This is a significant development for the consolidation industry, and one we wholeheartedly welcome.
We support the DWP for its efforts in embracing innovation while also recognising the need for robust regulation. Consolidation is a relatively new idea with powerful potential and it absolutely requires a dedicated regulatory framework.
Since the DWP’s White Paper in March, the momentum behind the consolidation of defined benefit pension schemes has gathered apace. We know that trustees and sponsors are increasingly integrating consolidation into their end-game planning, as they seek to ensure the security of members’ pensions. The publication of this consultation is therefore an important next step.
The DWP has clearly put a great deal of work into considering important elements of the consolidation model, such as ensuring sufficient protections for members, financial sustainability and good governance. It is right that we have a debate about the financial sustainability of consolidators. We strongly believe that the middle way between traditional pension schemes and insurers is the best route and we urge DWP to consider this path.
Clara was built with one clear objective in mind and one that tallies with the DWP’s proposals: providing a safer pension promise for members today by combining long-term capital and robust governance. We are very deliberately not an alternative to the insurance buyout market. Rather, we will act as a bridge to the gold standard of an insured future for pension scheme members.
Clara is designed to be member-first, but we agree with the DWP in its assessment of the importance of balancing member interests with the interests of capital providers.
We look forward to digesting the consultation fully over the coming weeks and responding formally in due course. We hope that the consultation will trigger lively, appropriate debate within the industry and beyond, and we will participate enthusiastically in that discussion.