LONDON (Reuters) – Former UK fashion retailer Sears’ pension scheme will transfer its nearly 600 million pounds ($733 million) in assets to Clara-Pensions, the superfund said on Monday, in the first such deal for schemes which cannot afford insurance.
Sears, which included women’s fashion brands such as Miss Selfridge and Richards, stopped trading as a retailer in 2000.
All 9,600 members of the Sears pension scheme will transfer to Clara, which is backed by investment manager Sixth Street, which runs $74 billion in assets. Clara is injecting 30 million pounds to help the scheme’s funding position.
Britain has around 1.5 trillion pounds in assets in defined benefit, or final salary, pension schemes. These promise a fixed payout to pensioners, but years of low interest rates drove many into deficit as they could not make the investment returns to meet those future payments.
Pension superfunds are designed to consolidate pension assets and invest them more profitably, as a cheaper alternative to so-called bulk annuities – insurance for pension schemes.
“Economies of scale from superfunds can do wonders for pensions, making people’s retirement more secure whilst enabling a broader range of investments in productive finance,” economic secretary to the Treasury Andrew Griffith said in a statement.
Superfunds first hoped to launch in 2019, but regulatory issues delayed the process and Clara is the only superfund to have received authorisation from The Pensions Regulator.
A sharp rise in interest rates and UK government bond yields in the past two years also made bulk annuities more affordable.
“The economic volatility was hugely detrimental to our model,” Clara CEO Simon True told Reuters. But Clara has now rebuilt its pipeline and has around 4 billion pounds in possible deals across a dozen pension schemes, he added.
Through the Clara superfund model, pension schemes aim to improve their funding positions over 5-10 years and then buy a bulk annuity, which is considered by regulators the safest structure for such funds.
“Superfunds can offer increased security, improved governance and better risk management, which means that pension savers are more likely to get their promised benefit,” said Nicola Parish, The Pension Regulator’s executive director of frontline regulation.
($1 = 0.8185 pounds)
(Reporting by Carolyn Cohn; Editing by Alexander Smith)