Eversheds Sutherland advises on UK’s first ‘connected covenant’ pension superfund transaction

Clara’s fourth transaction marks the first use of its connected covenant structure, expanding the potential number of defined benefit schemes able to access consolidation and increase member security. Clara’s connected covenant structure provides an additional layer of long-term security for members and strengthens the financial safeguards in place by allowing continuing security from the original sponsoring employer alongside Clara’s capital commitment. 

This is also the first superfund transaction involving a not-for-profit sponsor, evidencing that Clara is accessible to all types of sponsors, irrespective of sector. 

Clara operates a “bridge to buyout” model, whereby transferring schemes are placed in ringfenced sections of the Scheme, and additional capital from Clara’s investors (led by Sixth Street) are provided as a funding buffer. The ultimate aim is to secure member benefits in full via a buyout with an insurance company.

Eversheds Sutherland advised the Clara Trustee on its previous superfund transactions taking place in November 2023 (Sears Retail Pension Scheme), March 2024 (Debenhams Retirement Benefits Scheme), and December 2024 (Wates Defined Benefit Pension Scheme), and was delighted to be able to support the Clara Trustee again through this transaction process. The team was led by Partners Jeremy Goodwin and Emma King, supported by Legal Director James Ellis, Senior Associate Jill Walters and Associate Emma Shepherd (all Pensions). 

Commercial advice on the transition of administration services was provided by Partner Simon Lightman and Senior Associate Rawan Saraireh, with data privacy input from Partner Lorna Doggett and Senior Associate Carolyn Sullivan

Emma King, Partner at Eversheds Sutherland, commented:
“Congratulations to the whole Clara team on successfully closing its first transaction using the ‘connected covenant’ structure. This is a significant achievement and highlights Clara’s growing offering to the pensions market.”

James Ellis, Legal Director at Eversheds Sutherland, commented:
“We are thrilled to have advised the Clara Trustee on yet another successful transaction. This ‘connected covenant’ transfer is of particular significance for the pensions industry as it highlights Clara’s commitment to seeking innovative solutions to enhance the security of members’ benefits.”

Alan Pickering, Chair of Clara Trustees Limited, commented:
“We are delighted to welcome the Church Mission Society members into the Clara community as we bring another fantastic transaction to a close. We appreciate the outstanding level of support received from the Eversheds Sutherland team, the Clara team and their advisers, who have worked together to ensure the success of this new ‘connected covenant’ structure and get this transaction over the line. We look forward to continuing to work with Eversheds Sutherland on many more projects in the future.”