I no longer have anything to do with superfunds, of whatever form, but I am sorrowful that part of the Government has yet again shown it is captured by an aversion to growth.
There is nothing that superfunds are exempted from when it comes to levies, the only exemption they get is from common sense.
It seems that somebody in the DWP or HMT’s policy making team has determined that a superfund’s covenant to meet the pensions of pensioners is inferior to the 4,900 employers who support DB plans.
There is a clear message to the market here and that is that the superfund is not a safe place for an employer to send its pension scheme, it is a message to its trustees too.
Professional Pensions has reported
In its response to the PPF consultation, TPT Retirement Solutions said that, while it supported the lifeboat fund’s decision to reduce the regular levy to zero, it had “serious concerns” over its decision to continue to charge the levy on superfunds.
Last year, TPT announced its intention to launch a run-on superfund. Since then, reports have suggested a number of other workplace pension providers are also interested in the superfund space.
TPT said the PPF’s decision to continue charging the alternative covenant scheme (ACS) levy, which applies to schemes, including superfunds, without a substantive employer covenant does not proportionately reflect the risk superfunds pose.
It said schemes entering superfunds must be able to demonstrate an increased probability of benefits being paid in full – something TPT said meant superfunds represented less risk than regular DB schemes.
Furthermore, TPT said the availability a capital buffer would “put schemes in superfunds in a stronger funding position than regular DB schemes”.
TPT said it also opposed a continuation of the ACS levy on grounds of fairness – noting that regular schemes and members will now benefit from the zero levy, but those moving to a superfund will not, despite having paid the levy until the transaction.
TPT Retirement Solutions head of policy and external affairs Ruari Grant said:
“The PPF’s decision to reduce the regular levy to zero makes complete sense, but there’s no reason the same logic can’t be applied for superfunds. These schemes are to be held to a very high level by the regulator and will therefore pose minimal risk to the PPF.
“We are aware PPF is wary of future models emerging which may pose more risk, and of the risk were superfunds to reach ‘significant scale’. However, we’d urge them to take a more proportionate approach for the market that currently exists, and remain flexible in future – rather than risking stifling growth and innovation at the outset.”
I couldn’t agree with the newly appointed Ruari Grant. There is an extraordinary silence coming not just from TPR, PPF or his former employers Pensions UK about innovation. The Aberdeen innovation in taking on someone else’s scheme has had no congratulation from any of these organisations. Why?
There continues to be a legacy of fear of risk that here is a double contradiction of what the Pension Schemes Bill is trying to achieve. The Bill is looking to encourage the continuance of schemes , as Stagecoach’s scheme has continued by swapping its sponsor. The Bill is looking to see pensions take bold steps to help Britain recover growth in its economy.
The PPF’s decision to levy the ACS levy on Clara which has launched, TPT which is looking to and a range of other organisations looking to offer capital backing as a buffer instead of an employer, is a failure of common sense. The rules governing the security that superfunds and capital backed sponsoring have been 8 years in the making and now agreed as offering equivalent security to that offered by an annuity,- bulk purchased for members.
For all its talk of innovation, parts of the PPF/TPR/DWP/HMT policy making appears to have been infected by funk. This plays into the hands of the insurance companies who have been able to own the “end-game” for a number of years now.
I do not see this risk aversion as consistent with anything else being legislated or regulated. But alongside the spooked silence over the innovation of the Stagecoach/Aberdeen sponsor transfer, it suggests to me that the Government is not yet free of its anathema to growth.
I totally agree with you Henry.
The PPF is essentially a mutual insurance policy purchased by employers to protect their deferred remuneration promises. Apart from the fact that new entrants may not have to pay the grossly inflated levies paid in the past by employers, the majority of whom had no claims on the Fund, there appears to me to no reason why sponsors continuing to guarantee those defined benefits should should not be able to purchase the same insurance cover. In equity, the premium should be paid by the sponsor (out of its permitted profit extraction) and not out of the pooled pension fund assets.