DB superfunds

Defined benefit (DB) consolidation is the idea of pooling various elements of managing a DB pension scheme (eg liabilities, investments, actuarial services) to create economies of scale and reduce risk. There are multiple models of DB consolidation. One of these models is a DB superfund (also known as a DB consolidator).

A DB superfund is a vehicle into which the DB liabilities of multiple DB schemes can be transferred to secure their members’ benefits, resulting in the severance of the employers’ liability towards the transferring schemes. Instead of an employer covenant, the DB superfund benefits from a capital buffer which can be called on if the DB superfund needs it.

For further information, see Practice Note: DB consolidation—what are DB superfunds?

The DWP’s proposed permanent regime

DB consolidation was first envisaged in the White Paper published in March 2018 ‘Protecting defined benefit pension schemes’.

The Department for Work and Pensions (DWP) subsequently published a consultation in December 2018 (the DWP consultation) which sought views on a number of measures to support the consolidation of DB pension schemes. In particular, the government sought views on a new legislative framework

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