DB master trusts, consolidators and superfunds: why aren’t more schemes making the move?
Defined Benefit (DB) pension schemes have more strategic options than ever before. From DB master trusts and consolidation vehicles to emerging superfunds and traditional buy‑out routes, trustees and sponsors now have a wide spectrum of ways to manage costs, governance, and long‑term risk.
Yet despite the growing menu of solutions and the potential for operational savings of 20% or more, market activity remains surprisingly limited. So what’s holding schemes back?
A market full of choice … and complexity
Today’s DB landscape includes more than ten master trust and consolidation options. These range from consolidator vehicles that pool administration, actuarial and investment services to full DB master trust arrangements where governance is fully outsourced to a professional trustee board. In both of these models, the employer remains ultimately liable for meeting members’ benefits.
At the far end of the spectrum sit superfunds and buy‑outs, where liabilities are fully transferred from the sponsor.
With so many options and so much variation in governance, cost, and risk transfer, it’s no surprise that trustees and sponsors may struggle to navigate the landscape.
Cost isn’t the only consideration
The Pensions Regulator has been clear: scale matters, especially for smaller schemes. Larger schemes can often deliver stronger governance, better oversight, and more robust service provision.
Most DB master trusts and consolidators already work with established administrators, actuaries and investment consultants. They undertake rigorous provider selection processes, mirroring the due diligence expected of any standalone trustee board.
That said, regardless of whether master trust, consolidator, superfund or buyout is preferred, the trustee board and sponsor should conduct an appropriate selection exercise, with requirements identified and an objective evaluation process carried out.
We would always recommend that this includes a site visit to the administration centre, a chance to observe the people who will be looking after your members in action. And of course, if applicable, you should meet with the proposed Actuary and Investment Consultant to get comfortable with the team who will be supporting you into the future.
The Pensions Regulator’s code of practice sets out their expectations for selecting service providers. This includes running a tender process, committing sufficient time and resources, and carrying out due diligence. Using an independent evaluator with experience of selection exercises and a knowledge of the market will ensure an appropriate process is followed. We would be happy to talk to you about how we could help.
Superfund vs buy-out: a changing end-game landscape
Historically, buy‑out was the only route to fully remove pension liabilities from the sponsor. But it often came with a significant premium.
That changed in 2023, when the Sears Retail Pension Scheme became the first scheme to transfer into a superfund, Clara Pensions, marking a major milestone for the industry.
Since then, momentum has grown:
- TPT Retirement Solutions is preparing to launch its own superfund
- Clara Pensions has introduced a “small scheme service”
- More providers are exploring entry into the market
Superfunds typically offer a more affordable alternative to buy‑out, making them attractive where:
- The scheme cannot access or afford full buy‑out,
- there is a weakened or uncertain employer covenant, or
- a parent company wishes to break its link with a legacy pension scheme
Crucially, all superfund transactions require TPR clearance, and must demonstrate that:
- security of benefits is improved, and
- buy‑out is not realistically achievable in the near term
Thinking about your strategy for pensions?
If you’re exploring long‑term options for your DB scheme, whether consolidation, master trust, superfund or buy‑out, it’s essential to understand the full landscape. If you’d like to discuss what we’re seeing in the market or explore which options may suit your scheme, you can contact Tina on 020 8213 5860.