Superfund transfers: insights for trustees from our experience so far
Pensions & benefits Endgame strategy and journey planning Pension risk transfer Employer covenant consulting
2026 has been a record-breaking year for superfunds – with Clara completing four deals this year to date, and with the TPT Superfund announcing it has now passed TPR's assessment process, with another potential superfund provider known to currently be in assessment.
There is building momentum in the superfund market, and with a total of thirteen schemes now having transferred to Clara, eight of which were advised by LCP. Six of these schemes were in respect of the recent Marelli transfer, but each scheme had its own considerations.
For more details on each of these superfund transfers led by LCP, see:
- Case study: DB Superfunds: Wates’ breakthrough transfer
- Press release: Videndum’s transfer to Clara evidences the growing momentum behind the Superfund market
- Press release: LCP advises six Marelli schemes on their transfer to Clara in first-of-its-kind transaction
Working on these transactions has given us a stronger understanding of the Regulator’s expectations and insights on the practicalities of this endgame route.
The covenant perspective
A clear understanding of the scheme’s covenant support is key to understanding both the viability of superfunds as an endgame option and then building the rationale to TPR for the transfer of the scheme which is consistent with the gateway tests, with appropriate levels of analysis and due diligence.
In this blog, we explore the covenant lens, sharing LCP’s experiences from having advised the Trustees of eight of the schemes which have transferred to Clara to date.
We've distilled this down into five key lessons for trustees to consider – which are all centred around the fundamental question of whether a superfund improves member security.
Lesson 1 : Start with a focus on the outcome for members
Trustees should first understand their scheme’s position: how well funded is it, how strong is the covenant, what risks does the scheme and its sponsoring employer face, both now and in the future? Trustees need to understand the covenant support available today and how it might change over time.
The focus for scheme trustees should be on the options which may be available to maintain or improve member security, including considering superfunds, insurance and potentially any contingent support options put forward by the current sponsor. Covenant advice is central to enable trustees to assess the alternative options available and to make informed decisions based on their scheme’s specific circumstances.
For schemes with distressed employers, the case for exploring a superfund transfer may appear obvious. But trustees must still consider the scheme’s funding level, the time needed to reach buyout, and whether the employer is likely to remain viable for that long. TPR will expect these considerations to be assessed and documented.
Our role as covenant advisers is to support the Trustees to consider these key questions by turning financial analysis into a clear comparison of the existing position, realistic alternatives and likely outcomes, in order to help trustees determine whether a superfund transfer is the best option to improve member security.
Lesson 2 : Look beyond the distressed-covenant stereotype
Superfunds have been associated with schemes facing acute covenant pressure. Clara’s early transfers included schemes without ongoing employer support, while other transactions have involved distressed employers.
But the Wates transaction was a real turning point as the first transfer for an ongoing active sponsor – which evidenced that the relevant test is not whether the employer is distressed, but whether a superfund offers better outcomes for members than the realistic alternatives.
For example, a fixed amount of cash may be available to support a risk transfer to a superfund within a certain timeframe, but the contribution required to fund the scheme to buyout, or to support run on, may not. In other cases, longer term future employer support may be uncertain, making a superfund a more secure home.
Trustees should assess the options against their scheme’s specific circumstances, not a perceived (and now somewhat outdated) profile of the typical superfund candidate.
Lesson 3 : Build the rationale for transfer and engage early on this with TPR
Once trustees and sponsors have established that a superfund transfer merits serious consideration, the next step is to build the rationale for transfer – drawing together covenant, funding and de-risking advice to build the case which is consistent with the gateway principles.
Collaboration between trustees and sponsors is key to this, as is early engagement with TPR once the rationale has been developed.
Across the transactions we have advised on, we’ve seen that early engagement with TPR on the rationale for transfer can help to keep the transaction on track.
This early engagement has helped refine the trustees’ and sponsors’ proposals and to build the evidence needed to support a successful clearance application. By engaging early, trustees and sponsors can address TPR’s expectations before submitting their application, reducing the risk of late-stage objections.
Our experience has been that clearance applications have attracted minimal further questions where those expectations have been understood and addressed in advance.
Lesson 4 : Changes to regulation may widen the market - but the focus on covenant remains
Under the current interim regime, trustees must demonstrate that a transfer is in members’ best interests and meets TPR’s three gateway principles:
- buyout is unavailable now;
- buyout is not realistically achievable in the foreseeable future; and
- that a transfer would improve the likelihood of members receiving full benefits.
Whilst the Pension Schemes Act 2026 reshapes those tests, its onboarding conditions retain two key questions for the ceding scheme:
- Is the scheme already sufficiently funded to be able to secure an insurance buyout?
- Will the transfer make it more likely that members' benefits will be satisfied in full?
This could open up the market to schemes that might otherwise reach buyout funding in the foreseeable future with time and further employer support.
However, the underlying covenant questions remain. In order to satisfy the second onboarding condition, Trustees must still demonstrate why a transfer improves member security, drawing on analysis of the existing covenant, the alternatives realistically available, and the support offered by the superfund to demonstrate that the superfund transfer will mean it is more likely that members' benefits will be satisfied in full.
As more schemes become potential candidates and more superfunds enter the market, robust covenant analysis will be increasingly important in distinguishing transactions that are possible from those that are right for members.
5. Collaboration is key
We often hear how important collaboration is across the pensions industry, but we’ve seen firsthand that these processes really are only possible where there has been a highly collaborative approach between the trustee, sponsor, the superfund and advisers on all sides.
Covenant advice needs to sit alongside actuarial, investment and pension risk transfer advice, and it is vital that all different parties work together throughout the transaction.
Marelli was a great example of this – with six schemes, trustees, Clara as the superfund, various employers and guarantors operating across an international group, and advisors on all sides needing to pull together in one direction.
This was against a background of a group going through a complex global restructuring, meaning that timescales were compressed. Getting through every stage and securing member benefits was only possible by all sides working in lockstep with each other.
Superfund transfers demand a strong covenant focus from the outset to
- Understand the suitability of superfunds as an endgame option for the scheme in the context of the alternative options available to deliver secure member outcomes; and
- To then build the rationale to TPR for the transfer of the Scheme which is consistent with the gateway tests, with appropriate and proportionate levels of analysis and due diligence.
