Antony Barker: As the market evolves, we expect continued focus on transparency and regulatory engagement to support broader adoption
The James Neill Pension Plan deal is a “breakthrough” in the continuing development of capital‑backed investments and arrangements in the defined benefit (DB) pensions market, Safe Covenant says.
The capital-backed funding arrangement provider said the deal between the James Neill Pension Plan and Portunes Pension Capital – announced at the end of June – underlined the growing market confidence in this area, which also includes running-on DB schemes to buy out or for surplus to improve member outcomes.
Capital-backed arrangements (CBAs) involve pension schemes investing their assets alongside those of a third‑party capital provider over an initial pre-determined period, with improved outcomes supported by that external capital.
These structures are designed to reduce pressure on the current sponsor, provide an additional funding cushion to the trustees, and support running-on strategies, while allowing schemes to retain existing management arrangements.
Safe Covenant said the UK DB market continues to explore a range of endgame and run‑on strategies, with capital‑backed structures increasingly viewed as a complementary option alongside buyout, consolidation and traditional journey plans.
Chief executive Adrian Swales said: "The completion of the James Neill transaction represents another example of how third-party capital can be deployed to assist sponsors and trustees in meeting scheme objectives.
"At Safe Covenant we expect that increased awareness of the benefits of capital-backed arrangements will naturally lead to them becoming a commonplace run-on option."
Supporting scheme flexibility and funding resilience
Safe Covenant said CBAs are designed to support schemes seeking to maintain flexibility in their investment strategies, including retaining exposure to illiquid assets and integrating with existing liability‑driven investment.
It said they may also provide access to additional capital to strengthen funding positions, the reduction of sponsor covenant over time, and a structured approach to achieving funding targets within a defined horizon.
The firm said that such arrangements were typically underpinned by a capital provider that underwrites a targeted funding outcome or level of return, increasing the likelihood of schemes reaching long‑term objectives.
Safe Covenant emphasised that technical considerations remain key when considering these sorts of arrangements – noting that, as with all emerging solutions, careful structuring and due diligence remain were "essential" for trustees and sponsors evaluating capital‑backed proposals.
Safe Covenant technical director Antony Barker added: "The James Neill transaction provides a helpful reference point for the market, particularly in demonstrating the bespoke nature of capital‑backed solutions which we at Safe Covenant welcome."
He explained: "From a technical perspective, these arrangements can offer a combination of downside protection and improved funding trajectory, but they also require careful consideration of factors such as counterparty risk, legal structure and long‑term governance.
"As the market evolves, we expect continued focus on transparency and regulatory engagement to support broader adoption, particularly amongst larger schemes"
Safe Covenant was formally launched in May. The CBA provider is being led by Adrian Swales, the founder and former chief executive of Mobius Life; Antony Barker, the actuary and chief investment officer behind the launch of initiatives such as The Pensions Superfund; and Goddard Perry Consulting founder Steve Goddard.
The provider said it has secured the funding to support "several such solutions" and expected further transaction opportunities to emerge as familiarity with the structures increases, and trustees and companies together with their advisers continue to assess their suitability alongside more established routes.
