Partner Jane Kola comments in the Financial Times in relation to what superfunds should offer members and whether their pension benefits could change
Last month, UK regulators gave the green light for the creation of “pension superfunds” — commercially run entities capable of pooling final salary schemes from different employers and running them as one large fund.
With the first deals expected to be struck later this year, experts believe the path to consolidation could be hastened by the pandemic.
Although the superfunds market is in its infancy, looser regulatory requirements means it could provide a much cheaper way of doing this. Pooling several schemes together should, in theory, make them cheaper and more efficient to run — but in return, operators expect to make a profit, which has attracted controversy.
On what members should know about these, Jane commented:
“What moving to a superfund should offer members is greater long-term financial stability for the scheme so that over time it can become fully funded with a reduced risk of failure,”
Usually when groups of members transfer from one scheme to another they are offered benefits in the new scheme on a “like for like basis” so the benefits don’t change. However, Jane noted that does not mean they cannot be changed.
“The law permits changes in benefits as a part of the move as long as the transferring scheme actuary signs them off as broadly no less favourable than the original benefits,” says Jane. “For example, this might mean a later retirement date in return for more years and months of service or different pension increases.”
She says she expects that the first transfers into superfunds will be on a like-for-like basis as this will be easier to explain to members.
“As superfunds grow I expect a trend to develop of changing member benefits as a part of the transfer so that all members get the same type of benefits as such schemes are much easier and cheaper to run,” she adds.
Read Jane’s comments in the Financial Times.
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