Lloyds pension scheme trustee agrees £5.5bn longevity swap

Lloyds Banking Group Pensions Trustees has agreed a second longevity swap deal, which will cover a further £5.5bn of liabilities in the Lloyds Bank Pension Scheme No. 1.

The deal with Scottish Widows and SCOR is the trustee’s second longevity swap, following a deal that covered £10bn of liabilities in 2020.

The previous transaction covered members in the Lloyds Bank Pension Scheme No.1, Lloyds Bank Pension Scheme No. 2 and HBOS Final Salary Pension Scheme.

The newly agreed transaction is structured as an insurance with Scottish Widows as the insurer and corresponding reinsurance with SCOR as the reinsurer, resulting in the scheme's longevity risk being passed onto SCOR.

Pension benefits that will be paid to members will not change and all pensioners will continue to receive their pensions, which will continue to be paid by the trustee.

The trustee said it selected Scottish Widows and SCOR as insurer and reinsurer because their respective propositions offered the “best balance of financial security and underwriting strength".

WTW acted as lead adviser to the trustee, while Allen & Overy provided the trustee with legal advice.

Legal advice was provided to Scottish Widows by Eversheds Sutherland, while CMS advised SCOR.

Commenting on the announcement, Lloyds Banking Group Pensions Trustees director and Investment & Funding Committee chair, Vicky Paramour, said: “We are pleased to have successfully completed these longevity insurance and reinsurance arrangements with Scottish Widows Limited and SCOR.

“This will reduce the scheme’s exposure to longevity risk and make the scheme more secure to the benefit of all members.

“The selection of Scottish Widows Limited and SCOR followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market and their respective propositions delivered the best combination of benefits to meet our brief.”

WTW lead adviser to the trustee, Matt Wiberg, added: “It has been a great pleasure to work with the trustee again and I am delighted to have advised on their second material longevity transaction.

“The trustee has now hedged over £15bn of the schemes longevity risk providing greater certainty in relation to their long-term journeys.

“The infrastructure established by the first transaction in 2020 was crucial in running an efficient process that enabled the trustee to benefit from a market opportunity to further reduce longevity risk in a cost-effective manner.”

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