TPT Retirement Solutions (TPT), one of the UK’s leading pension providers, has announced its intention to launch a new Defined Benefit (DB) fund designed to support ongoing performance.
Both The Pension Regulator (TPR) and the Department for Work and Pensions (DWP) have voiced their support for larger funds, which give schemes another last-ditch solution. Capital funds are designed to take responsibility for meeting the liabilities of corporate DB pension schemes to their original sponsors. They are particularly suitable for schemes that do not have large cash flow positions and cannot afford alternatives such as full purchase and insurance.
Currently, there is only one superfund that TPR has assessed in the UK market, and it aims to buy as its ultimate goal. TPT’s superfund proposal, which is designed to go forward, will expand the endgame solutions available to employers and trustees. TPT has secured funding to fund an initial £1bn of operations, which it expects will be sufficient to support a number of deals subject to scale, regulatory approvals and market conditions.
An opportunity in the DB integration market
Large superannuation funds offer a great deal of choice in a wider consolidation market. With many programs facing improved funding levels in recent years, capital funds represent an effective way for those programs that still lack full funding to be purchased. Currently, 4 out of 5 UK DB schemes are surplus with a combined funding rate of 120% on a technical provision basis. Continued capital is well placed to invest in growth assets, supporting the Government’s ambitions for the UK economy.
TPT has developed its new superfund with members’ interests at the core. It focuses on maximizing the opportunities for members to receive full benefits, with the distribution of members’ surplus from the fifth year onwards, increasing the majority of the surplus once the risk capital has been returned to the investor.
Programs to consolidate and reduce the burden of donors
By combining strategies, spreading risk and putting experienced managers in place, large pension funds allow sponsors to avoid the ongoing costs and administrative burdens involved in running individual schemes.
Capital funds are required to maintain additional funds in addition to plan assets, to provide a buffer that trustees would not have access to in a private plan. Once the plan is transferred to the super fund, the responsibility for the plan no longer rests with the paying trustee, and reliance on the employer agreement is lost. The aim is to ensure increased opportunities for members to receive full benefits. The TPT superfund will be established with an independent Board of Trustees and an executive team.
TPT’s comprehensive integration strategy
TPT’s planned superfund follows May’s announcement of its intention to develop a multi-employer CDC proposal, and the recent launch of its DC proposal for a living income. Pending regulatory approval, TPT will have six different integration vehicles, making it a clear industry leader and a prominent pioneer in the development of pension solutions. The TPR has provided clear guidance on DB capital funds, giving trustees confidence in the due diligence process.
Nicholas Clapp, Chief Commercial Officer at TPT Retirement Solutions, said:
“We are very pleased to announce our plans to launch a superfund that we intend to move forward rather than a bridge to buy. There is a real opportunity here, and our intention to launch a superfund is part of a wider desire to provide a full range of options to integrate into plans that suit their needs.”
David Lane, chief executive of TPT Retirement Solutions, said:
“At TPT, we believe that pooling vehicles such as these provide better outcomes for members. They benefit from the economics that support TPR’s ambitions for fewer, larger, well-run schemes that offer better value for money. By design, larger funds also come with a wealth of investment capital – an innovation that closely aligns with the Government’s ambitions for economic growth.”
