The £590m Sears Retail Pension Scheme has agreed to transfer its assets and the liabilities of about 9,600 members to stage-to-buyout provider Clara-Pensions, with the Pensions Regulator giving the green light. Members are due to transfer at the end of this month. 

 

The transaction could signal a turn in the fortunes for the UK’s long-suffering superfunds market, which recently saw the exit of the Pension Superfund, the only other non-insurance company dedicated to taking on pension liabilities. 

 

As part of the agreement, Clara will provide £30m of new capital to the scheme for employees of various fashion retailers owned by the former Sears plc, which was bought by Sir Philip Green in 1999. Clara is backed by investment firm Sixth Street. The San Francisco-based investor was set up in 2009 by former Goldman Sachs employees. 

 

Via a sectionalised trust, Clara plans to use scale to reduce costs for schemes and invest for buyout with an insurance company in what it terms a ‘bridge to buyout’ model. The Sears trustees have already written to the scheme’s members informing them that their pension benefits will be moved to the Clara Pension Trust.  

  

“We have been carefully managing the Scheme with the aim of securing all members’ benefits with an insurance company through a full buyout in the future. As part of this transaction, Clara will provide an additional £30m of funding, which will support the scheme’s journey to a successful buyout and provide greater security for members,” the trustees said about the transaction, adding that scheme administrator Isio will remain in place. 

  

Clara’s chief executive Simon True said: “Insurance remains the gold standard for any pension scheme member, but not all schemes can afford to reach that goal. Clara was created to provide a safe bridge that brings the insurance market into reach for more schemes and their members.” 

 

True said Clara was now “firmly on the road to making defined benefit pensions safer and more secure for thousands of people”. 

Alan Pickering, who chairs the trustees of Clara, said his board looks forward to welcoming the new members. 

 

Economic secretary to the Treasury, Andrew Griffith, also commented on the deal, which comes just before Tuesday’s King’s Speech and the Autumn Statement later this month, when the government is expected to set out plans for pensions. In the wake of the chancellor’s Mansion House speech, the government had finally responded to its 2018 superfunds consultation with proposals for a regulatory regime for their authorisation, supervision, and enforcement. It also proposed to make the Pension Protection Fund run a DB consolidator. 

 

Griffith said: “Superfunds are an important innovation to British pension provision. Economies of scale from superfunds can do wonders for pensions – making people’s retirement more secure whilst enabling a broader range of investments in productive finance.” 

 

TPR’s executive director of frontline regulation, Nicola Parish, said: “Superfunds can offer increased security, improved governance and better risk management which means that pension savers are more likely to get their promised benefit. We want to see fewer, larger, well run pension schemes and are pleased to see the market innovate and consolidate in savers’ interests.” 

 

Clara claims to have built “strong engagement with around a dozen schemes that are keen to transact” since having passed TPR’s assessment two years ago, and aims to consolidate assets of about £2bn by the end of 2024. 

The Sears trustees were advised on the transaction by law firm Sackers, while WTW was their lead pension risk transfer adviser and scheme actuary. Barnett Waddingham was the investment consultant of the Sears Retail Pension Scheme. CMS provided legal advice to Clara-Pensions and Eversheds Sutherland to the Clara Pension Trust. Van Lanschot Kempen is the fiduciary investment manager, with the trust also taking investment advice from LCP and using Hymans Robertson as its scheme actuary. Clara’s pool of advisers also includes Travers Smith. 

 

Suzanne Vaughan, pension risk transfer adviser to the trustees from WTW, said the transaction marks the start of a new chapter in pension scheme derisking.  

 

“In a derisking market that has experienced ever-increasing insurer-led buy-in and buyout activity, this validation of an alternative path is incredibly helpful for those sponsors, trustees and members of schemes where buyout is currently out of reach,” she said. 

 

The deal removes the fear of being the first mover, which was a key obstacle for trustees, according to Adam Saron, the founder and former chief executive of Clara-Pensions.  

 

"Everyone was saying it looks great, it sounds great, it’s a potential pathway, but we don’t want to be first. That is the real significance – it's a precedence transaction and importantly, it’s of a significant size,” said Saron. 

 

Saron stressed the alignment of interests between the scheme members, the trustees of Clara and the provider's financial backers to achieve an insurance buyout as soon as is efficient. Clara has in the past aimed for a five to 10-year journey to get schemes to buyout. 

 

He also noted the timing of the deal amid expected changes to pensions legislation, saying “there is a real change in government perspective on the need to have alternatives. Having more solutions than one is good. Consolidation is not a magic bullet but a major factor in solutions, it makes solutions easier." 

   

   

 

What is your view on superfunds, both on stage-to-buyout providers and unsectionalised trusts?