Fortune 500 pension scheme completes £1bn longevity swap

The UK pension scheme of an unnamed Fortune 500 company has completed a £1bn longevity swap, with PartnerRe as reinsurer, and Zurich as the insurer acting as the intermediary.

The transaction, which covers pensioner and non-pensioner members, insured the majority of the risk that members live longer than expected and was described as a “key milestone” in the trustees’ plan to secure all benefits.

Hymans Robertson acted the lead transaction adviser for the scheme and scheme actuary. Legal advice was provided to the scheme by Gowling WLG, and Slaughter and May acted as legal advisers for Zurich.

The deal was highlighted by Hymans Robertson as being among the first in an emerging trend of longevity swap transactions to include non-pensioners, with the firm suggesting that trustees are seeing such swaps as a "valuable" tool to support ambitions to buyout.

Indeed, Hymans Robertson lead advisor, Iain Pearce, confirmed that the trustee also expects to transfer the longevity protection to an insurer as part of a future buy-in when it is affordable to do so.

“We are delighted to have guided the trustee through this latest step in their de-risking journey by addressing a key risk facing the scheme as it works to secure all benefits as it becomes affordable," he continued.

"As demonstrated by this transaction, trustees are increasingly seeing longevity swaps as a valued and instrumental transaction to support ambitions to buyout, by accelerating the speed at which this risk can be addressed without restricting investment freedom over their journey plan."

Adding to this, Zurich head of longevity risk transfer, Greg Wenzerul, highlighted the deal as "a step forward in the streamlining of these types of Zurich transactions, which increased efficiencies for all parties involved".

“We were delighted that our offering could be effectively tailored to meet the requirements of the pension scheme in question, and to have completed our first transaction involving both PartnerRe and also non-pensioner members," he added.

20-20 Trustees independent trustee to the scheme, Steven Southern, also voiced his opinion
on the longevity swap, stating that the trustees are “delighted” to have taken another step on the journey to secure benefits of their members without taking avoidable risks.

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