Clara superfund takes over Wates Group’s 1,500 members

UK-based Clara-Pensions superfund has completed its third transaction by taking on board 1,500 defined benefit (DB) members from Wates Group.

All members will continue to receive their pension entitlements, with Clara and Wates Group injecting new capital to enhance the security of members’ benefits, Clara said.

Under the terms of the transaction, Wates Group will contribute an additional £19m (€23m) of funding to support the scheme in the form of a one-off payment and Clara will provide additional capital to enhance the security of members’ benefits.

Clara said that Wates Group, together with the Wates trustees, is committed to ensuring its members are fully cared for under Clara and will have increased certainty they will receive their pension entitlements.

Under Clara’s model, members ultimately transfer to an insurer through a buyout process after spending five to 10 years with Clara.

The superfund was advised by legal firm Osborne Clarke. It continues to be backed by global investment firm Sixth Street and was supported in its due diligence by Heywood Pensions Technologies.

Clara trustees are supported by pensions consultancy Hymans Robertson, fiduciary manager Van Lanschot Kempen and State Street, and legal firm Eversheds.

Wates Group was advised by PwC and CMS, while the fund trustees were advised by LCP, Macfarlanes and Cardano, a business of Marsh McLennan.

First active business transaction

This is the first superfund transaction to be completed by an active business and, according to the superfund, demonstrates the wide range of schemes which can benefit from the Clara solution.

The superfund added it has a “strong pipeline” of potential deals, with schemes that have liabilities of over £5bn, and this transaction reflects its continued evolution as the business adds to its existing 20,000 members and £1.2bn of assets under management.

Clara’s previous two transactions involved the Sears and Debenhams pension schemes.

In November 2023, Clara completed its first transaction, which was the UK’s first superfund transaction – where some 9,600 members of the Sears Retail Pension Scheme transferred to Clara. Scheme members benefited from £30m of extra capital, which immediately improved member security and provided increased certainty on their journey to an insured buyout in five to 10 years’ time.

In March 2024, 10,400 members of the Debenhams Retirement Scheme, which had entered the Pension Protection Fund’s (PPF) assessment period following the insolvency of Debenhams, joined Clara where they now receive 100% of their promised pensions in retirement. Under the terms of the transaction, £4m in back-payments have been paid to members who received reduced pensions during the PPF assessment period.

Matt Wilmington, chief transaction officer at Clara-Pensions, said: “At Clara, our pipeline has never been so healthy, with over £5bn of liabilities currently under active discussion. We are immensely proud to have completed our first transaction of this type, demonstrating to active businesses that Clara is a great option for both them and the members of their legacy pension schemes. We expect this transaction to pave the way for more sponsors seeking to enhance the security of their employees’ and former employees’ benefits by entering Clara.”

Amy Hemmett, head of superfunds at PwC UK, said: “Clara’s ability to deliver safer pensions for members was proven by its first two transactions but, importantly, this is the first transaction with an ongoing sponsor, albeit operating in a challenging market landscape. The outcome for members has been demonstrated to be meaningfully improved by the transfer to Clara, via detailed testing of the transaction.”

She said this will bring the role of superfunds into new focus for a wider scope of trustees and corporates alike, who are aiming to achieve the best outcomes for their members but are not yet ready for an insurance buyout.

Hemmett said: “We anticipate that this transaction, and the demand for innovation in end-game solutions for pension schemes, will continue to drive the superfund market, including potential interest from other providers.”

Matthew Cooper, head of pension risk transfer at PwC UK, said that transferring risk to a third party through insurance buy-in/buyout transactions has long been used to improve member security.

And while he said insurance will continue to be the right route for many schemes, PWC analysis suggests there could be more than 200 schemes with around £150bn of assets that could benefit from a transaction with a defined benefit (DB) superfund like Clara.

He said: “The validation of the DB superfund concept that this transaction represents could drive significant growth in this offering.”

The Pensions Regulator’s (TPR) executive director of market oversight, Neil Bull, said: “We have granted clearance for Wates Pension Fund to transfer into a DB superfund.”

He said that superfunds can offer increased security, improved governance and better risk management, all leading to better member outcomes.

“We want to see fewer, larger, well-run pension schemes and are pleased to see the market innovate and consolidate in savers’ interests,” he noted. 

Read the digital edition of IPE’s latest magazine