Industry experts have said that the news of the UK's first superfund transaction could act as a catalyst for "transformative change" in the pensions industry, with LCP estimating that there could be £5bn or more of further superfund transactions in the next few years.

Clara announced today (6 November) that it agreed its first superfund transaction, around two years after becoming the first superfund to successfully complete The Pension Regulator’s assessment process.

The news has been welcomed by a number of industry organisations, with LCP highlighting the deal as demonstration that the superfund model can enhance the support provided to members’ benefits, suggesting that others may soon follow suit.

LCP senior consultant, Dev Gandhi, said: "This transaction not only marks a significant milestone for Clara, but has the potential to be the catalyst for transformative change in the pensions industry.

"We estimate that there could be £5bn or more of further superfund transaction in the next few years and expect to see new providers and similar solutions entering the market, driving yet more innovation and competition in this space.”

Adding to this, LCP partner and head of endgame innovation, Jonathan Griffith, said: “We are delighted to see the first deal done. The superfund transaction reflects a reinvigorated commitment to delivering improved outcomes.

"Clara represents one of a growing number of new endgame options for pension schemes to embrace as a way to secure benefits for pension scheme members whilst also offering enhanced value for other stakeholders.”

This was echoed by Aon partner, Andrew Grime, who suggested that the deal will be "extremely welcome news to schemes which have been exploring superfunds as a potential destination".

"The journey to this first transaction was long and challenging with many regulatory, financial and practical hurdles to overcome," he continued.

"Clara will hope that the certainty this transaction brings can help pave the way for other suitable schemes to follow."

The new was also highlighted as a "historic milestone" by Hymans Robertson head of alternative risk transfer, Iain Pearce, who agreed that other schemes that follow can also gain from external loss absorbing capital in new ways.

However, Pearce admitted that, as with any new structure or solution, it will be necessary for additional due diligence and steps as the parties involved build their knowledge and understanding of these offerings.

"This will help them decide whether or not a transaction is right for their own members. As Clara seeks to write more business, we would expect that understanding within the industry will grow," he continued.

"This will mean that the implementation process is increasingly better understood and could help to develop a degree of standardisation, as we see with bulk annuity transactions.

"Future superfund legislation can help provide more clarity and execution certainty, and may become more pressing as more transactions are announced.”

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