A trustee of the Pension Superfund stood down in February citing her doubts that the Pensions Regulator would ever positively assess a run-off consolidator, while founder Edi Truell says he is encouraged by the government’s recent consultation response on superfunds. 

 

Margaret Snowdon, a former trustee of the defined benefit consolidator founded by financier Edi Truell and the Greater London Authority’s investment chief Luke Webster, said she stood down as a trustee because she “couldn’t see TPR ever positively assessing a long-term run-off consolidator like PSF”. 

 

Snowdon said her experience as a trustee of the Pension Superfund going through the assessment was that the regulator was not helpful in explaining why the Superfund did not meet its guidance requirements.   

 

“The reasons for failure changed with each submission, leading to a conclusion that they were generally opposed,” she said. 

 

The experience has led Snowdon to believe that TPR supports only stage-to-buyout solutions as alternatives to insurance, which is the model that competitor Clara-Pensions offers. Clara is listed by TPR as the only consolidator that has been positively "assessed”. Even so, like the Pension Superfund, Clara has yet to announce winning any business. 

 

"The TPR consultation response did little to make me change my view,” said Snowdon, believing it to be a missed opportunity. TPR recently reviewed its superfunds guidance, updating its position on profit extraction, an increased discount rate and clarifying other areas of the current regime. 

 

A spokesperson for the Pensions Regulator said it does not comment on specific businesses, adding: “Only once a superfund has demonstrated with robust evidence that they are following our guidance and have met our expectations will they be added to the list. Where this has not been demonstrated we will provide feedback directly to parties. If a superfund wished to be re-assessed, we would consider their request.” 

  

The spokesperson said the expectations set out in guidance are challenging because TPR wants savers who end up in a superfund to be protected.  

 

“We therefore make no apology for the assessment process being challenging. We now have one scheme on the list which shows our expectations can be met if a superfund can demonstrate, through robust evidence, that it has done so,” the spokesperson said. 

 

Clara has passed stage 1 of the assessment. Adam Saron, founder and former chief executive of Clara, said Clara has had a good relationship with the regulator, “but it was also tough, they were appropriately rigorous and challenging where it needed challenge”. 

 

The dialogue was good, he said, with the regulator open to having their feedback questioned and making an effort to provide clarity where this was requested. 

 

TPR will have learnt lessons in this assessment process as well and know better what it is looking for, he suggested: “When I read the regulator’s new guidance, all the lessons are there. It may be less obvious to people who have not been through the assessment but the way it’s been updated, it’s much smarter.” 

 

 

For Truell, however, there is a difference between the regulator’s and the government’s published viewpoints. He said the DWP’s position has not been fully incorporated into TPR’s revamped guidance. 

 

“We were much encouraged by the [Department for Work and Pensions’] response to superfunds. TPR’s updated guidance failed to reflect important aspects of the DWP’s response. Pension Superfund continues to discuss being positively assessed as a Superfund with TPR, once they have incorporated DWP’s views into their thinking,” Truell said. 

 

A TPR spokesperson said the August 2023 update to its guidance “ensures the interim regime remains fit for purpose and incorporates changes taking into account recent market developments and our experience of operating the regime since 2020. For this update we have sought industry stakeholders feedback and we have worked closely with government in setting out our expectations on how superfunds should operate until specific legislation is in place.” 

 

The spokersperson added: “DWP’s consultation response sets out some proposals for the future legislated regime and we will work together with them in due course as they make progress towards a new legislative regime.” 

 

The DWP responded to its 2018 consultation last month. In the foreword, pensions minister Laura Trott said: “I am pleased that at least one superfund, Clara Pensions, has met TPR’s key expectations but I want to see this market develop further, and soon.” 

 

The DWP also made clear that stage-to-buyout should not be the only type of DB consolidator, saying this would threaten the viability of the superfund market, and observing that there is no requirement for DB schemes to buy out.  

 

However, the department is proposing a ‘regulatory gateway’ which would mean that schemes that can afford buyout do take that route, limiting which schemes DB consolidators can take on. 

 

Perhaps to kickstart the market, the government has now also suggested that the Pension Protection Fund could take on pension schemes where the sponsor is still solvent - not dissimilar to a superfund. 

 

 

The long wait for legislation, exacerbating hesitation by employers and schemes to be the first mover, has left DB consolidators’ operations without a purpose and will have created financial pressure on those that remain without any new business. 

 

Capital Cranfield trustee Michele Hirons-Wood was on the Superfund’s board until early this year. She said her appointment term was coming to an end, “and we collectively felt it didn’t make sense to continue with a full professional board at that time in light of the status of regulatory approval”. 

 

A search on LinkedIn meanwhile shows that the Superfund’s former chief executive, Michael Clark, stopped working for the organisation in February. A spokesperson for the Superfund said Truell is taking care of business as executive chairman until a full-time CEO is needed, adding: “There is only so much a CEO could do until the regulator gives a green light.” 

 

Mark Hooton meanwhile indicates on the same social media platform that he has not been the Superfund’s chief financial officer since early this year. The Superfund said Hooton was “still very much part of the team”. 

 

Clark and Hooton have been contacted for comment. 

 

 

The long dry spell for DB consolidators has now been followed by rising funding levels and a threshold that could be written into law. Snowdon questioned whether superfunds were still viable given the proposed ‘gateway’ test and the vastly improved average funding position of DB schemes since last year. 

 

However, Saron believes there is considerable dispersion in funding levels. While some schemes would have moved past the level where they would consider a superfund over an insurer, others have moved up into the bracket of schemes where a superfund would be an option, he argued.  

 

“When rates moved last year, schemes thinking about consolidation jumped and there is gap, but it’s filling up,” he said. 

 

 

The Pension Superfund was set up as an alternative for defined benefit schemes to insurance buyout, which was unaffordable for many while gilt yields remained depressed during the Bank of England’s quantitative easing that followed the 2008 financial crisis. 

 

The Superfund would work similar to an insurer – cutting the link to the employer and backing the pensions promise with a financial instead of an employer covenant, provided in this case by third-party investors. It would however operate outside the strict capital requirements that insurers must adhere to, which means it offers a level of security that is lower than an insurer’s but potentially more affordable. 

 

A legislative framework for DB consolidators has been missing to date, despite the government consulting in 2018. To bridge the gap, in June 2020 TPR issued guidance, having consulted with industry beforehand, and created an interim regime where consolidators had to be TPR assessed. So far, it lists only Clara-Pensions – which offers a ‘stage to buyout’ model – on its website of positively assessed providers.