Edi Truell mothballs Pension SuperFund after watchdog inaction

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Edi Truell, the veteran financier, is winding down his Pension SuperFund five years after launch, blaming the regulator, government and the insurance sector for making his controversial business model “uninvestable”.

Truell, founder of private equity group Disruptive Capital, told the Financial Times he was “mothballing” the Pension SuperFund after failing to secure regulatory authorisation for his business model, which was the first of its kind in the UK.

Truell said his decision came after the pensions regulator failed to produce promised guidance on how profits generated by superfund investments could be distributed.

“We were promised there would be clarity on profit distributions by June at the latest,” Truell said. “For that not to be forthcoming erodes trust in government and the regulator.”

The development will be a blow for other private equity players looking to move into the fast-growing pension consolidation market, where vehicles take over the assets and liabilities of company pension funds, allowing the employer to discharge its obligations. Regulatory approval of superfund structures has taken years amid concerns — jumped on by insurers — that protections for pension-scheme members could be watered down.

Truell launched the Pension SuperFund in 2018 as a “safe and affordable” way for businesses to offload their defined benefit schemes at a cheaper premium than they might pay to an insurer to take over liabilities.  

Truell, a self-described “disruptive capitalist”, said he spent “the better part of £50mn” of his own money developing the business after he was invited to do so by a former pensions minister in 2016. 

The Pension SuperFund was one of two consolidators vying to operate in the nascent market but Truell’s model did not receive authorisation after three attempts. 

A rival superfund, Clara, is able to undertake deals after being successfully assessed by the regulator in 2021. Clara aims to run schemes as a “bridge” until they can be passed on to an insurer, in what is known as a buyout. The Pension SuperFund instead aims to administer the benefits in perpetuity.

The Prudential Regulation Authority, which oversees insurers, previously raised concerns about superfunds and said they should only be used as a bridge.

Under Truell’s model, investors were to share in investment outperformance, along with pensioner members who could potentially benefit from Christmas bonuses. In contrast, Clara’s model does not allow excess assets to be accessed until every member in a scheme has their full benefits passed to an insurer.

The Pensions Regulator said it had revised its guidance to make it easier for schemes to transfer to a superfund: “We’re now considering how best to go forward on profit extraction, but our primary focus has to be ensuring that savers’ interests are protected.”

Luke Webster, the Pension SuperFund’s chief executive, said the lack of regulatory guidance made the market “uninvestable”.

“Were you running a pension superfund today, there would be no line of sight for an investor as to how they might get their money back,” he said.

Industry experts said delays to the launch of a legal framework for commercial pension consolidators had hampered the market.

In 2018 the government consulted on a proposed framework but did not issue a response until this year. 

“Government delays can have real consequences,” said Steve Webb, former pensions minister and now partner with LCP, the actuarial consultants. “If people are investing their own money and taking risks with it, they need certainty.”

A Department of Work and Pensions spokesman said superfunds were an “important innovation” and that the government “remains committed to having a permanent regulated superfunds regime and will legislate as soon as parliamentary time allows.”