Clara Pensions’ £3 Billion Private Market Push: A Calculated Leap That Could Reshape UK Retirement Finance
LONDON — In a bold declaration of confidence in both private markets and domestic growth, Clara Pensions, the UK’s first commercial pension superfund, has unveiled a plan to invest more than £3 billion in private assets over the next three years. It is a move that could redefine how legacy defined benefit (DB) pension schemes are managed — and potentially catalyze a new chapter in the evolution of UK retirement finance.
At a time when market participants are scrutinizing capital efficiency, liquidity profiles, and long-term liability matching more than ever, Clara’s announcement is not just a financial maneuver — it is a signal. A signal that the UK’s £1.4 trillion DB sector is poised to undergo a structural shake-up, with private market integration and fund consolidation at its core.
Table: Size and Projected Growth of the UK Defined Benefit Pension Scheme Sector (2021–2025)
| Metric | Period / Date | Value (£ Billions) | Source / Note |
|---|---|---|---|
| Estimated Total Assets (Private Sector DBH) | End Q4 2021 | 1,821 | ONS via UK Parliament Report (Mar 2024) |
| Estimated Total Assets (Private Sector DBH) | As of Mar 31, 2023 | 1,439.8 / 1,281 | PPF / TPR via UK Parliament Report (Mar 2024) / TPR Report (Dec 2024, restated) |
| Estimated Total Assets (PPF Eligible Schemes) | As of Mar 31, 2023 | 1,400 | PPF Purple Book via UK Parliament Report (Mar 2024) |
| Estimated Total Assets (Private Sector DBH) | As of Mar 31, 2024 | 1,228 | TPR Report (Dec 2024) |
| Estimated Total Assets (Private Sector DBH) | As of Sep 30, 2024 | 1,178 | ONS Funded Occupational Pension Schemes Report (Apr 2025) |
| Projected Bulk Annuity & Longevity Swaps | Full Year 2025 | 70 | WTW Projection (Jan 2025) |
A Superfund With Super Ambitions
Clara’s planned deployment of £3 billion into private markets is underpinned by an asset allocation strategy that envisions 30–35% of the fund’s reserves directed toward private investments. Remarkably, up to 50% of those will be UK-based.
Did you know that Clara Pensions is strategically allocating its assets to balance growth and stability? The pension scheme aims to dedicate 30% to 35% of its portfolio to private markets, investing over £3 billion in these areas over the next three years. This focus on private markets complements a significant allocation to traditional assets, such as liability-driven investments and high-quality credit, which provide stability and support long-term financial goals. By diversifying its investments, Clara Pensions seeks to enhance returns while supporting economic growth, particularly within the UK.
But this isn’t merely about alternative returns. Clara is placing a strategic bet on “productive finance” — channelling institutional capital into sectors that fuel real economic growth: infrastructure, energy transition, technology, and housing. The emphasis on UK allocation dovetails with post-Brexit efforts to bolster domestic investment and reduce reliance on foreign capital flows.
Clara’s deal pipeline, now estimated between £10 and £15 billion, underscores increasing demand among pension trustees and sponsors to de-risk legacy schemes. “There’s clear momentum,” said one pensions consultant involved in ongoing negotiations. “Sponsors want clarity. Trustees want security. Clara is offering a model that promises both.”
From Retail Ruins to Institutional Reinvention
Clara is not new to dealmaking — and its track record already includes some of the most challenging schemes in recent UK retail history. The superfund injected £30 million into the Sears Retail Pension Scheme and £34 million into Debenhams' Retirement Scheme. These ring-fenced capital injections enhanced member protections while positioning the schemes for eventual buyout — a transition model Clara refers to as the “bridge to buyout.”
A Pension Superfund 'Bridge to Buyout' is a de-risking option for defined benefit (DB) pension schemes, acting as an interim step. These superfunds consolidate scheme liabilities, aiming to manage them efficiently and improve funding levels until a full insurance buyout becomes achievable and affordable.
More recently, Clara reached an agreement to onboard 1,500 members from Wates Group’s pension scheme. While undisclosed in valuation, the move is seen as a watershed moment: the first instance of Clara working with an active sponsor rather than a defunct retail estate.
“This third deal is pivotal,” said an industry analyst tracking the superfund space. “It’s no longer just about cleaning up retail collapses. Clara is now a viable option for live businesses looking to tidy up their balance sheets.”
Private Markets: Promise and Peril
The allure of private markets is well documented: higher returns, diversification, and a lower correlation with public markets. But for pension funds, it’s not just about returns — it's about matching liabilities, managing duration, and ensuring cash flow consistency.
Comparison of historical returns between public equity, private equity, and infrastructure assets.
| Asset Class | Time Horizon | Annualized Return | Source Note | Correlation Note |
|---|---|---|---|---|
| Private Equity | 23-Year (to 2023) | 11.0% | Based on US state pension data (Cliffwater/CAIA) | Private markets generally show lower correlation to public markets. |
| Public Equity Benchmark | 23-Year (to 2023) | 6.2% | Public market equivalent for US state pension PE (Cliffwater/CAIA) | Higher correlation exists between public stocks and bonds. |
| Private Equity | 10-Year (Rolling) | Outperforms | Hamilton Lane data shows PE outperforming MSCI World in every 10-year rolling period analysed. | Private equity beta to S&P 500 can be lower (e.g., 0.5 after adjustments) than public equity. |
| Public Equity (MSCI World) | 10-Year (Rolling) | Lower than PE | Hamilton Lane data shows PE outperforming MSCI World. | N/A |
| Listed Infrastructure | 10-Year (to 2022) | 9.5% | FTSE Global Core Infrastructure 50/50 100% Hedged to USD (Gross) Index (Maple-Brown Abbott) | Private infrastructure exhibits low correlation with public equities (e.g., 0.46). |
| Unlisted Infrastructure | 10-Year (to 2022) | 11.4% | EDHEC infra300 Equity Index (Local) (Maple-Brown Abbott) | Listed infrastructure correlation to public equities is higher than private infrastructure's correlation. |
| Private Infrastructure | 10-Year (Q2 2014-Q2 2024) | Outperforms most | Outperformed all asset classes except Private Equity (KKR analysis using Cambridge Associates data) | Private infrastructure exhibits low correlation with public infrastructure (e.g., 0.35). |
| Listed Infrastructure | 10-Year (trailing end June 2024) | 4.6% | S&P Global Infrastructure Index (Newton Investment Management) | Listed infrastructure has lower volatility than broad equity markets but higher than private infrastructure. |
| Unlisted Infrastructure | 10-Year (trailing end June 2024) | 5.2% | EDHEC Infra300® VW Equity Index (Newton Investment Management) | Private infrastructure performance is less influenced by market sentiment than public infrastructure. |
“Private assets are not a panacea,” cautioned one investment risk manager. “They’re illiquid, complex, and sometimes opaque. But with sufficient scale and governance — which Clara seems to be building — they can be a powerful asset in the right hands.”
The illiquidity premium represents the potential excess return investors demand for holding private market assets, which are inherently difficult to sell quickly compared to public securities. Understanding this premium is essential for evaluating private market investment risks, a key consideration for investors like pension funds who must manage their overall liquidity needs.
Indeed, Clara’s strategy is also a reflection of broader shifts in institutional asset allocation. Traditional 60/40 portfolios are increasingly giving way to more sophisticated models with exposure to real estate, infrastructure, private equity, and direct lending. Clara is positioning itself to capitalize on this momentum, but execution risk looms large.
The Sixth Street Backing: More Than Just Capital
Clara’s ambitions are made possible, in part, by its financial backer: Sixth Street, the global investment firm with more than $75 billion in assets under management. Its involvement brings not just credibility but also a critical edge in sourcing, structuring, and managing complex private investments.
“Having a backer with global reach and a deep alternatives platform gives Clara access that few can match,” noted one fund strategist. “It turns their private market thesis into a real competitive advantage.”
Yet, this backing also raises questions about governance. Will Clara prioritize pensioner outcomes or private equity returns? For now, the capital injections into member protections suggest an alignment of interest — but this is a space regulators will no doubt be watching closely.
Regulatory Overhang: A Window That Won’t Stay Open Forever
Clara currently operates under a temporary regulatory regime, approved by The Pensions Regulator (TPR) as part of a pilot program to evaluate superfunds. Permanent legislation is expected in 2025 — and with it, potentially tighter controls, higher capital buffers, or new reporting obligations.
Table summarizing the key roles and functions of The Pensions Regulator (TPR) in the UK.
| Role/Function | Description |
|---|---|
| Protecting Pension Members | Safeguards workplace pension benefits and reduces risks of insolvency or reliance on the PPF. |
| Promoting Good Governance | Encourages high standards of pension scheme management and compliance with legal requirements. |
| Enforcing Auto-Enrolment | Ensures employers enroll eligible employees into qualifying schemes and comply with contribution rules. |
| Regulatory Oversight | Oversees DB, DC, public service schemes, and master trusts while collaborating with other regulators like the FCA. |
| Enforcement Powers | Issues fines, improvement notices, freezes schemes, and prosecutes non-compliance or fraud. |
| Risk Assessment | Identifies high-risk schemes for closer supervision while maintaining lighter oversight for others. |
| Collaboration | Works with trustees, employers, and advisers to provide guidance and education on pensions. |
| Strategic Goals | Focuses on security, value for money, innovation, decision scrutiny, and bold regulation. |
“Regulatory uncertainty is the biggest structural risk,” said a policy advisor familiar with upcoming reforms. “The current regime is transitional. If the final framework becomes too onerous, Clara’s model could lose its edge.”
Still, Clara appears to be building ahead of the curve — a strategic hedge against regulatory tightening. Its capital injection structure, deal transparency, and governance model may well become the template for future entrants.
Consolidation Is Coming — and Clara Is Leading the Charge
The broader trend Clara is riding — and accelerating — is consolidation. With over 5,000 DB schemes in the UK, many of them subscale and administratively burdensome, merging these into fewer, professionally managed vehicles is seen as both efficient and inevitable.
Did you know that the UK's Defined Benefit (DB) pension landscape has undergone significant changes? The number of private sector DB schemes has dropped dramatically, from 7,751 in 2006 to around 4,974 by 2024. This decline reflects a broader trend of scheme closures, with 73% now closed to future accruals and only 12% open to new members. As a result, most members are in closed schemes, leading to increased fragmentation and a shift toward more conservative asset allocations. This transformation highlights the evolving nature of DB pensions, driven by de-risking strategies and regulatory pressures.
Clara’s model of risk transfer — de-risk, scale, and prepare for eventual insurance buyout — resonates with both trustees and sponsors. “This is where the market’s headed,” one fiduciary manager commented. “It’s about scale, governance, and derisking — not DIY pension management.”
Competitors in the bulk annuity market are watching closely. If Clara can offer similar security at a lower cost, traditional insurers may be forced to rethink pricing and underwriting strategies.
A Turning Point for UK Capital Markets?
Beyond pensions, Clara’s shift into private assets — especially those tied to UK growth — could have macroeconomic implications. By unlocking dormant pension capital and funnelling it into high-impact sectors, the model could complement the government’s efforts to revive domestic investment.
Some policy circles have privately expressed hope that superfunds like Clara could “fill the void” left by retreating foreign capital and help fund the UK’s infrastructure gap — estimated at over £600 billion.
Estimated UK infrastructure investment gap highlighting the funding shortfall.
| Metric | Estimated Figure / Detail | Time Period / Source | Notes |
|---|---|---|---|
| Unfunded Infrastructure & Capital Projects | £1.6 trillion | By 2040 (EY Report, Sep 2024) | This is the total identified value of projects and programmes currently unfunded up to 2040, driven by economic headwinds and national priorities. |
| Potential Funding Shortfall (Gap) | At least £700 billion | By 2040 (EY Report, Sep 2024) | This is the estimated gap remaining after potential government contributions (around half of the £1.6tn), requiring private investment to more than double. |
| Required Increase in Private Investment | Needs to more than double from the projected £568 billion required by 2040 | By 2040 (EY Report, Sep 2024) | Required to cover the £700bn shortfall if government spending doesn't increase beyond historical patterns. |
| Funding Challenge (Energy, Transport, Housing) | £615 billion shortfall (£75bn per year) | By 2030 (Investment Delivery Forum, Nov 2023) | Based on £1.3 trillion needed vs £700 billion forecast funding. Around £350bn of this shortfall needs to come from private sources. Housing is the biggest challenge. |
| Current Pension Fund Allocation to Infrastructure | 1-3% of Assets Under Management | As of Oct 2024 (Pensions Policy Institute) | This is considered a small minority, but interest and allocation are expected to grow, especially from Defined Benefit (DB) and Local Government Pension Schemes (LGPS). |
| Potential Pension Fund Investment Boost | £80 - £200 billion | Recent Govt./Industry Proposals (Nov 2024) | Estimates vary; £80bn figure from Govt. plans for 'megafunds', £200bn figure from PIC research on potential if LGPS consolidation unlocks private capital. |
| Annual Increase Needed in Private Investment | Around £10 billion annually | Next decade (NIC, cited by Deloitte) | Highlighted by the National Infrastructure Commission as the required increase in private investment over the coming decades to meet needs. |
| Total Infrastructure Need (Next Decade) | Over £700 billion | Next decade (IPA, cited by Deloitte) | Estimate from the Infrastructure and Projects Authority for required investment across all UK infrastructure sectors. |
“If executed correctly, this is a virtuous circle,” one senior investment advisor observed. “De-risk pensions, channel capital into growth, and improve member outcomes — all at once. But the devil is in the detail.”
Investment Signals: What Should Stakeholders Be Watching?
For Pension Trustees
Clara offers a simplified path to risk transfer without the upfront premium costs of a full buyout. But trustees must assess the trade-offs between short-term illiquidity and long-term solvency gains.
For Sponsors
Offloading pension risk to Clara can enhance corporate flexibility — freeing up capital for reinvestment or M&A activity. But reputational exposure remains if member outcomes fall short.
For Asset Managers
Clara’s move may accelerate demand for UK-focused private market strategies. Fund managers offering direct lending, growth equity, or infrastructure strategies may find new institutional partners — provided they meet Clara’s risk and return thresholds.
For Regulators
The impending legislation will be decisive. A supportive framework could foster more superfund entrants, while excessive restrictions may stall momentum. Transparency and fiduciary alignment will be key battlefronts.
Bold Moves for a Fragile Market
In an era of rising interest rates, geopolitical flux, and pension risk awareness, Clara Pensions is charting a distinct course. By marrying robust capital backing with a focus on domestic private markets, it offers a template for what 21st-century pension stewardship could look like.
It is a high-risk, high-reward proposition — one that will demand flawless execution, regulatory alignment, and market resilience. But if successful, Clara’s model could do more than just de-risk legacy liabilities — it might unlock a new engine for UK growth, stability, and innovation.
As one senior consultant put it, “If Clara pulls this off, it won’t just change pensions. It’ll change how the UK thinks about long-term capital.”