The PGL Pension Scheme has completed the first unwinding of a longevity swap advised by Aon Hewitt.

Positive asset performance in combination with a strong liability management programme resulted in the scheme making 2016’s largest bulk annuity purchase. By arranging the longevity swap in advance, the trustee was able to attain advantageous pricing for the annuity conversion.

The Scheme agreed to reshape the insurance terms of the swap, replacing it with a £1.2bn annuity with Phoenix Life in December 2016. This added to the risk transferred from the scheme.

Aon advised the scheme’s trustee with its de-risking strategy for several years. During this time, the scheme hedged all of its key financial risks using liability driven investment, addressed other risks for its pensioners, where in 2014 Aon advised on the purchase of a longevity swap which was also with Phoenix Life, and the scheme invested in innovative illiquid asset strategies, delivering positive returns.

The annuity purchase is part of a wider initiative where the trustee, sponsoring employer and their advisers are continuing to work together to support further de-risking.

Aon Hewitt risk settlement adviser Dominic Grimley, said: "Bringing so many elements of the scheme together in this way was a particularly rewarding experience. Reaching this point was only possible due to the hard work and belief from the trustee and employer, combined with strong stewardship of the scheme."

Gowling WLG partner Paul Feathers, who led the Gowling WLG team on the transaction said, "It was a pleasure to be involved in helping to deliver a positive outcome for the scheme and its beneficiaries through this complex and innovative transaction, the completion of which reflects the hard work of the stakeholders and their determination to think creatively to ensure the security of members' benefits.”

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