Trustees evaluating a superfund transfer must prioritise covenant analysis from the start and consult The Pensions Regulator (TPR) early, LCP has advised.
Early analysis determines suitability
LCP has issued guidance for pension scheme trustees, highlighting the importance of thorough assessment in determining whether a transfer to a superfund is suitable. The consultancy emphasized that robust covenant assessments were essential to determining whether a superfund transfer was appropriate, rather than simply justifying a decision after it had been made. Notably, Clara has announced its eighth transaction, and TPT Superfund has recently received approval from The Pensions Regulator, expanding the options available to schemes. LCP has advised on three of Clara’s transactions, including a pioneering transfer involving six Marelli pension schemes.
Trustees should initiate the process by evaluating their scheme’s financial situation, the employer’s financial health, and the risks associated with both the scheme and its sponsor. They should then weigh the potential benefits of a superfund transfer against other viable long-term strategies, such as purchasing insurance or securing additional support from the employer. The primary goal is to enhance the security of members’ benefits. By taking a wide-ranging approach, trustees can make informed decisions that prioritize the well-being of scheme members.
LCP challenged the perception that superfunds were primarily an option for schemes with distressed sponsors, pointing to the 2024 Wates transaction as evidence that suitability depends on whether the transfer offers better outcomes than available alternatives.
Trustees must engage with TPR before submitting a clearance application to discuss the rationale for the proposed transfer. This helps address regulatory expectations and avoid late-stage objections. LCP head of DB consolidation Laura Amin stated that member security would remain central to decisions as the regulatory framework evolves. “2026 has marked a breakthrough year for superfunds,” she said. “More sponsors and trustees are actively considering superfunds alongside other endgame options to provide members’ benefits for the long term.”
Trustees must assess their scheme‘s funding status, the employer’s covenant, and specific risks before comparing a superfund transfer to other realistic options. These alternatives could include insurance buy-ins or extra support from the sponsor. The main aim is to improve the security of members’ benefits.
The Pension Schemes Act 2026 could broaden the potential market for superfunds, as the proposed onboarding conditions are expected to remove the existing gateway requirement that insurance buyout must not be realistically achievable in the foreseeable future. Trustees will still need to demonstrate that a transfer improves the likelihood of members receiving their full benefits, supported by clear comparisons between existing covenant support, alternative arrangements, and the security offered by the superfund.
