Pension schemes moving to commercial consolidators is being held up by a lack of regulation and guidance, according to Barnett Waddingham partner, Danny Wilding.

Speaking to Pensions Age, Wilding described The Pensions Regulator (TPR) and the Pension Protection Fund (PPF) as the “biggest barriers” to schemes moving to commercial consolidators, as they did not “feel ready approve moves to consolidators”.

However, a spokesperson from TPR responded: ”In December we published guidance for trustees considering transferring to a superfund, which makes clear the decision must be in the best interests of members. That means it should further the purpose of paying the accrued scheme benefits.

“We’ve seen how effective the supervision and authorisation framework has been for driving up standards in defined contribution master trusts, and fully expect the same protections to exist for DB superfunds from an early stage in this developing market. We will continue to work with government to build legislation."

A PPF spokesperson added: "As we have previously stated well run commercial consolidators, or superfunds, have the potential to improve security for some schemes, but our levy payers and members will effectively be underwriting the risk of superfund failure. A robust regulatory regime must be established to manage these risks.

"While much work remains to be done we believe key proposals set out in DWP’s consultation will help ensure any superfund allowed to operate provides a high degree of confidence it will pay benefits in full and not claim on the PPF. We look forward to working closely with DWP, TPR and wider industry to help finalise proposals following the consultation.”

Commercial consolidators initially hoped that they would be able to operate under existing regulations, however this has proved not to be the case.

The Department for Work and Pensions was working on drafting guidance for commercial consolidators, although this is being held up by other parliamentary matters, namely Brexit.

As a result, Wilding said that there was “a backlog of schemes that want to be able to join [a commercial consolidator]”.

Wilding stated that there was interest in consolidation from some scheme trustees, but that the regulation was not in place to move the schemes to commercial consolidators.

Although a recent survey by Hymans Robertson revealed that just 25 per cent of trustees believed moving to a commercial consolidator would improve the security of members’ benefits, this is not an insignificant number.

It also found that more could be done to educate trustees on the commercial consolidation options available, as 35 per cent have not heard of the Pension SuperFund and 60 per cent have never heard of Clara Pensions.

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