Clara-Pensions opens for UK superfund deals after watchdog clearance

By Carolyn Cohn

LONDON (Reuters) -Pensions consolidator Clara-Pensions is open to deals to manage UK company final salary benefit schemes after becoming the first British firm to win regulatory clearance to act as a superfund, it said on Tuesday.

Pension superfunds are designed to manage several pension schemes together, and offer a lower-cost alternative to insuring them through a so-called bulk annuity of the type provided by life insurers such as Aviva, Legal & General and Phoenix.

"Clara’s member-first model is ready for transactions," said Clara-Pensions' Chief Executive Adam Saron, adding that the firm was now planning its deals for the coming year.

British companies have nearly two trillion pounds ($2.67 trillion) in defined benefit, or final salary, pension schemes, most of which are closed to new members.

Nearly half are in deficit, and many companies are looking to offload the schemes, which can be a drag on their balance sheets.

The Pensions Regulator said on Tuesday that Clara-Pensions was the first superfund to pass its assessment process.

The superfund model is new https://www.reuters.com/article/britain-pensions-superfunds-idUSL5N20T4Y4 but has similarities to the Dutch pension system, where individual company pension schemes have been joining bigger, sector-wide programmes.

Superfunds can "increase protection for savers and their pensions, whilst providing employers with a new, affordable option to manage their legacy pension responsibilities”, said Britain's minister for pensions and financial inclusion Guy Opperman.

But the structure has come in for criticism from bulk annuity providers on the basis that it may provide less protection for policyholders.

"It is vital...that trustees and employers still carry out their own thorough due diligence to ensure they are confident a superfund is the right option for their particular scheme and members," said Nicola Parish, TPR’s executive director of frontline regulation.

Employers should only consider a superfund which is on the TPR's list, she added. "We expect employers considering a superfund to come to us for clearance.”

The first superfund deals will likely be finalised next year, said Iain Pearce, senior risk transfer consultant at pensions consultants Hymans Robertson, though he added that he expected the regulator to "closely scrutinise all cases".

($1 = 0.7490 pounds)

(Reporting by Carolyn Cohn; Editing by Huw Jones and Jan Harvey)