Life & Financial Services Insights
Could superfunds disrupt the bulk annuity market?
09 Jul 2020
The Pensions Regulator (“TPR”) recently published details of an interim regime for the pre-authorisation of so-called “superfunds”, which provide an alternative means of settling defined benefit pension liabilities for schemes that might otherwise have aimed to insure their liabilities with an insurer.
We have already published an article summarising this interim regime. However, a key issue for insurers is how much disruption the new regime might cause for the bulk annuity market.
A superfund acts very much like a bulk annuity insurer in that it will agree to take on the obligation of paying the benefits due to the pension scheme members in exchange for a one-off, up-front payment. However, the key difference is that the superfund is not an authorised insurance company. They are therefore not subject to Solvency II, nor are they regulated by the PRA. The government plans to create a legislative and supervisory framework, but until then superfunds will be regulated by TPR.
The key question for insurers is whether this will create competition or whether these two regimes can harmoniously live side-by-side. This L&FS Insights article delves into this further.