Thanks to the Pension Protection Fund for using its data gathering prowess to keep those of us working in and commentating on pensions, armed with the right information.

It’s the latest stuff from the Purple Book and it shows just how important our DB legacy of private schemes is.

The reason we still have so many DB pension funds.

We have got used to the idea of 5,000 pension schemes and at 4,838, the prediction that by the second half of this decade, defined pensions would have collapsed in number has been proved wrong.

I will put six things that haven’t happened

1. The buy-out of pension funds by insurance companies has not happened, we have insurance companies inside many of these pension funds but we are some way off closure. Schemes have been bought out but kept alive because we are told it is too complicated to shut them down and give administration to insurers. That’s one.
2. The superfunds we were supposed to have by now, have not arrived. Pension Superfund didn’t happen, Clara did but has so far only consolidated four funds and we don’t see much new – other than some statements of intent by TPT. That’s the second reason
3. On the contrary, the mood in the market is that the Stagecoach/ Aberdeen deal may be the first of innovative transfers and capital backed deals which will keep schemes intact (that’s three)
4. The PPF has had a much smaller number of schemes going into it since the “recovery of DB funding positions” following the end of QE and the return of surpluses in funding calculations (based on risen gilt yields). That’s four

There may be a fifth one , though this is me being cynical, but there is a lot of revenue streaming towards advisers and professional trustees from pension schemes remaining intact without buying-out or consolidation into superfunds and the PPF is not a happy place for trustees to conduct its scheme to.

This is cynical and sceptical because it supposes that pension schemes have been supported to keep themselves alive by a Pension Regulator which has tested the employer’s covenant to an extreme. For many TPR’s insistence on prudence has disabled many employers from growing their business but it has kept pension schemes intact, like the albatross around the seaman’s neck. The sixth reason why we may have so many pension schemes intact is that the PPF has been protected by TPR to a point that it is over £14bn in surplus, it simply hasn’t done the job we thought it would.

2026?

At a recent SPP event, a whole lot of people stuck their hand up when the question was asked if they’d support superfunds next year. 

I’ll believe that when I see it. We first heard superfunds were coming nearly 9 years ago and there are just too many hurdles to get over from TPR to vested interests earning on funds for me to see it as a flood, I suspect Clara will make some progress as a bridge to buy-out but we have yet to see the vision of Edi Truell and team back in 2017 taking hold.

It will happen if TPR applies a value for money analysis on the cost of maintaining DB schemes (especially small DB schemes) in place versus the cost of moving them to superfunds (when they arrive for run-on).

My challenge to TPR is it accept that it was wrong to stand in the way of Pension Superfund and what could have come after it. Edi Truell comments that DWP has not helped the SuperFund model

The Pension Bill is not fit for purpose. Confused and muddled drafting, especially on what is and what is not a superfund. And no clear path to superfund capital providers receiving a clear return on capital ( as was promised for years); nor for that matter upside sharing with members as per the Pension SuperFund model. Until that is clear, forget superfunds.

As for insurance solutions, I see buy-out and buy-in becoming a lot less attractive to the majority of schemes that are (belatedly) working up to the attractiveness of using surpluses for the good of all. TAS 300 is an actuarial VFM tool which should be much more used and more publicised. I suspect that many of the deals done in the past four years were done without any proper attention paid to alternative to the “gold-plated” insurance buy in (leading at some point to buy-out).

The biggest opportunity going abegging is with the PPF which is a superfund in waiting if ever there was one! It can’t be accessed unless on failure of the sponsor and it will take a massive climb down by the covenant assessment team at TPR and the lobby for the insurers that is everywhere for the PPF to be a consolidator for schemes that want to do the kind of transfer that Stagecoach have just done – but on equivalent terms to scheme rules- with the PPF. We aren’t going to get this in 2026 (unless there is a u-turn on the pension schemes bill which I think unlikely).