Clara-Pensions expects consolidator competition ‘within a year’

Clara was the first — and is so far the only — commercial consolidator to have received approval by the Pensions Regulator, having passed through its interim authorisation regime in November 2021.

A number of other companies are thought to be looking to enter the consolidation market, most notably The Pension SuperFund, but none have so far been given approval to accept transactions.

Speaking at the Pensions and Lifetime Savings Association’s annual conference on October 13, True suggested that this may soon change, and that “in a year’s time there will be other entrants in this space”.

Though he did not name specific competitors, he mentioned the emergence of capital-backed consolidation models, arguing that these “will have a lot more scrutiny, but there will definitely be a wider range of options in the next year”.

TPR chief executive Charles Counsell told a Society of Pension Professionals event in September that the regulator had been approached “a number of times” of late by companies working on capital-backed consolidation models, and called on the government to legislate to provide “a statutory footing”.

The Department for Work and Pensions launched a consultation into commercial consolidation in 2018, but has yet to publish its response. TPR, meanwhile, has been operating its interim authorisation regime since June 2020.

At the PLSA event, True said TPR’s scrutiny was “a long process”, but that “there are others already in the process” — meaning that other consolidators should emerge without much further delay.

Of Clara’s own offer, he said trustees of schemes in the tranche below full buyout, such as those with funding levels of around 90 per cent, “don’t have a great deal of choice at the moment”, and consolidator options like Clara’s provide them with another, cheaper solution.

“At any point in time, the top 10 per cent [of schemes in terms of assets under management] are probably in buyout territory already. The next tranche are not quite ready for buyout, and that bloc could be people for whom the Clara solution works. So the 10 per cent down is the funding area we’d expect to transact,” True explained.

“We’re targeting schemes above £200mn in size — we want to get to scale relatively quickly. What we’d like to do over time is extend that offer to smaller schemes, make it a more interesting proposition to trustees. At the moment, we’re trying the proof of concept so people have confidence they’re going into a viable and robust structure.

“I’d hope it would [suit] a wide range [of sponsor profiles]. What we’ve found is that the solution works equally well for a strong sponsor. The cheque for buyout is X, the cheque for Clara is Y — it has the same effect,” he continued.

“Demonstrably, members are in a better place. So I think the solution can work across the full spectrum, from strong to weak.”