Defined benefit (DB) consolidation—what are DB superfunds?
Produced in partnership with Camilla Barry of Macfarlanes
Defined benefit (DB) consolidation—what are DB superfunds?

The following Pensions practice note Produced in partnership with Camilla Barry of Macfarlanes provides comprehensive and up to date legal information covering:

  • Defined benefit (DB) consolidation—what are DB superfunds?
  • Merits of DB consolidation
  • DB consolidation—precedents
  • Key consolidation models
  • Proposed framework for regulation of DB superfunds
  • The DWP
  • The Pensions Regulator
  • The PPF
  • Definition of DB superfund
  • Permanent regime for DB superfunds—the DWP’s proposals
  • More...

The purpose of this Practice Note is to provide an overview of defined benefit (DB) consolidation, including information on consolidation models, the development of a regulatory framework for DB superfunds (also known as ‘DB consolidators’) and the definition of DB superfunds. This Practice Note also describes the legal structure of two emerging DB superfunds to the market, the ‘Pensions SuperFund’ and ‘Clara Pensions’.

For information on the interim regime developed by the Pensions Regulator in relation to DB superfunds, see Practice Note: TPR’s interim regime for DB superfunds.

For information on considerations applicable to trustees and employers when contemplating a transfer to a DB superfund, see Practice Note: Transfer to a DB superfund—trustee and employer considerations.

Merits of DB consolidation

DB consolidation has been a feature in jurisdictions outside of the UK including in the Netherlands and Canada (although it should be noted that recent concerns have arisen in the Netherlands that collective DB schemes, which feature a large degree of risk sharing, may end up encouraging suboptimal risk taking).

A key purpose of a DB occupational pension scheme has always been to provide better benefits for members for the same average cost by pooling life risk, accessing a wider range of investments, spreading investment and funding risk, and sharing administration costs. Access to equity returns and risk pooling through occupational pension schemes was always expected to enable employers

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