Clara announce first Connected Covenant deal and first deal with a charity as nearly half consider that a DB Superfund could be an appropriate endgame for their DB scheme

The UK’s fourth DB Superfund transaction has been announced between Clara Pensions (Clara) and Church Mission Society Pension Scheme.

Unlike the three previous transactions, under this deal the scheme retains a link back to the sponsor, Church Mission Society (what Clara terms a “Connected Covenant” transaction). This means the scheme benefits from similar protections to previous DB Superfund transfers - such as additional capital to underwrite risks - but also retains access to the existing sponsor in the unlikely event that additional support should be needed.

Following previous Clara deals for active and insolvent sponsors, this deal highlights another situation where a DB Superfund could be an appropriate endgame option. The size of the transaction (£55m) is the smallest to date. It is encouraging for trustees and sponsors as this now presents those with smaller schemes a broader range of endgame opportunities.

This announcement follows the publication earlier this month of a regulatory framework for DB Superfunds in the 2025 Pension Schemes Bill, demonstrating strong support from the Government. This framework unlocked a potential £600bn market for DB Superfunds.

Jonathan Griffith, Partner and Head of Endgame Innovation at LCP, commented: 

“On a recent LCP webinar, nearly half of attendees said that a DB Superfund is potentially appropriate for their scheme. With this growing market sentiment – and strong support from Government evidenced in the recent Pension Schemes Bill which opens up a potential £600bn market – we expect further appetite from both trustees and sponsors to explore DB Superfunds as part of endgame planning.  This increased interest will build momentum increasing options and innovation, and we expect to see new entrants to the DB Superfund market.”

Richard Soldan, Partner and Head of Not for Profit at LCP, commented:

“With this example of the Church Mission Society Pension Scheme as the first charity scheme moving to a DB Superfund, it’s clear that this is an option that charities and their pension schemes will want to consider carefully. The connected covenant option should increase security for the scheme members and significantly reduce, albeit not eliminate, risks for the employer. It will be fascinating to see how this market develops – both generally and for not-for-profit employers specifically.”