The Pensions Regulator’s (TPR) updated defined benefit (DB) superfund guidance “opens the door” for more superfund activity to take place, LCP partner and head of corporate consulting, Gordon Watchorn, has argued.

Responding to the regulator’s announcement on the guidance, Watchorn stated that a combination of relaxed entry requirements in the guidance and more competitive pricing would lead to increased activity in the market.

“Pension schemes can now start to forge ahead knowing they have the information needed to make informed decisions about the options for their scheme and with the comfort that the regulator is doing all it can to allow the market to develop and thrive,” he noted.

Watchorn added that scheme sponsors will need to revisit their pension strategy to ensure that the next phase of the journey was optimal based on all the options available.

“Sponsors and trustees should now have comfort in the viability of these consolidator options and existing consolidators in the market may see interest turn into completed transactions,” he continued.

“The guidance could also pave the way for a number of new providers to make their entrance into the market, which would be great for schemes considering this option.”

Watchorn’s colleague, LCP senior consultant, Dev Gandhi, added that the increased endgame choices for pension schemes meant it was “imperative” for them to get the right advice to help navigate what could soon be a “burgeoning market”.

Also commenting on the updated guidelines, Clara-Pensions CEO, Simon True, said that the changes had aligned the interim regime with the Department for Work and Pensions’ (DWP) plans for superfunds legislation and provided important clarity to DB scheme sponsors and trustees.

“The changes will also help ensure consolidation is always available as a practical, strong option for DB pension schemes that are unable to afford buyout in the near future,” True continued.

“We are particularly pleased to see a recalibration of the risk discount rate, with alignment to market conditions, and the enhanced clarity on the clearance process.

“Along with the government’s recent response to its consultation on DB consolidation, we anticipate that this update will continue to build confidence in commercial consolidation and Clara’s model in particular.

“We are in active discussions with more than 10 schemes, with combined assets of over £4bn, and we remain confident of progressing with our first transactions soon.”

Broadstone head of policy, David Brooks, stated that TPR had made a “potentially significant” easement to the gateway criteria as part of its review of the superfund regime.

“Full buyout with an insurer remains the gold-standard, but TPR will allow schemes that could otherwise afford buyout to consider moving to a commercial consolidator, and where the buyout market does not have either sufficient capacity or commercial interest at this time,” he noted

“This could be a strongly positive development to those schemes that are perhaps too small or commercially unattractive to insurers in this current buyer’s market but for whom they are ready to transfer risk away from their sponsor.”

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