pensions<\/a> obligations before they hit the high funding levels required to sell to an insurer, in a deal known as a buyout. The TPT proposal would allow pension schemes to \u201crun on\u201d, rather than acting as a bridge to a buyout, and enable profits to be shared.<\/p>\n\u201cThe plan is to use the surplus that arises from running the superfund to augment member benefits\u201d said David Lane, chief executive at TPT.\u00a0The group plans to submit its proposal to the pensions regulator for assessment in January. <\/p>\n
Lane said the amount shared with members would depend on a range of factors \u2014 including a scheme\u2019s funding level on entering the superfund and investment performance \u2014 but that over a 25-year period \u201cthe majority of the surplus would accrue to the members\u201d.<\/p>\n
So far only one commercial superfund appears on the regulator\u2019s list of assessed superfunds, Clara Pensions, which completed its first deal in late 2023. Clara\u2019s model specifically aimed to improve schemes\u2019 funding levels to the threshold required for buyout. <\/p>\n
Veteran financier Edi Truell set up Pension SuperFund in 2018 as a way for businesses to offload their DB schemes at a lower cost than in an insurance deal. People close to the company said the fund was never listed as meeting the regulator\u2019s assessment criteria, despite being submitted for approval. <\/p>\n
David Fairs, partner at consultancy LCP, said the regulator had set a \u201chigh bar\u201d for the launch of superfunds, but that he expected further applications as government policy on superfunds had become more clear in a pensions bill expected to become law next year. <\/p>\n
He added that schemes that planned to run on \u201cclearly have a different risk profile\u201d than those that are a bridge to buyout. But these also take a longer-term view that could fit with the government\u2019s ambition to boost investment in UK companies, he said. <\/p>\n
The UK has close to 5,000 corporate DB pension schemes managing about \u00a31.2tn of assets on behalf of 8.8mn members, according to data from the Pension Protection Fund. The vast majority of schemes are closed to new members.\u00a0<\/p>\n
In 2020, the pensions regulator issued interim guidance for setting up superfunds. But take-up so far has been slow after a rapid rise in interest rates in 2022 improved the funding levels of many defined benefit schemes. <\/p>\n
In 2024, UK DB pension schemes on aggregate were 94 per cent funded on a net buyout basis, the level at which a scheme can be sold to an insurer, representing a deficit of about \u00a370bn, down from \u00a3615bn in 2021.\u00a0<\/p>\n
While there can be a one-off uplift in member benefits in buyout transactions, most deals would see pensions paid as per the scheme rules \u2014 with little scope for further improvement. <\/p>\n
\u201cOngoing, more dynamic sharing of value can be useful over long time periods, for example if the inflation situation changed radically\u201d said Raj Mody, an independent pensions expert. <\/p>\n
Insurers are also starting to look at offering more flexible options. M&G, which re-entered the DB pension buyout market in 2023, announced plans last month to launch a with-profits bulk purchase annuity, providing more scope for enhanced member benefits.<\/p>\n
The Pensions Regulator said it welcomed innovation \u201cthat has potential to improve outcomes for savers and provide choice for trustees\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"Stay informed with free updates Simply sign up to the Pensions industry myFT Digest — delivered directly to…\n","protected":false},"author":2,"featured_media":199832,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":{"0":"post-199831","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/199831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=199831"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/199831\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/199832"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=199831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=199831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=199831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}