The 2025 Pension Schemes Bill unlocks potential £600bn market for DB superfunds

Pensions & benefits Endgame strategy and journey planning DB pensions Pension Schemes Bill

The recently published Pension Schemes Bill¹ sets out the formal legislative framework under which DB Superfunds will operate from 2028 after 5 years of operating under interim guidance issued by the Pensions Regulator.

The draft Bill represents a big boost for this emerging market. It simplifies the superfund “gateway tests” that trustees are required to satisfy as part of any transfer to a DB superfund² and proposes removing the requirement that the scheme must have “no realistic prospect of buy-out in the foreseeable future”. Under the draft Bill, there are two gateway tests for the ceding scheme:

The financial position of the ceding scheme is not strong enough to enable the trustees to arrange an insurer buy-out and;
The superfund transfer will make it more likely that the transferred liabilities will be satisfied in full.

LCP estimates that this simplification of the gateway tests opens up around 50% of all DB pension schemes as potentially viable candidates for a DB Superfund transfer representing some c£600bn of assets. This will be welcome news for both existing and emerging DB Superfunds and provides a powerful new endgame option for many DB pension schemes.

Sam Jenkins, DB Superfund expert at LCP, commented:

“Much of the focus for DB pension schemes in past weeks has been on surplus release, but many people don’t realise that half of the 2025 Pension Schemes Bill was dedicated to the DB superfund market. The Government has been vocal in its support for DB superfunds, stating³that they ‘will ensure this market thrives’, which sets a very positive tone for where DB superfund regulations may land off the back of the Pension Schemes Bill.

“Our analysis indicates that the simplifications to the gateway tests open up a potential £600bn universe for DB superfunds. Many schemes will continue to target insurance, but we expect to see sustained growth in the use of DB superfunds as an alternative where full buy-in is not currently affordable.”