Regulator blogs on "friction points" in superfund transfer process

The Regulator has published a blog reflecting on its experience of clearing transfers of DB pension schemes to DB superfunds. To date, only the Clara DB superfund has met the Regulator's assessment process and three transfers to that superfund have been cleared.

The Regulator notes that at the end of 2024, around 40 per cent of DB schemes could potentially have met the gateway tests and considered whether a transfer to a superfund was in their members' best interests. However, 40 per cent of these schemes had assets of less than £100m and the superfund market needs to develop in scale to take on smaller schemes. The Regulator expects the forthcoming Pension Schemes Bill, which will establish a permanent legislative framework for DB superfunds, to provide impetus for further expansion of superfunds.   

David Walmsley, Director of Trusteeship, Administration and DB Supervision at the Regulator, and author of the blog highlights the Regulator's expectations in relation to certain "friction points" in the transfer process, and provides insight on the essential requirements and considerations involved in the buy-out cost estimation, due diligence, rationale for transferring, the evaluation of full benefits post-transfer, and the structuring of bulk transfer terms.

The Regulator also confirms that a buyout quote from the insurance market is not required for the purpose of determining whether buyout is affordable for the gateway test. Instead, an objective estimate of the cost of executing a buyout from an actuary with experience of the market will suffice.