The trustee of the Church Mission Society (CMS) Pension Scheme has completed a deal with Clara Pensions, marking the first superfund transaction using Clara's 'connected covenant' structure, as well as the first deal involving a not-for-profit sponsor.

Under the agreement, 730 members of the scheme and £55m in assets will transfer to Clara’s management.

Scheme members will continue to receive their full pension entitlements, however, with the transaction backed by significant financial contributions from both CMS and Clara.

Hymans Robertson was lead adviser to CMS, who also received legal advice from Gunnercooke, while Barnett Waddingham acted as the lead adviser for the trustee of the scheme, with legal advice provided to the trustee by Burges Salmon.

The Clara Trustee was also supported by Hymans Robertson, alongside fiduciary managers Van Lanschot Kempen, and legal firm Eversheds Sutherland.

Clara, which continues to be backed by global investment firm Sixth Street, was advised by legal firm Cameron McKenna Nabarro Olswang and was supported in its due-diligence by Heywood Pensions Technologies.

Highlighted as the start of the scheme's journey to buyout, the transaction is the first to make use of Clara’s connected covenant feature, which is expected to strengthen member security through both Clara’s capital and a continuing guarantee from the original sponsor.

The new covenant structure, developed specifically for this transaction, allows a continuing contingent guarantee from the original sponsor – in this case, CMS – alongside Clara’s capital commitment.

This is intended to provide an additional layer of long-term security for members, strengthening the financial safeguards in place as the scheme progresses towards an insured buyout.

The deal is also the first superfund transaction involving a not-for-profit sponsor, which has been highlighted as an important step for charities seeking to secure members’ pensions while refocusing on their charitable purpose.

Indeed, Clara Pensions chief transactions officer, Matt Wilmington, argued that this is a "landmark" deal for the not-for-profit sector.

"We’re proud to support the Church Mission Society in securing the long-term future of its members’ pensions, while enabling the organisation to refocus on its core charitable purpose," he stated.

"This transfer is not only the first involving a charity, but also the first to use a connected covenant structure – an important new layer of protection for members.

"With a strong and growing pipeline that includes several other charitable schemes, we are proving that Clara is accessible to all types of sponsors, regardless of sector.”

Adding to this, CMS Pension Scheme trustee chair and Capital Cranfield professional trustee, Richard Hubbard, said: “This is really good news for our members.

"As trustees we are focused on our duty to ensure pensions are paid, and this transaction means our members’ pensions are more secure.

"The new arrangement benefits from significant financial commitments from both CMS and Clara, in addition to the ‘connected covenant’ which means our members retain the long-term protection of our existing security package.

"With the Clara Trustee taking over our responsibilities in a seamless manner, we are confident our members are in good hands. I have been impressed with how all the parties worked together, and would like to pass on my thanks to all the advisors for their collegiate behaviours.”

CMS chief executive officer, Alastair Bateman, added: “Church Mission Society is deeply committed to the wellbeing of our employees past, present and future and so I, and the rest of the senior leadership team, are pleased to be able to take this important step towards ensuring the security of our mission partner and staff pensions.”

Also commenting on the deal, a spokesperson for The Pensions Regulator said: “We have recently cleared the fourth transfer to a superfund.

"No two transfers have been the same which demonstrates how we are flexible in our support of innovation in this growing market. We continue to work constructively with trustees and employers looking to transfer their DB scheme to a superfund.”

Hymans Robertson alternative risk transfer specialist, Harry Allen, highlighted the deal as a "fantastic outcome" for members of the scheme and CMS, suggesting that the covenant-enhancing, rather than covenant-replacing, structure is a "real breakthrough in the superfund market, which is now gaining significant momentum".

This was echoed by Barnett Waddingham principal and senior risk transfer consultant, Jack Sharman, who said: “We’re delighted to have led the advice on this groundbreaking transaction and to have delivered a solution that meets everyone’s objectives.

“We’re particularly proud to have demonstrated that superfund transactions can be accessed even by smaller schemes in the not-for-profit sector, which can face unique challenges.

"This, together with the innovative new covenant structure for this transaction, means that it is an exciting time to find new solutions in the pension risk transfer space.”

---