UK workplace pension provider TPT has revealed plans to launch a defined benefit superfund designed to support run-on.
Superfunds are designed to take on the obligation of meeting the liabilities of corporate DB pension schemes from their original sponsors. They are particularly suitable for schemes that don’t have large surplus funding positions and cannot afford alternatives such as a full buy out with an insurer.
Both the pensions regulator and the Department for Work and Pensions have expressed their support for superfunds, which offer schemes an alternative endgame solution.
Currently, there is only one superfund that has been approved by the UK regulator, and it targets buy out as its end goal.
TPT’s superfund proposition, designed to run-on, will broaden the range of endgame solutions available to employers and trustees. TPT has secured capital to fund the first £1bn of transactions which it anticipates will be sufficient to support a number of deals subject to scale, regulatory approval and market conditions.
By pooling schemes together, spreading the risk and putting experienced fiduciary managers at the helm, pension superfunds allow sponsors to step away from the ongoing costs and administrative burden involved with running individual schemes.
Superfunds are required to hold additional capital over and above the scheme’s assets, to provide a buffer that trustees would not have access to in a standalone scheme.
Once a scheme transfers to a superfund, responsibility for the scheme no longer sits with the ceding trustee and reliance on the employer covenant falls away. The intent is to ensure an increased likelihood that members receive full benefits. TPT’s superfund will be established with an independent Trustee Board and full-time executive team.
The planned superfund follows the May announcement of its intention to develop a multi-employer CDC proposition, and the recent launch of its DC income-for-life proposition. Pending regulatory authorisations, TPT will have six different consolidation vehicles, making it a clear industry leader and standout pioneer of pension solution development.
Nicholas Clapp, Chief Commercial Officer at TPT Retirement Solutions, said: “We’re very excited to announce our plans to launch a superfund that targets run on rather than a bridge to buy out. There is real opportunity here, and our intention to launch a superfund forms part of a broader ambition to offer a full suite of consolidation options to schemes to suit their bespoke needs.”
