Disruptive and Warburg Pincus back the creation of 'the Pension SuperFund' to offer new solution for UK Pensions

‘THE PENSION SUPERFUND’ TO OFFER NEW SOLUTION FOR UK PENSIONS 

• “The Pension SuperFund” will be the UK’s first pension consolidating ‘superfund’
• Specialises in consolidating, securing and servicing UK defined benefit pension assets and liabilities
• Provides a more affordable solution to the challenge of securely funding defined benefit pensions
• Provides better security, governance and funding for many defined benefit pension funds
• Highly experienced team, led by Alan Rubenstein, former CEO of the UK Pension Protection Fund
• Initial £500 million of capital to underpin The Pension Superfund’s commitments.

Responding to the challenges from both Government and Industry* of finding new ways of ensuring sufficient funding to meet promises made by defined benefit pension schemes, The Pension SuperFund offers a solution for those employers who need a more affordable way to fulfill their pension promises while also providing improved security for their pension scheme members.

The Pension SuperFund will accept bulk transfers of UK defined benefit pension assets and liabilities and consolidate them into one occupational pension scheme.  The advantages of scale provided by consolidation will enable The Pension SuperFund to achieve higher investment returns, stronger risk management and lower costs. This, underpinned by the capital provided by its investors, will enable The Pension SuperFund to offer higher levels of security for meeting future pension promises and better outcomes for pension scheme members, trustees and sponsoring employers.

The Pension SuperFund is led by Alan Rubenstein, who was until January this year the Chief Executive of the UK’s Pension Protection Fund.  Alan will be supported by a highly experienced and successful management team, comprising Marc Hommel, the former Global Head of Pensions Advisory at PwC, and Luke Webster, Chief Investment Officer at the Greater London Authority.

The Pension SuperFund has attracted the support of major institutional investors, including the likes of Warburg Pincus and Disruptive Capital. The Pension SuperFund has lined up an initial £500 million of capital, subject to transaction approvals, to underpin The SuperFund’s pension commitments.  Further capital will be raised in future as needed to support a superfund that is expected to grow over time to £20 billion and beyond.

Alan Rubenstein, CEO of The Pension SuperFund, comments: “The benefits of consolidation are well documented, both in the UK and overseas. We welcome the encouragement given to consolidation in the Government’s recent White Paper.  We know that many businesses are constrained by their pension liabilities and need to find a more affordable way to fulfil their promises to pension scheme members.  The Pension SuperFund is taking the lead in providing the opportunity to deliver better outcomes and improved security to pension scheme members, trustees and sponsoring employers.

“We are already in discussion with several pension funds and their sponsoring employers, as well as the professional advisers that support them.   There are currently around 5,600 private sector defined benefit pension schemes, with obligations to around 11 million members.

I’m very excited to be launching this enterprise. I am delighted that our team and our proposition have attracted the support of highly regarded investors like Warburg Pincus and Disruptive Capital to underpin the security we will provide to The Pension SuperFund’s members.”

-Ends-

*NOTES TO EDITORS

In September 2017, the Pensions and Lifetime Savings Association (PLSA), which represents 1,300 pension schemes with 20 million members, published the final report of its Defined Benefit (DB) Taskforce.  The Taskforce comprised a cross-section of pension industry professionals, employers, pension trustees, advisers and union representatives.  The report highlighted that the collective deficit of the UK’s DB schemes had averaged over £400bn over the previous 10 years, due to low investment returns and increases in life expectancy. It noted that as many as 3 million members of defined benefit pension schemes currently only have a 50 per cent chance of seeing their benefits paid in full, but could be more secure if their retirement funds were consolidated. The report also highlighted that the sustainability of many employers is threatened by the cost and uncertainty of having to make up pension deficits, diverting money away from crucial investment in developing businesses and improving the productivity of the workforce.

In the Green Paper entitled Security and Sustainability in Defined Benefit Pension Schemes, published in February 2017, the Department for Work and Pensions stated clearly their view was that there “appears to be a strong case supporting greater voluntary consolidation” and that they believed the creation of consolidation vehicles “would be a helpful development”.

The Government’s White Paper entitled ‘Protecting Defined Benefit Pension Schemes’, published on March 19^th 2018, further encourages the development of consolidation, pointing out that, “Commercially run consolidation vehicles would, if designed properly, both reduce inefficiency and offer better long term outcomes for certain scheme members whilst offering an alternative strategy for managing legacy Defined Benefit schemes” and that, “As well as providing an opportunity to improve outcomes for Defined Benefit members, consolidation could benefit both scheme sponsors and the PPF.”

Alan Rubenstein stepped down from his role as Chief Executive of the PPF in January 2018, following nearly nine years in charge during which the PPF grew to over 240,000 members while assets grew from £3bn to £30bn.  Over the period, the PPF improved its funding level from 90% to 121% of its liabilities and won many awards for risk and asset management.  

Marc Hommel was for 17 years a partner at PwC where he led their UK and global pension advisory practices.  He has worked with employers, trustees, governments and policymakers in the pensions industry for over 30 years.

Luke Webster is Chief Investment Officer of the Greater London Authority and formerly was Chief Financial Risk Officer at London Pension Fund Authority, where he led their £11bn consolidation with the Lancashire Pension Fund.

For further information, please contact:

Lansons 

Laura Hastings                                                                         Lucy Horne     

07768790752                                                                          020 7294 3689

TPSF@lansons.com