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By Sinead Cruise
LONDON, June 18 (Reuters) - The Pensions Regulator (TPR) on
Thursday published the framework for the launch of UK pension
superfunds, a new structure designed to ease the burden of
Britain's 2 trillion pound ($2.5 trillion) final salary pension
sector on cash-strapped firms.
The new guidance, effective immediately, sets out the
regulator's expectations on governance of so-called superfunds,
how they are assessed and regulated, and the capital they must
be supported by.
Britain is grappling with a spiralling pension funding
problem after years of rock-bottom interest rates led to big
gaps between the sums the pension schemes must pay out and the
income they receive from investing.
Retired workers are also living longer and companies hit by
economic shocks like the global financial crisis and coronavirus
pandemic can sometimes struggle to find the cash they owe.
The superfunds work by consolidating assets from various
company pension schemes, with a view to achieving economies of
scale and more efficient money management.
"Well-run superfunds have the potential to deliver more
secure retirement incomes for workers, while allowing employers
to concentrate on what they do best – running their businesses,"
Minister for Pensions, Guy Opperman, said in a statement.
Pension superfunds provide an alternative to so-called bulk
annuities - insurance policies for final salary schemes -
offered by major insurers such as Legal & General and
Aviva.
Critics of superfunds have expressed concern about their
capital adequacy but TPR said it will require schemes to hold
sufficient assets and use special models to measure obligations
so they can meet promises to savers with "a high degree of
certainty".
TPR said it would provide further information to the market
on the operation of its interim guidance before any specific
legislation.
($1 = 0.7970 pounds)
(Reporting By Sinead Cruise; Editing by Kirsten Donovan)
