Pension scheme trustees considering a superfund transfer should prioritise covenant analysis from the outset and engage with The Pensions Regulator (TPR) early to ensure the transaction delivers the best outcome for members, LCP has argued.

In a new blog outlining five lessons from its experience advising on superfund transactions, the consultancy stressed that robust covenant assessments were essential to determining whether a superfund transfer was appropriate, rather than simply justifying a decision after it had been made.

The guidance comes amid growing momentum in the superfund market, with Clara having announced its eighth transaction and TPT Superfund recently passing TPR's assessment, expanding the range of providers available to schemes.

LCP has advised trustees on three of Clara's eight transactions, including the first-of-its-kind transfer of six Marelli pension schemes.

According to LCP, trustees should begin by assessing their scheme's funding position, employer covenant and the risks facing both the scheme and its sponsor, before comparing the potential outcomes of a superfund transfer with other realistic endgame options.

These could include insurance buy-ins or additional contingent support from the sponsoring employer, with the ultimate objective of improving member benefit security.

LCP also challenged the perception that superfunds were primarily an option for schemes with distressed sponsors, pointing to the 2024 Wates transaction as evidence that the suitability of a transfer depended on whether it offered better outcomes than the available alternatives.

The consultancy emphasised the importance of early engagement with TPR, arguing that discussing the rationale for a proposed transfer before submitting a clearance application could help trustees and sponsors address regulatory expectations and avoid late-stage objections.

Looking ahead, LCP suggested that the Pension Schemes Act 2026 could broaden the potential market for superfunds, as the proposed onboarding conditions are expected to remove the existing gateway requirement that insurance buyout must not be realistically achievable in the foreseeable future.

However, it stressed that trustees would still need to demonstrate that a transfer improved the likelihood of members receiving their full benefits, supported by clear comparisons between existing covenant support, alternative arrangements and the security offered by the superfund.

LCP head of DB consolidation, Laura Amin, said: "2026 has marked a breakthrough year for superfunds, and the market's momentum continues to build.

"More sponsors and trustees are actively considering superfunds alongside other endgame options to provide members’ benefits for the long term."

Amin argued that member security would remain central to superfund decisions as the regulatory framework evolved, with new regulations expected next year.

"We expect that to remain the case under the new regulations due to be published next year, and the covenant focus will continue to be key," she added.

Meanwhile, LCP senior consultant, George Bassnet, stressed that covenant analysis should inform trustees' decisions throughout the process.

"Overall, the lessons are clear: superfund transfers demand a strong covenant focus from the get-go to inform the trustees’ decision making, not to justify it afterwards.

"Covenant is also vital to understand the suitability of a superfund as an endgame option, how it compares with other realistic endgame options and where trustees have decided a superfund is the right endgame for their scheme, in building a rationale to TPR for the transfer which is consistent with the gateway tests."

---