The trustee of the Wates Pension Fund, together with Wates Group, have agreed to transfer members' defined benefit (DB) pension benefits to Clara, marking the first UK superfund transaction with a scheme with an active sponsor.

The deal, which covers 1,500 members and £210m of scheme assets, is expected to complete in January 2025.

Under the terms of the transaction, Wates will contribute an additional £19m of funding to support the scheme in the form of a one-off payment, in addition to contributions of more than £75m that have been paid into the fund over the past eight years, while Clara will also provide additional capital to enhance the security of members’ benefits.

The trustee and Wates jointly agreed on the transfer to Clara following a "thorough review", with the trustees receiving advice from LCP, Macfarlanes and Cardano, while Wates received advice from PwC and CMS.

Clara, which continues to be backed by global investment firm Sixth Street, received legal advice from Osborne Clarke, and was supported in its due-diligence by Heywood Pensions Technologies.

The Clara trustees, meanwhile, are supported by Hymans Robertson; fiduciary managers Van Lanschot Kempen and State Street; and legal firm Eversheds.

Commenting on the deal, Wates Pension Fund trustee chair, Mike Roberts, said: “This is a very positive development, providing increased security for members’ benefits.

“Throughout this process, we have seen the care and commitment Clara has for its members. This, coupled with the additional funding secured from Wates Group and Clara as part of the transfer, has been key to our decision making.”

“We are confident that, with the transfer to Clara, members’ benefits will be more secure and, in the future, move to an insurance company sooner than if they remained in the fund.”

Wates Group chief executive officer, Eoghan O’Lionaird, added: “Wates has always delivered on its commitments to the fund and this has led us to the strong funding position we find ourselves in today.

“Following a rigorous decision-making process with the trustee, we’ve identified an opportunity to further improve the security of our members’ benefits. This is important to Wates, especially given the challenges of both an uncertain economy and market conditions.

“We are pleased to be able to facilitate a transfer to Clara with a £19m contribution to the fund, along with funding from Clara, giving our members greater security for the future.”

The Pensions Regulator also confirmed that it provided regulatory clearance for the transfer to Clara, with executive director of market oversight, Neil Bull, adding: “We have granted clearance for Wates Pension Fund to transfer into a DB superfund.

"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.” 

PwC head of superfunds, Amy Hemmett, also suggested that the transaction could 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.

"We anticipate that this transaction, and the demand for innovation in endgame solutions for pension schemes, will continue to drive the superfund market, including potential interest from other providers," she stated.

Indeed, Clara also highlighted the deal as a demonstration of the range of schemes which can benefit from the Clara solution, confirming that it has a "strong" pipeline of potential deals, with schemes that have liabilities of over £5bn.

Clara Pensions chief transaction officer, Matt Wilmington, said, “This is another exciting day for Clara, as well as for Wates, the Wates trustee and, most importantly, our new members.

"Working with Wates, whose commitment to the care of its former and current employees was to the highest standard, has been a true pleasure.

"We welcome the company’s willingness to engage in this sponsor-driven transaction model, which enhances the security of member’s benefits. It was fantastic to work with the advisors on all sides, whose collaborative and can-do approach all made this transaction possible.

“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.”

LCP risk transfer partner, Sam Jenkins, also said that it is "extremely pleasing" to see this transaction expand the range of credible endgame options for pension schemes and their sponsors.

"It has been a pleasure leading the advice to the trustee on this landmark transaction. It required advice on multiple workstreams concurrently and was made possible by careful planning and collaborative working between all parties," Jenkins added.

"The end result is a robust commercial agreement with Clara that provides a secure home for members’ benefits and a bridge to insurance in the future.”

This article was originally published on our sister website, Pensions Age.

---