Sears Retail Pension Scheme became the first UK defined benefit (DB) pension scheme to be consolidated into a superfund.
In a move which one pension consultancy claimed was a ‘significant milestone’ for the industry, Clara-Pensions announced it had reached an agreement with the trustees of the Sears scheme.
Clara is the only pension superfund to have so far received clearance from The Pensions Regulator (TPR) to conduct this type of business in the UK.
TPR defines a superfund as: “A vehicle that, upon entry or at some point in the future, allows for the severance or substantial alteration of an employer’s liability towards a DB scheme, or the DB section of a hybrid scheme.”
Clara-Pensions received TPR’s clearance to conduct superfund business back in 2021. So the deal with the £590mn Sears scheme, which has 9,600 members, was a long-awaited one.
Members of the Sears scheme will have their benefits transferred to Clara in what the superfund announced was the start of a “journey to an insured buyout”.
Clara will ringfence an additional £30mn in order to increase the security of members’ benefits as part of the deal, which has been cleared by TPR.
Clara is backed by Sixth Street, which manages around $74bn (£61bn) in assets and employs 500 around the world.
It was set up in 2017 and any schemes it signs up are placed in separate sections of the Clara Pension Trust.
Additional capital from Clara’s investors is injected to create a funding buffer for the schemes it signs up.
Clara’s pool of advisers, partners and non-executive directors includes Lawrence Churchill, chair and the founding chairman of the Pension Protection Fund and Alan Pickering, former Chairman of the National Association of Pension Funds, now known as the Pensions and Lifetime Savings Association (PLSA).
Bridge to buyout?
Super Funds are not an alternative to a fully-funded insurer-led buyout, rather they are aimed at providing a bridge to one.
They do this by acting as both a consolidator and intermediary which brings in external investor capital and expertise to increase the bought out scheme’s funding.
When the scheme becomes fully funded, it can then seek the assumed protection of an insurer buyout.
Trustees for the Sears scheme, said they had been carefully managing the scheme with the aim of securing all members’ benefits with an insurance company through a full buyout in the future.
Clara, via its investment managers and advisers, will work to improve the scheme’s funding, with the £30mn from investors ring-fenced to draw on. This cash will be used as insurance so it can pay out the benefits of members if the returns on the scheme’s assets fall short of its required funding level.
While continuing investment of the Sears pension will be taken over by Clara, Sears trustees confirmed that the administrator Isio will remain in place.
