Our response to the DWP’s DB Consolidation Consultation
The primary concern for DB (“Defined Benefit”) Trustees is the security of their members’ benefits. For Trustees to hand that responsibility over to a superfund through consolidation activity, they need to ensure that the covenant of the superfund is demonstrably stronger than the sponsor covenant and the security of benefits is improved. Trustees also need to get the assurance that the assets backing the members’ benefits will be managed in a robust way, so that members’ benefits are also secure in the future even if the superfund’s assumptions on market returns do not materialise.
We believe that superfunds, under robust legislation and supervision, can provide a better alternative for many DB schemes that are currently exposed to a weak covenant. We do not believe the collective effort involved in creating an entirely new regulatory regime to provide a cheaper non-insured alternative for schemes that are already well-funded and exposed to a strong covenant is worth it. We, therefore, welcome efforts from the DWP to ensure that the new superfund market will be appropriately regulated.
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