Simon True, CEO of Clara-Pensions, said: “This is a landmark day for Sears’ members, as they become the first members of Clara and will benefit from a day one injection of new, ring-fenced capital of £30m to support their journey to an insurance buyout. Members will be able to take confidence in the improved financial security of their benefits and the commitment and expertise of Clara.”
What it means for clients
The idea of a superfund is that it provides the kind of scale that can protect pension scheme members’ benefits, so a client whose DB scheme is ‘bought’ by a superfund will, on paper, have the security of knowing their pension will be paid out.
True pointed out that an insurance buyout remains the gold standard for any pension scheme member.
He said: “Not all schemes can afford to reach that goal. Clara was created to provide a safe bridge that brings the insurance market into reach for more schemes and their members.”
Superfunds have been sold on their ability to provide security through scale, but this will take a while.
True said there were 10 other deals in the pipeline and it expects to have taken on board a further 30,000 scheme members by the end of 2024, as well as pension assets amounting to an estimated £4bn.
For now Clara remains the only UK pension superfund to have received regulatory approval, and the UK superfund model has, so far, proved too tough for other companies to make it viable.
The Pension SuperFund (PSF) in 2021 tried and failed three times to complete the TPR’s superfund assessment process.
At the time its co-founder, Edi Truell blamed The Pensions Regulator (TPR), government and insurance industry for making his DB superfund business model “uninvestable”.
He said TPR had not produced ‘profit extraction’ guidance on how superfund investment profits could be distributed.
Profit and buyout
Superfunds, like Clara, rely on cash from external investors, who - once the benefits of members have been secured - take their cut through making successful investment decisions.
Extracting this surplus, or profit, will need an act of Parliament to set out how much and how investors can extract their profits.
In September, the TPR signalled a change in its position on profit extraction, although it said it would be consulting further with industry on how this will work to help create a system that worked for both providers and members.
For now Clara’s deal is being welcomed as the start of a new era for pensions which have struggled to become fully funded enough to benefit from the umbrella of an insurance buyout.
Laura Trott, minister for pensions, said: “I am confident the market will continue to grow, freeing up employers to focus on their core business, and assisting in the Government’s push for increased productive investment within the pensions sector.”
