The pensions industry has expressed its confidence that defined benefit (DB) superfunds are a viable de-risking option for schemes, and expects more deals to follow the first transaction completed last week between Clara Pensions and Sears Retail Pension Scheme.

A poll of pension scheme trustees by WTW found that 90 per cent agreed that a superfund transfer could be a viable solution for schemes in the right circumstances.

Nearly two-thirds (62 per cent) cited strengthened covenant and better member outcomes as the main benefits of a superfund transfer, while 20 per cent felt that increased choice of de-risking solutions was the main benefit.

Furthermore, all responding trustees polled believed that, now the first transfer had taken place, it was either very likely (85 per cent) or quite likely (15 per cent) that more schemes would complete superfund transfers.

WTW was the lead adviser on Sears Retail Pension Scheme’s superfund transfer to Clara Pensions, as well as scheme actuary, pensions covenant adviser and member communications consultant.

“The most important part of the Sears transaction with Clara Pensions was the way it was structured to improve security and enhance protection for members,” commented WTW pension risk transfer team senior director and lead adviser to the Sears Retail Pension Scheme Trustees in its superfund transfer, Suzanne Vaughan.

“This guiding principle provides a benchmark for all subsequent superfund transfers to follow.

“We know that interest in superfund transfers has grown significantly since the first transaction completed last week. Trustees can now evaluate a new viable option as a means of achieving their long-term scheme objectives. But, of course, pursuing a superfund transfer is not suitable for all schemes.

“Currently it is best suited to those schemes that have a weaker sponsor covenant and fall short of the funding levels required to achieve an insurance-led buyout at this stage.

“Under Clara’s business model, the longer-term objective for schemes that do transfer is to achieve an insurance buyout within the medium term. Through a transfer to Clara they can achieve strong protection for members’ benefits to support them on this journey.

“Preparing for a superfund transfer shares many similarities with preparations for an insurance-led bulk transfer.

“Having transaction-ready scheme data is important to avoid unnecessary delays and access to live insurer pricing is important in order to maintain alignment with market value.

“Additionally, early engagement with The Pensions Regulator in order to develop an open and collaborative approach is vital in order to achieve a smooth clearance process.”

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