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DB Superfund market given the green light by the Pensions Regulator

Last updated: Friday July 03rd 2020

The Pensions Regulator (TPR) has issued guidance that sets out the standard for setting up and running a defined benefit (DB) superfund model. This includes directors, senior managers and trustees.

What is a superfund?

A superfund is a model that allows for the severance of an employer’s liability towards a DB scheme and one of the following conditions applies:

  • the scheme employer is replaced by a special purpose vehicle (SPV) employer. This is, to all intents and purposes, a shell employer and is usually put in place to preserve the scheme’s PPF eligibility
  • the liability of the employer to fund the scheme’s liabilities is replaced by an employer backed with a capital injection to a capital buffer (generally created by investor capital and contributions from the original employers)

The replacement employer backed by a capital buffer will usually support a consolidator scheme. Some of the important features of a consolidator scheme are as follows:

  • a bulk transfer of a ceding scheme’s liabilities to a consolidator scheme, which is prepared to accept the liabilities of a number of schemes from unconnected ceding employers
  • it will have its own governance and administration (these functions may be in-house, or outsourced)
  • there will usually be one trustee board

If a model is entered into, which could result in employer replacement at some point in the future, the arrangements need to be set up so our guidance can be complied with when the replacement happens.

All potential superfunds should liaise with TPR early to see whether our guidance applies to them.

For more information, please visit The Pensions Regulator’s guidance here. Alternatively, please contact us on 020 7112 8300 or you can email info@assureuk.co.uk.

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