Bank of England (BoE) governor Andrew Bailey is understood to have warned against superfund consolidation of defined benefit (DB) pension schemes less than a week after the entities were given the green light by The Pensions Regulator (TPR).
Sky News has reported Bailey warned that the regulatory regime - unveiled by TPR last week as an interim measure before expected legislation - could pose a risk to financial stability.
Bailey is said to have written to work and pensions secretary Thérèse Coffey with concerns over the framework, which was widely heralded as a positive step forward by the pensions industry to protect scheme members in the long-term by avoiding the high cost of a traditional insurance company buyout.
Despite this, DB scheme consolidators The Pensions Superfund and Clara Pensions are still confident in the sustainability of the superfund model.
Both superfunds confirmed they were poised to begin transacting as soon as possible last week after TPR released the interim guidance, with Clara noting a number of transactions were already in the pipeline for before the end of the year.
Clara Pensions chief executive Adam Saron told Professional Pensions: "Monitoring financial stability is the governor's job, so we'd expect him [Bailey] to take an interest in anyone who holds large amounts of assets - insurers, pension schemes and hopefully, one day, consolidators. We're always happy to explain our model to people and why a bridge to the insurance market like Clara's will create safer, more stable pensions for members."
The Pensions Superfund founder Edi Truell added: "Superfunds offer trustees an affordable, secure, and mutually aligned option which improves security.
"This constant comparison to insurance is in danger of missing the point."
In an interview with Professional Pensions last week, TPR executive director of regulatory policy, analysis and advice David Fairs was now in the process of creating further guidance for trustees and sponsors of schemes that are considering a move to a consolidator and taking a duly careful approach to managing the complex market.
A TPR spokesman has today (24 June) told Professional Pensions that the regulator remained "fully alive to the risks presented by unregulated DB consolidator superfunds" and was confident the interim regime was a high enough bar to prove the legitimacy of their governance.
"Our robust interim regulatory regime will help ensure savers can have confidence in superfunds should their pension be transferred into one in the future. Our modelling illustrates that under our framework, there is a 99% likelihood that the superfund would be able to pay the benefits they are promising to members' in full."
The BoE chose not to respond to Professional Pensions' request for comment.
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