The Pension Superfund is an interesting development for employers and employees in the United Kingdom and is beginning to become relevant in all of Europe. Insurers have recently been given the green light to offer the superfund and several insurers are already putting this in place for their customers. These Pensions represent a new and highly regulated ‘vehicle’ designed to consolidate UK occupational Defined Benefit (DB) pension funds.

The superfund is achieved using a novel new method that accepts bulk transfers of all pension assets and liabilities from multiple employers’ DB funds into an existing HMRC (the UK tax authorities) registered and Pension Protection Fund eligible arrangement. In other words, an existing employer’s DB scheme is moved, as a bulk transfer, directly into the ‘Superfund’ which is managed by new trustees and is topped up, as necessary by a final sponsor (Employer) contribution to make up any fund deficit. Superfunds are also unique in that they involve the replacement of a DB scheme’s sponsoring employer with the capital-backed ‘Special Purpose Vehicle’ (SPV).

From the employer’s perspective the cost of the overall contribution may rise. However, any Commercial Businesses who inject a required ‘Capital Buffer’ amount can gear themselves up to generate a profit margin from the Superfund, so herein lies an initial, tangible benefit in making such a move.

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