined benefit schemes considering consolidation, which were designed to help the market develop in the absence of legislation.
Despite rumours that The Pension SuperFund was about to step in to rescue members of the Arcadia schemes when the retail chain collapsed in December, there has as yet been no confirmation that any commercial consolidator has gained TPR’s clearance to enter the market.
Superfunds were absent from the Pension Schemes Act, and the industry has been awaiting further legislation in this area for some time.
In May, TPR listed superfunds in the first year’s agenda of its three-year plan, saying its first-year priorities in this area will be to “continue to assess superfunds wishing to enter the market against our guidance to manage risks and seek to ensure savers are protected in the period before specific legislation is in place”.
“We will also continue to work with the government (and the DB consolidation cross-government group) throughout the year to keep our interim regime under review. We’ll use our experience to support the DWP in continuing to develop the legislative framework for superfunds, which we anticipate being introduced from 2022-23,” it said.
The DWP has confirmed it intends to set out its “vision” for the future regulation of superfunds later this year.
“The government remains committed to supporting a number of measures to facilitate the consolidation of DB pension schemes. The impacts of Covid-19 on employer solvency have reinforced calls for secure forms of consolidation,” the DWP’s annual report stated.
“The combination of economies of scale and better governance [consolidators may bring] could provide more security for members of some DB pension schemes, while reducing the risks posed to the Pension Protection Fund.”
It added that consolidation “will incentivise employers to significantly improve scheme funding, increasing the likelihood of members receiving their benefits in full”.
“DWP [has] been working closely with representatives from the pensions and insurance industries, with other government departments and regulators, to design a robust authorisation and supervision regime for superfunds. We aim to set out our vision for the future regulation of superfunds in autumn/winter 2021,” the DWP stated.
It is continuing to develop the future regulatory regime and will look to legislate “as soon as parliamentary time allows”, it said.
