(Parliamentary Under Secretary
of State for Pensions & Financial Inclusion): The
Pensions Regulator has today published an interim regulatory
regime for Defined Benefit Pension “superfunds”.
A superfund is a privately funded “for profit” consolidation
vehicle, which takes over responsibility for Defined Benefit
Pension Schemes liabilities from the sponsoring employer. To
enter a superfund, sponsoring employers are required to pay a
significant, upfront sum to improve the funding level of their
scheme, in exchange for discharging their pensions liabilities.
This is an interim regime. The government will continue to
develop the permanent regime before legislating, with full and
proper parliamentary scrutiny in the usual way.
Operation of the interim regime will be kept under review by the
government to ensure that it is properly protecting and advancing
the interests of pension scheme members and the Pension
Protection Fund.
The government will continue to develop a permanent regime for
superfunds. This is an innovative area and market participants
should not assume that the permanent regime will automatically
replicate the interim regime. Alongside responses to the Defined
Benefit Pension Scheme Consolidation Consultation, the government
will be informed by experience gained during the interim regime
when considering the features of the permanent regime, including
those relating to capital adequacy. The permanent regime may
include an alternative set of requirements, including more
prudent requirements, compared to the interim regime, but we
cannot pre-empt the parliamentary process.
The permanent regime will be designed to protect pension scheme
members and the Pension Protection Fund, including by ensuring
that superfunds have the necessary flexibility to continue
contributing to a strong pensions ecosystem in which sponsoring
companies and scheme trustees have a range of options open to
them.
The government believes that superfunds have the potential to
improve the likelihood of members getting their benefits in full
whilst providing employers with a new, affordable option to
manage their legacy pension liabilities. However, if at any point
it appears that changes to the interim regime are required in
order to protect and advance the interests of scheme members, the
government and The Pensions Regulator will take prompt, robust
action.
Today’s publication will mean that The Pensions Regulator will
have a much firmer basis to take action against a superfund
should they deem it a necessary and proportionate step.
The guidance can be accessed at the following address:
https://www.thepensionsregulator.gov.uk/en/document-library/regulatory-guidance/db-superfunds
