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Article | Pensions Briefing

An interview with the chief executive of Clara-Pensions

February 24, 2022

The Pensions Regulator has given the formal green light to the industry’s first defined benefit superfund, Clara-Pensions. We catch up with Adam Saron, Clara’s chief executive.
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Costas Yiasoumi (CY): The Pensions Regulator (TPR) recently announced that Clara-Pensions has completed the first phase of its assessment process. Why was this announcement at the end of 2021 so significant?

Adam Saron (AS): Clara can now move forward with consolidation transactions and our goal of providing safer pensions to members. Throughout the assessment process, TPR had always been clear that trustees should not transact with superfunds until they have met the regulator's requirements. TPR’s announcement means that we have passed that milestone.

CY: What are Clara’s key features?

AS: Clara’s core founding principle is that we put the member first. For us, that means three things. The first is common to all superfunds: a transfer to Clara should be about providing a better pension outcome for members, a safer pension. The way we do that is through contributing our own funded capital.

Second, we're designed as a bridge to buyout. So we see ourselves as part of the endgame journey, rather than the destination itself.

And last and probably most importantly, the capital that we provide to support each scheme that becomes a section of the Clara pension trust. There is no return of that capital to our investors or no return on that capital until all members’ benefits are secure. We are a commercial enterprise and want to make a return, but our return only comes after we have delivered that endgame, once we have delivered that buyout for the membership.

CY: What size of transactions are you interested in over the next 24 months, as you build Clara-Pensions?

AS: As a consolidator we want to achieve scale because it makes us a safer entity. Over the next 12 to 18 months, we will be focusing on larger transactions: around £200 million and upwards. The first transactions are going to be viewed as novel and that probably means relatively higher adviser costs. Certainly, in all the interactions we've had with the regulator, they're very focused on proportionality in transactions. You wouldn't want to be in a situation where the cost of advice effectively overshadows the economics of the trade.

CY: As has already been mentioned, the superfunds are for-profit entities. Sometimes we read that superfunds are likely to invest in risky assets so as to make as much money as possible. Is that your approach?

AS: Absolutely not. Clara, at its heart, is a pension scheme. We have an independent trustee board, just like all the other defined benefit pension schemes in the UK, and the majority of assets sit within the pension trust under the control of our trustees, who have appointed Kempen as their fiduciary manager. So really, it's the trustees who are making any investment decisions. We also use Kempen to manage the assets that sit outside the scheme, which are under our corporate control. But when you take a step back and think about the investment strategy for that total asset stack, the scheme plus the buffer, it is very much focused on a lower-risk strategy. So credit assets and contractual returns, rather than equity.

CY: I’ve heard superfund pricing should be 10-15% cheaper than a buyout. Is that true or false?

AS: I think that’s right, although it depends on the mix of members and the benefit structure. Broadly speaking, the higher the proportion of deferred members, the closer to the lower end of that cost range you should expect to be. It is easier to hold deferred members in a pension structure than on an insurance balance sheet.

CY: How do you respond to comments that superfunds are less thoroughly vetted than insurance companies?

AS: We have gone through a very detailed process with the regulator covering our people, processes of governance, financial sustainability and frankly, it's not over. We've met the initial TPR assessment milestone, but all that has initiated us for now is very intense, one-to-one, ongoing supervision. The regulator is in favour of superfunds, but they want very well-governed, safe ones.

CY: How long will it take to get a quotation from Clara?

AS: We are probably not that different to a bulk annuity provider, it will take six to eight weeks, depending on the scale of the scheme. If you are looking at more of a feasibility study, we can usually get an initial indicative quote for that done within a week.

Thank you for reading. If you would like to learn more about superfunds, please contact your WTW consultant, Costas Yiasoumi or Hazel Kendrick. You could also read about the six steps trustees should take when they’re thinking about moving into a superfund or read our superfund Q&A with a panel of experts.


Senior Director, Transactions
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Senior Director, Transactions
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