Jessica BirdClear expectations for the release of capital from defined benefit (DB) superfunds form part of updated guidance released today by The Pensions Regulator (TPR).
TPR updated the guidance after listening to the industry regarding capital release; the position in the updated guidance aims to support innovation while retaining protection for scheme members.
The DB superfunds guidance now states capital can be released up to twice a year and when meeting a specific trigger and safeguards.
TPR also considered how superfunds and capital backed arrangements (CBA) could play a role in the case of schemes whose employers have become insolvent.
Here trustees may decide to enter into a CBA or superfund on a reduced capital adequacy basis where the alternative is for the scheme to buy out on less than full benefits.
Nina Blackett, interim executive director of strategy, policy and analysis at TPR, said: “We expect superfunds and capital backed arrangements to increase as the DB market consolidates.
“We strongly support innovation in the interests of savers, and in updating the guidance we have worked closely with industry.
“The introduction of capital release will make it more attractive for providers to enter the market because it will enable surplus above a healthy funding level to be taken ahead of buyout.
“The inclusion of superfunds in the new Pension Schemes Bill should provide confidence to potential market participants.”
