Roughly £500bn of defined benefit liabilities could benefit from consolidation over the next five years, Alan Rubenstein has said.

Speaking at the Barnett Waddingham Annual Pension Conference yesterday, 1 May 2018, Superfund chief executive Rubenstein said that they estimate around £250bn of DB liabilities could benefit in the current market, doubling to £500bn over the next five years.

The former Pension Protection Fund chief executive, who announced the new £500m seeded Superfund in March, said it will be schemes in the middle of the funding spectrum who he expects will be able to capitalise.

He said: “At one end of the spectrum there are some strong schemes for which buyout is a real possibility, but which may just be out of reach, they won’t be interested. At the opposite end there are weaker stressed schemes who would dearly love to shed their DB liabilities, but in the current environment cannot do and until the law changes these are destined for a slow slide into the PPF.

“Even allowing for restrictions on size funding level and covenant break, we estimate that today around an eighth, roughly £250bn of DB liabilities could benefit from consolidation.

Even more interestingly our analysis suggests that could double to £500bn over the next five years.”

Discussing regulation around the consolidation of schemes, Rubestein said: “We would expect the consultation to look very much like the master trust regime and feature fit and proper tests, not just for trustees but for any others with significant influence over consolidating a pension.”

Furthermore, a committee of trustees and investors would hold a veto over who could transfer into the new pensions superfund, to safeguard it against unnecessary risks.

Giving evidence in front of the Work and Pensions Committee today, as part of the Committee’s inquiry into the government’s DB white paper, Rubenstein said that he believes the overall size of the DB market to be about £2trn, with around 10 or 15 percent of that being able to benefit from consolidation, “no more”.

He added that within five years the fund had an ambition to build up to £20bn, roughly 1 per cent of the DB universe, and a third of schemes such as the Universities Superannuation Scheme.

Rubenstein added that they hope to have transferred the new schemes by the end of this year.

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