Transferring a DB scheme into a superfund such as Clara-Pensions can provide savings of as much as 10% for employers, according to the analysis by Hymans Robertson in its revised paper ‘A Closer Look at Clara’. The paper has been updated following the TPR announcement that Clara-Pensions had successfully completed the assessment process for defined benefit consolidators.

In the paper, the leading pensions and financial services consultancy found that scheme demand may even outstrip supply for a period of time as Clara seeks to build scale. Early engagement will be crucial to ensure that schemes do not find themselves having to wait, with a number of transactions expected to be completed in 2022.

The report shows that a superfund can boost the chances of members receiving their benefits, by strengthening and reinforcing the path to buy-out. It also distances the scheme from the sponsor which averts the risk of collapse if the sponsor were to fall over.

Commenting on the ‘Closer look at Clara’ report, Iain Pearce, Head of Alternative Risk, Hymans Robertson, says:

“Commercial consolidation is now here, and the market will be transformed as Clara, with its recent assessment from TPR, begins to open up a new endgame for schemes. Research we conducted last year found a stark increase in the number of Trustees considering moving to a superfund, with a nearly 50% increase in this option being considered, and we expect this to continue to grow.

“When deciding whether to transfer, Trustees need to be confident that members would be more likely to receive their benefits and understand the implications of severing the link to the sponsor as part of the “gateway tests”.

“To support these decisions, there is a need to quickly and efficiently build understanding of how alternative risk transfer solutions can help protect members’ benefits. The paper sets out to explain the role superfunds such as Clara can play. For plenty of schemes, an extra buffer using third party funds should be too good an opportunity to be missed.”

A copy of the Closer Look at Clara Paper can be accessed HERE.