DWP backs pension system overhaul that could give millions of savers bonus payments from surplus cash

TPT Retirement Solutions (TPT), one of the UK’s leading workplace pensions providers, has today announced its intention to launch a new Defined Benefit (DB) superfund designed to support run-on.

Both The Pensions Regulator (TPR) and the Department for Work and Pensions (DWP) have expressed their support for superfunds, which offer schemes an alternative endgame solution.

TPT has announced the first payouts could begin from the fifth year of operation, with members receiving a larger share of any surplus once investors have been repaid.

The plan is meant to give members greater security and the chance of an extra boost to their pensions, instead of focusing only on moving schemes over to insurers through a buyout.

Regulators have backed the idea as a cheaper alternative for schemes that cannot afford a full buyout, offering a new route for millions of workplace pension savers.

Funding has already been raised to support £1billion worth of initial deals, paving the way for what would be Britain’s first superfund aimed at running long term rather than selling out to insurers.

At the moment, only one superfund operates in the UK with official approval, and it targets buyout as the end goal. This new model would give more choice to employers and trustees, especially for schemes without the money needed for a full insurance buyout.

Currently, four in five UK defined benefit schemes are in surplus, with combined funding levels of around 120 per cent.

The new vehicle would enable schemes to access growth assets, supporting governmental economic objectives whilst providing an alternative endgame solution.

Superfunds operate by combining multiple pension schemes whilst maintaining additional capital reserves beyond standard scheme assets, creating a protective buffer unavailable to standalone arrangements.

When a pension scheme moves into a superfund, the employer no longer carries responsibility and trustees hand control to the new structure.

By combining multiple schemes together and placing them under professional management, the model spreads risk and removes the ongoing costs and admin burden for employers.

The proposed superfund would be run by an independent trustee board with a full-time executive team to ensure strong oversight. Extra capital would also be held in reserve, boosting the chances that members receive their full pension benefits.

This approach fits with the regulator’s goal of having fewer, bigger pension schemes that can offer better value through economies of scale.

Nicholas Clapp, the group’s Chief Commercial Officer, said he was excited about creating a superfund focused on long-term operation rather than simply bridging to a buyout.

"We're very excited to announce our plans to launch a superfund that targets run on rather than a bridge to buy out," Mr Clapp stated.

He emphasised that the initiative forms part of TPT's wider strategy to provide comprehensive consolidation solutions tailored to individual scheme requirements.

David Lane, TPT's Chief Executive, highlighted the member benefits of consolidation vehicles through operational efficiencies.

"At TPT, we believe consolidation vehicles such as this provide better outcomes for members," Mr Lane said.

He noted that superfunds naturally create substantial investment capital pools, which corresponds with governmental aspirations for economic expansion.

The proposed superfund would become TPT's sixth consolidation proposition, following recent developments including multi-employer CDC schemes and income-for-life retirement products.