Is a DB superfund the right end game option for your DB scheme?
DB superfunds are DB pension schemes into which other schemes can consolidate, removing the link with the existing sponsor and transferring the risk to the superfund provider
The benefits provided to members by the superfund mirror the scheme’s benefits. The scheme can benefit from economies of scale which can be achieved via consolidation.
Superfunds can offer an alternative risk transfer route for trustees and sponsors to bulk purchase annuity insurance.
Before DB superfunds arrived, the main exit option for a scheme and its sponsor was a bulk annuity buy-out with an insurer. DB superfunds now offer an alternative exit option.
Typically this is at a lower cost than buy-out.
To date Clara-Pensions (‘Clara’) is the only DB superfund to have completed the Pensions Regulator's assessment process. We expect further superfunds to launch in the coming months as the market expands.
The case for an individual DB superfund transfer must be “cleared” by TPR and must be assessed as meeting the ‘gateway tests’ (the conditions for transfer).
Recent developments in the Pension Schemes Bill – combined with public and private statements from DWP and from TPR – lead us to believe that many schemes with a buy-out deficit could present a rationale for a superfund transfer which TPR is likely to support.
How LCP can help you to consider superfunds as a risk transfer route for your scheme
Having advised on the first superfund transaction for a non-distressed sponsor, LCP has deep experience of the process for a superfund transfer, including The Pension Regulator’s (TPR’s) approach to providing “clearance”.
We are well placed to support you in considering whether a superfund is the right end game option for your scheme, with expertise across all key areas: pension risk transfer, covenant, investment, regulatory and actuarial.
We have insights from our roles in advising key participants in the superfund market, including the trustees of Clara on investment and advising other potential entrants to the superfund market. This gives us an unrivalled perspective on the current and future direction of this market which is reflected in our strategic advice to our clients.
Exploring superfunds
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A DB superfund is a pension scheme…
A superfund is simply a registered pension scheme, managed by its own set of trustees and with its own advisers, into which other schemes can transfer its liabilities and assets. The benefits provided to members by the superfund mirror the scheme’s benefits and the link to the existing sponsor is typically broken on a transfer.
… with a capital buffer
The superfund’s investors provides capital to support the liabilities transferred to the superfund. This capital is ring-fenced outside of the scheme, but it can be accessed by the scheme to support it funding if required.
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Once a pension scheme has transferred its members to a DB superfund, the remaining scheme can be wound up and removed from the sponsor’s balance sheet.
To support the transfer, a superfund has investors who provide capital on day one to provide a long-term support for the liabilities being transferred.
Schemes moving to a superfund are exchanging their sponsor covenant for the financial covenant offered by the Superfund (i.e. the capital / financial support provided by its investors) as well as (typically) an upfront cash injection from the sponsor.
Therefore, the key question when assessing whether a superfund is appropriate is whether the transfer to the superfund is expected to improve member outcomes (including the likelihood of receiving their benefits in full). A clearance application has to be submitted to the Pensions Regulator explaining how the Trustee has concluded the transfer is in members’ best interests.
Our multi-disciplinary advice teams (spanning pension risk transfer, covenant, investment, regulatory and actuarial) give our clients the confidence in reaching a robust view on this key question and in presenting this to other key stakeholders, including the Pensions Regulator.
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The appropriateness of a DB superfund will depend on the circumstances of your scheme and the key strategic objectives of the sponsor and of the trustees.
In particular, trustees, sponsors and ultimately the Pensions Regulator will need to be satisfied that a transfer to a superfund will improve the position of members (taking into account funding, investment and covenant considerations).
An initial feasibility should be undertaken to evaluate a superfund transfer. This would involve assessing a superfund transfer against your key strategic objectives and against the alternative end game options available to the scheme and its members, such as an insurance buy-out or run-on. It will assess which route is likely to deliver the best outcome for members.
As the superfund market develops, with new entrants and enhanced competition, the lower price and reduction in timescales for risk transfer via a superfund as compared to insurance may be material for some schemes – leading to an important decision for sponsors and trustees on whether a superfund may be the appropriate end game destination for their scheme.
Get in touch with one of our experts to see which option might be right for you
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Currently Clara is the only DB superfund to have completed TPR’s assessment process.
To date Clara has completed four transactions
With each transaction marking an important milestone for the superfund market in ‘proof of concept’ for the superfund model and paving the way for further innovation in the DB endgame space. These are as follows:
- The first Clara transaction was for the £590m Sears Pension Scheme in November 2023, where there was no existing sponsor of substance. This was the first superfund transaction to be cleared by TPR and demonstrated a workable pathway for future transactions.
- The £600m Debenhams Pension Scheme followed in April 2024 – a PPF+ case which saw members move from PPF compensation level to full scheme benefits within Clara. This demonstrated Clara’s role as a real alternative for schemes previously destined for the PPF.
- The £210m transfer of the Wates Pension Fund in December 2024 marked the first for a non-distressed, ongoing sponsor – with the employer making a material contribution to meet Clara’s transfer price and improve member security. LCP led the transaction advice to the trustee for this ground-breaking deal which demonstrated that a DB superfund is now a viable alternative exit option for a much broader range of schemes, and was widely seen as a catalyst for DB superfund market growth.
- In June 2025, Clara announced the first “connected covenant” deal with the transfer of the £55m Church Mission Society, which was also their first with a not-for-profit sponsor. Under this model the members transfer to Clara (in the same way as other transactions) but the sponsor provides a continuing contingent guarantee to the relevant section of Clara. At £55m, this transaction was the first Clara deal in the sub-£100m market and the first to demonstrate the viability of Clara’s connected covenant approach.
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The Pension Schemes Bill 2025 will establish a firm legal framework for DB superfunds which, combined with greater competition from new DB superfund entrants, is expected to give rise to further momentum in this market as an alternative to insurance.
As the superfund market develops, with new entrants and enhanced competition, we expect improvements in pricing which may lead to material reductions in timescales for risk transfer via a superfund as compared to insurance for some schemes – leading to an important decision for sponsors and trustees.
All schemes underfunded on buy-out should have superfunds now in the mix of end game options under consideration. And with developments in market practice, the situations in which a superfund may form part of a scheme’s end game strategy will continue evolve.
A DB superfund is a pension scheme…
A superfund is simply a registered pension scheme, managed by its own set of trustees and with its own advisers, into which other schemes can transfer its liabilities and assets. The benefits provided to members by the superfund mirror the scheme’s benefits and the link to the existing sponsor is typically broken on a transfer.
… with a capital buffer
The superfund’s investors provides capital to support the liabilities transferred to the superfund. This capital is ring-fenced outside of the scheme, but it can be accessed by the scheme to support it funding if required.
Once a pension scheme has transferred its members to a DB superfund, the remaining scheme can be wound up and removed from the sponsor’s balance sheet.
To support the transfer, a superfund has investors who provide capital on day one to provide a long-term support for the liabilities being transferred.
Schemes moving to a superfund are exchanging their sponsor covenant for the financial covenant offered by the Superfund (i.e. the capital / financial support provided by its investors) as well as (typically) an upfront cash injection from the sponsor.
Therefore, the key question when assessing whether a superfund is appropriate is whether the transfer to the superfund is expected to improve member outcomes (including the likelihood of receiving their benefits in full). A clearance application has to be submitted to the Pensions Regulator explaining how the Trustee has concluded the transfer is in members’ best interests.
Our multi-disciplinary advice teams (spanning pension risk transfer, covenant, investment, regulatory and actuarial) give our clients the confidence in reaching a robust view on this key question and in presenting this to other key stakeholders, including the Pensions Regulator.
The appropriateness of a DB superfund will depend on the circumstances of your scheme and the key strategic objectives of the sponsor and of the trustees.
In particular, trustees, sponsors and ultimately the Pensions Regulator will need to be satisfied that a transfer to a superfund will improve the position of members (taking into account funding, investment and covenant considerations).
An initial feasibility should be undertaken to evaluate a superfund transfer. This would involve assessing a superfund transfer against your key strategic objectives and against the alternative end game options available to the scheme and its members, such as an insurance buy-out or run-on. It will assess which route is likely to deliver the best outcome for members.
As the superfund market develops, with new entrants and enhanced competition, the lower price and reduction in timescales for risk transfer via a superfund as compared to insurance may be material for some schemes – leading to an important decision for sponsors and trustees on whether a superfund may be the appropriate end game destination for their scheme.
Get in touch with one of our experts to see which option might be right for you
Currently Clara is the only DB superfund to have completed TPR’s assessment process.
To date Clara has completed four transactions – with each transaction marking an important milestone for the superfund market in ‘proof of concept’ for the superfund model and paving the way for further innovation in the DB endgame space. These are as follows:
The first Clara transaction was for the £590m Sears Pension Scheme in November 2023, where there was no existing sponsor of substance. This was the first superfund transaction to be cleared by TPR and demonstrated a workable pathway for future transactions.
The £600m Debenhams Pension Scheme followed in April 2024 – a PPF+ case which saw members move from PPF compensation level to full scheme benefits within Clara. This demonstrated Clara’s role as a real alternative for schemes previously destined for the PPF.
The £210m transfer of the Wates Pension Fund in December 2024 marked the first for a non-distressed, ongoing sponsor – with the employer making a material contribution to meet Clara’s transfer price and improve member security. LCP led the transaction advice to the trustee for this ground-breaking deal which demonstrated that a DB superfund is now a viable alternative exit option for a much broader range of schemes, and was widely seen as a catalyst for DB superfund market growth.
In June 2025, Clara announced the first “connected covenant” deal with the transfer of the £55m Church Mission Society, which was also their first with a not-for-profit sponsor. Under this model the members transfer to Clara (in the same way as other transactions) but the sponsor provides a continuing contingent guarantee to the relevant section of Clara. At £55m, this transaction was the first Clara deal in the sub-£100m market and the first to demonstrate the viability of Clara’s connected covenant approach.
The Pension Schemes Bill 2025 will establish a firm legal framework for DB superfunds which, combined with greater competition from new DB superfund entrants, is expected to give rise to further momentum in this market as an alternative to insurance.
As the superfund market develops, with new entrants and enhanced competition, we expect improvements in pricing which may lead to material reductions in timescales for risk transfer via a superfund as compared to insurance for some schemes – leading to an important decision for sponsors and trustees.
All schemes underfunded on buy-out should have superfunds now in the mix of end game options under consideration. And with developments in market practice, the situations in which a superfund may form part of a scheme’s end game strategy will continue evolve.
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