The landmark superfund transaction between Clara Pensions and the Sears Retail Pension Scheme could herald a raft of similar deals - with new providers and similar solutions set to enter the market.
Lane Clark & Peacock (LCP) - which acts as investment consultant to the Clara Pension Trust - said that, as highlighted by the transaction, the superfund model can enhance the support provided to members' benefits, as it provides additional layers of protection.
It said such solutions could also help schemes with some of the other challenges they face - noting that, in the case of the Sears scheme, there were material illiquid asset holdings which could have realised losses had they have needed to be sold quickly as a result of a typical buy-in or buyout transaction.
LCP said the Clara deal with the Sears scheme could be "transformative" for the industry.
Senior consultant Dev Gandhi said: "This transaction not only marks a significant milestone for Clara, but has the potential to be the catalyst for transformative change in the pensions industry. We estimate that there could be £5bn or more of further superfund transaction in the next few years and expect to see new providers and similar solutions entering the market, driving yet more innovation and competition in this space."
LCP partner and head of endgame innovation Jonathan Griffith added: "The superfund transaction reflects a reinvigorated commitment to delivering improved outcomes. Clara represents one of a growing number of new endgame options for pension schemes to embrace as a way to secure benefits for pension scheme members whilst also offering enhanced value for other stakeholders."
Hymans Robertson is scheme actuary of the Clara Pension Trust. Head of alternative risk transfer Iain Pearce agreed today's deal would have a broad impact.
He said: "The conclusion of this first transfer to a superfund is a historic milestone and paves the way for other pension schemes to do the same. Other schemes that follow can also gain from external loss absorbing capital in new ways, where doing so increases the chance that members receive all the benefits they were promised."
Pearce added: "As with any new structure or solution, it will be necessary for additional due diligence and steps as the parties involved build their knowledge and understanding of these offerings. This will help them decide whether or not a transaction is right for their own members.
"As Clara seeks to write more business, we would expect that understanding within the industry will grow. This will mean that the implementation process is increasingly better understood and could help to develop a degree of standardisation, as we see with bulk annuity transactions. Future superfund legislation can help provide more clarity and execution certainty, and may become more pressing as more transactions are announced."
PwC said that, as an increasing number of pension schemes explore end-game options, superfunds could offer schemes with weaker sponsors an alternative solution to enhance the security of members' benefits.
Head of alternative pension solutions Matt Cooper said: "According to our analysis, there are around 500 DB schemes that may be suitable to enter into a superfund with aggregate assets of £100bn.
"Although a small proportion of the £1.4trn 5,000 private sector DB pension schemes market, this corresponds to around 750,000 pension scheme members who could potentially benefit from a superfund. The market for pension schemes able to potentially benefit from transacting with a superfund is sufficiently large to support a number of superfunds to achieve the scale needed to make them commercially viable."
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