DB consolidation
Consolidation - what are we waiting for?
12 May 2020
It’s fair to say that it has been very quiet on the commercial consolidation front for some time, after much press coverage and industry attention early on. But what has really been going on, and what can we expect to happen next?
Commercial consolidators are vehicles designed to accept pension scheme liabilities for less than the cost of buy-out, providing additional capital to improve members’ benefit security, and severing the sponsor’s obligation to support the scheme.
Following a highly anticipated Government White Paper in March 2018 signposting the future development of a regime to facilitate commercial consolidation, two vehicles quickly emerged:
- Clara-Pensions – which aims to buy-out schemes it takes on in the medium term.
- The Pensions SuperFund (PSF) – which plans to run-off liabilities it takes on indefinitely.
The Pensions Regulator (TPR) has been working with consolidators to provide ‘pre-authorisation’ of their models, following which individual transactions can be submitted for formal clearance. This is the step required for the first transactions to happen under the interim regime, ahead of the final authorisation regime coming into force.
Pre-authorisation from TPR of both Clara and PSF is expected imminently, following which the first transactions will be quickly submitted for clearance. We’re expecting to see the first deals hit the headlines this year, though we’re admittedly hesitant given previous delays and distractions from COVID-19.
We’re hearing rumblings of other consolidation offerings being set up. New entrants, particularly in an emerging and evolving space, mean competition and innovation, which should be welcomed by the industry.
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