Re/insurance broking giant Aon has underlined the significance of so-called Superfunds and expects the new Pension Risk Transfer (PRT) instrument to be deployed imminently.
Superfunds have been introduced to help help counteract emerging gaps between the fixed sums paid out by pension schemes and the income received from investments.
The driving concept behind Superfunds, which as of today cleared a significant regulatory hurdle, involves the collective consolidation of assets from various company schemes into something more efficient.
The first deals will be small, Aon notes, but aim to manage billions of pounds in assets.
“Following the guidance issued by The Pensions Regulator (TPR) in June and October 2020, the market has been keenly awaiting the completion of the initial assessment of one of the superfunds,” said John Baines, partner and head of commercial consolidation at Aon.
“Today’s confirmation that Clara has completed this assessment is hugely positive for the market. This was the last remaining piece of the puzzle before pension schemes can focus in earnest on whether transferring to a superfund is a viable ultimate destination.”
Clara Pensions is a company ran by former hedge fund manager Adam Saron and, with its assessment complete, a transaction could be seen as early as 2022’s first quarter.
“Given the situation many schemes find themselves in following the impact of the COVID-19 pandemic, this approval comes at the right time for trustees who are concerned about sponsor covenant, or for sponsors who need a cheaper solution to the ‘pensions problem’ than buyout,” addded Baines.
“In fact, many schemes have been waiting for a positive signal from TPR and will accelerate their work to complete any remaining steps needed for them to enter the superfund.
“More widely, trustees and sponsors should consider using this market development to revisit their long-term strategy and assess whether superfunds are a viable endgame option for their scheme.”
