The Pensions Regulator (TPR) has said that new defined benefit (DB) pension models must offer both clear benefits and proper protections, raising particular concerns over a possible new offering to pay DB pensions to defined contribution (DC) savers.

In a blog post, TPR interim director of supervision, market oversight, David Walmsley, said that TPR is seeing an increasing amount of innovation in the evolving pensions landscape, highlighting scheme consolidation as a specific "hot spot" of innovation.

"We believe that the benefits of economies of scale, strong governance and access to investment expertise in larger, better-resourced schemes will help to drive stronger outcomes for savers," he continued.

"And, reflective of the improved funding positions many DB schemes find themselves in, new models and propositions are making their way into the market in response to increased demand for consolidation options."

In particular, Walmsley said that TPR was "pleased" to see Clara Pensions agree its first two transactions, and wants to see an "emerging competitive superfunds market that offers enhanced security for savers".

"Ultimately, these are commercial vehicles," he added, confirming that TPR will shortly be publishing its approach to the profit release mechanism in superfunds to provide the right balance between commercial incentives and saver protection.

In addition to this, he confirmed that TPR is continuing to develop its regulatory approach to DB alternative arrangements, including capital backed journey plans (CBJPs), which are being proposed as an option in scheme rescue scenarios, as previously confirmed last year.

"We are looking at this area with our focus being on savers receiving their full benefits," he continued.

"We also plan to publish new DB alternative arrangements guidance later this year to help trustees (and employers) navigate alternative arrangements, including CBJPs."

However, Walmsley argued that while innovation is "fundamental" to delivering better outcomes for savers, member protections are also key.

"We are keen to support new market propositions where they provide both a clear benefit to savers, and also have the right protections around them," he continued. "One cannot come without the other. That is why sometimes we have to sound a note of caution."

In particular, Walmsley said that one potential innovation proposition, a possible new offering to pay DB pensions to DC savers who transfer into it, needs "very careful thought".

He stated: "We can see the potential in supporting the development of a new option for DC savers at retirement.

"Savers need new products to sit within appropriate regulatory and supervisory frameworks, and our priority is to make sure protection is balanced with innovation in saver interests.

"We, other regulators and government are continuing to consider whether a solution like this one could be supported, and we would not expect the market to develop further until this question has been resolved."

The comments follow the news that the co-founders of The Pension SuperFund (PSF), Edi Truell and Luke Webster, have launched a new scheme, Pension SuperHaven, which will accept transfers in from individuals’ pension pots and intends to provide members with a pension for life while sharing the investment performance of the scheme.

Announcing the launch, Pension SuperHaven said that it was already in discussions with “multiple companies and funds of significant size”.

However, also commenting at the time of the launch, a spokesperson for TPR said that it "had not assessed or provided regulatory approval for the new Pension SuperHaven model", and would need to be "assured by any new market entrants that savers are protected".

Commenting in response to the regulator's latest comments, Truell said: "We welcome TPR’s continued engagement in trying to support much needed innovation.

"We have been working carefully with both them and the Financial Conduct Authority (FCA) over the past two years to ensure that members and their trustees have access to all the necessary pathways, so that they can make a fully informed market choice."

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