The transaction is Clara’s second deal and brings its assets under management to more than £1bn.
The deal takes the Debenhams scheme out of the Pension Protection Fund’s (PPF) assessment process and ensures that member benefits will be paid in full.
Members who have been receiving reduced benefits since the scheme entered PPF assessment in 2019 will receive back payments totalling £4m, while Clara has injected an additional £34m to improve the financial security of benefits.
The consolidator said the capital injection was designed to provide “increased certainty on the journey to an insured buyout in five to 10 years’ time”.
Clara operates what it calls a ‘bridge to buyout’ model, which involves each scheme being contained within a separate ringfenced section. Additional capital is provided by Clara investors, chiefly private equity firm Sixth Street Partners, with the aim of preparing the schemes for full buyout with an insurer.
The Pensions Regulator (TPR) has approved the deal, and the formal transfer process is to begin next month.
The transaction brings Clara’s membership to approximately 20,000 people and £1.2bn in assets under management. The consolidator finalised its first transaction in November when it brought on board the Sears Retail Pension Scheme.
What the key players said
Mark Cliff, client director at Vidett and chair of trustees for the Debenhams Retirement Scheme, said: “Ever since Debenhams went into administration, the trustees have been working hard to find a solution that is in our members’ best interests. We are confident that transferring members’ benefits to Clara provides the best available outcome for them.
“The trustees took extensive professional advice to assess all the options. We have also consulted closely with the Pension Protection Fund and The Pensions Regulator throughout the process.”
Sara Protheroe, chief customer officer at the PPF, said: “This deal demonstrates the success of our PPF+ Advisory panel, which we introduced in 2022 to support overfunded schemes to explore options beyond the PPF, as well as the PPF’s ability to continue to evolve to meet the needs of the changing landscape of defined benefit pensions.”
Dev Gandhi, senior consultant at LCP, which provides investment advice to Clara, said the speed of the transaction showed that the pensions industry was growing in confidence about the consolidator model.
“With a growing interest amongst other schemes – and any concerns around being an ‘early adopter’ eased – we expect the superfund market to go from strength to strength in the months ahead,” Gandhi added.
TPR’s interim executive director of frontline regulation, Mel Charles, said: “Superfunds can offer increased security, improved governance and better risk management, which means that pension savers are more likely to get their promised benefit. We want to see fewer, larger, well run pension schemes and are pleased to see the market innovate and consolidate in savers’ interests.”
Suzanne Vaughan, senior director in WTW’s pensions transactions team, noted that both of Clara’s first transactions were led by the trustees of the schemes rather than being initiated by employers seeking to offload liabilities.
She added: “With this second transaction, Clara-Pensions is making good progress on its mission to reach the required economies of scale for its business model… Clara is on track to quickly continue that growth through 2024 if pipelines and interest levels are anything to go by.”
