The UK’s Department for Work and Pensions (DWP) has launched a consultation into the prospect of consolidating defined benefit (DB) pension schemes into so-called ‘superfunds’ to improve security for members.

The UK’s Department for Work and Pensions (DWP) has launched a consultation into the prospect of consolidating defined benefit (DB) pension schemes into so-called ‘superfunds’ to improve security for members.

The consultation paper (68 page / 688KB PDF) suggests that encouraging a well-managed superfund sector could be a more effective way of managing liabilities. In particular the DWP suggested that employers would be incentivised to inject funding into pension schemes to enable them to enter a superfund, so discharging legacy liabilities and allowing companies to focus on their core business.

The government said superfund schemes would protect savers through a capital buffer, reducing the risks associated with employer insolvencies, improve the likelihood of members’ benefits being paid in full, and enable access to a wider and potentially more innovative mix of investment opportunities.

The consultation builds on proposals published in March this year to strengthen DB protections, handing the Pensions Regulator (TPR) more powers and creating a new criminal offence to punish wilful or reckless behaviour by company directors.

Pensions expert Robert Tellwright of Pinsent Masons, the law firm behind Out-Law.com, said the consultation followed earlier work in the area of defined contribution schemes.

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