The Debenhams Retirement Scheme has completed a £600m (€702m) bulk transfer to Clara-Pensions, exiting the Pensions Protection Fund (PPF) and restoring full benefits for its members.
This transaction comes just four months after its first landmark deal and reinforces the view that superfunds offer a viable endgame option for pension schemes with distressed sponsors. Clara now has over £1bn of assets under management.
The Debenhams scheme has been in PPF assessment since 2019. With this transaction, its 10,000 member benefits will be secured and paid in full, including back payments of £4m to members to restore benefits for those who received reduced pensions while in the PPF assessment period.
Clara will also provide members of the Debenhams scheme with an injection of £34m of ring-fenced capital to improve member security and provide increased certainty on the journey to an insured buyout in five to 10 years’ time.
The trustees of the Debenhams scheme, chaired by Mark Cliff at Vidett, have now written to inform members of the intention to transfer their pension benefits to Clara. The formal transfer of members will proceed in April 2024.
LCP acted as investment consultant to Clara-Pension Trust and helped support with the investment aspects of the transaction including the transition to Clara. Hymans Robertson has advised the Debenhams fund and its trustee, while Osborne Clarke acted as legal advisor.
Dev Gandhi, senior consultant at LCP, said: “Clara’s second superfund transaction has come swiftly, demonstrating the market’s growing confidence and means – in less than six months since its first transaction – Clara’s asset base has already reached over £1bn. With a growing interest amongst other schemes – and any concerns around being an ‘early adopter’ eased – we expect the superfund market to go from strength to strength in the months ahead.”
Jonathan Griffith, partner and head of endgame innovation at LCP, pointed out that transfers from the PPF that provide full scheme benefits are rare.
“This deal provides further proof that superfunds are key players in the UK pensions landscape and illustrates the drive and innovation across the industry to ensure that member pension promises can be met in full,” he noted.
“This deal provides further proof that superfunds are key players in the UK pensions landscape and illustrates the drive and innovation across the industry to ensure that member pension promises can be met in full”
Jonathan Griffith at LCP
Iain Pearce, head of alternative risk transfer and lead advisor at Hymans Robertson, said Debenham’s pension scheme members’ benefits were “far from certain” during the period since the scheme entered PPF assessment in 2019.
“It has been exciting to support the emergence of superfunds as a new valuable option for trustees. It’s enabled the trustees to continue, in challenging circumstances, to fulfil the promise previously given to members,” he said.
Harry Allen, senior risk transfer consultant at Hymans Robertson, added that this transaction will accelerate the process for building understanding and knowledge of superfund transfers within the industry, in doing so “driving efficiency and reducing execution risk for these transactions”.
Sara Protheroe, chief customer officer at the PPF, also noted that this is a positive outcome for members of the Debenhams scheme.
She said: “When a scheme enters PPF assessment, our focus is always to protect members and achieve the best available outcome for the scheme. We’re pleased that our collaborative approach working with Clara, coupled with the value from our specialist PPF panellists, has helped secure a better than initially expected outcome for members.”
Protheroe added that the deal demonstrates the success of PPF+ Advisory panel, which was introduced in 2022 to support overfunded schemes to explore options beyond the PPF, as well as the PPF’s ability to continue to evolve to meet the needs of the changing landscape of defined benefit pensions.
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