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Pensions: Interim Guidance for Superfunds

Volume 677: debated on Thursday 18 June 2020

The pensions regulator has today published an interim regulatory regime for defined benefit pension “superfunds”.

A superfund is a privately funded “for profit” consolidation vehicle, which takes over responsibility for defined benefit pension schemes liabilities from the sponsoring employer. To enter a superfund, sponsoring employers are required to pay a significant, upfront sum to improve the funding level of their scheme, in exchange for discharging their pensions liabilities.

This is an interim regime. The Government will continue to develop the permanent regime before legislating, with full and proper parliamentary scrutiny in the usual way.

Operation of the interim regime will be kept under review by the Government to ensure that it is properly protecting and advancing the interests of pension scheme members and the pension protection fund.

The Government will continue to develop a permanent regime for superfunds. This is an innovative area and market participants should not assume that the permanent regime will automatically replicate the interim regime. Alongside responses to the defined benefit pension scheme consolidation consultation, the Government will be informed by experience gained during the interim regime when considering the features of the permanent regime, including those relating to capital adequacy. The permanent regime may include an alternative set of requirements, including more prudent requirements, compared to the interim regime, but we cannot pre-empt the parliamentary process.

The permanent regime will be designed to protect pension scheme members and the pension protection fund, including by ensuring that superfunds have the necessary flexibility to continue contributing to a strong pensions ecosystem in which sponsoring companies and scheme trustees have a range of options open to them.

The Government believe that superfunds have the potential to improve the likelihood of members getting their benefits in full whilst providing employers with a new, affordable option to manage their legacy pension liabilities. However, if at any point it appears that changes to the interim regime are required in order to protect and advance the interests of scheme members, the Government and the pensions regulator will take prompt, robust action.

Today’s publication will mean that the pensions regulator will have a much firmer basis to take action against a superfund should they deem it a necessary and proportionate step.

The guidance can be accessed at the following address: