Guest comment: TPR outlines superfund expectations

In December we published guidance for defined benefit (DB) superfunds seeking to enter the market and made clear they need to talk to us about their plans before opening for business.

Superfunds are DB pension schemes established to accept bulk transfers of assets and liabilities from other DB schemes. Instead of ongoing employer covenant, member security comes from a capital buffer provided by the former sponsor and investors who expect to profit from the arrangement.

The DWP consultation on consolidation of DB pension schemes, also published in December, proposes a range of areas in which TPR will have to be satisfied. Our guidance reflects the consultation proposals.

We have set out our expectations of DB superfunds which intend to operate before any authorisation regime is put in place and whilst the authorisation framework planned by government is under consultation.

In light of the range and potential scale of emerging business models, we will scrutinise all DB superfunds that enter the market to ensure any risks are identified, assessed and mitigated.

We have also published guidance for trustees considering transferring to a superfund. This makes clear the decision must be in the best interests of members.

TPR also expects employers to seek clearance in respect of any proposed transfer to a superfund, even if they consider any detriment is mitigated.

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