BBC Pension Scheme strikes £3bn longevity swap deal with Zurich and Canada Life

The BBC Pension Scheme has completed a £3bn longevity swap deal with Zurich and Canada Life Reinsurance.

The transaction will provide the scheme, and the BBC as sponsoring employer, with protection against the risk of rising costs should pensioner members and their dependents live long than expected.

Aon acted as lead transaction adviser, including negotiating insurance terms with Zurich and brokering the reinsurance with Canada Life.

Legal advice was provided to Zurich by CMS, to the trustees by Allen & Overy, and to Canada Life Reinsurance by Herbert Smith Freehills.

Commenting on the announcement, BBC Pension Scheme trustee board chair, Catherine Claydon, highlighted the deal as an important step in the scheme's risk management strategy.

“We appreciate the support of our sponsoring employer and our advisers,” she noted.

Adding to this, Zurich head of longevity risk transfer, Greg Wenzerul, said: "We are delighted to have helped minimise the longevity risk of the BBC Pension Scheme.

“We are also grateful to Canada Life Re for their flexible approach. This is an example of how large pension schemes can successfully hedge longevity risk in a cost-effective and low-risk way.

“We set out to lower the perceived barriers for pension schemes seeking longevity-only de-risking and using a UK regulated insurer to structure the deal offers trustees a secure, simple and flexible solution.”

Canada Life Reinsurance global head, Jeff Poulin, added: “Congratulations to all teams involved in executing this significant new transaction with the BBC Pension Scheme.

"Canada Life Reinsurance has been active in the UK longevity reinsurance market since its inception and have looked to support our clients with pragmatic and flexible solutions.

“We are pleased to have been able to build on our existing relationships with Aon and Zurich in order to support the Trustee on its de-risking journey.”

The deal follows the recent £3.7bn longevity swap Prudential Staff Pension Scheme secured with Pacific Life Re, with industry forecasts predicting a total of around £15bn of longevity swaps to be completed in 2020.

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