New regulator guidance ‘an important step on the long and winding road to superfunds’

New guidance published today by the Pensions Regulator (TPR) is an important next step on what has sometimes seemed a tortuous journey to consolidation of DB pension schemes, according to LCP’s head of corporate consulting, Gordon Watchorn.

The guidance sets out a series of ‘gateway tests’ which trustees must satisfy themselves have been met before seeking to go ahead with a superfund transaction. These include being sure that the alternative of a buyout is not possible either immediately or in the ‘foreseeable future’, and also that the transaction improves the chance of member benefits being paid.

Gordon Watchorn, partner at LCP said:

“These guidelines are an important step on the long and winding road to superfunds. As the guidelines point out, in some cases the comparison with a superfund will be relatively clear cut, especially where the current employer seems unlikely to survive. But there will be many more cases where the decision is more finely balanced and trustees will need to demonstrate they have taken careful advice on the balance of risks associated with different strategies.

"This will include assessing how scheme funding and sponsor strength are likely to evolve over the next three to five years in order to judge whether a buyout will be a realistic option over that time period. I hope that the publication of these guidelines will pave the way for the first superfund transactions next year and the implementation of an important option for trustees and sponsors looking to do the best for scheme members”.