The Pension Insurance Corporation (PIC) has converted an existing longevity swap for the Scottish Hydro Electric Pension Scheme into a £750m buy-in.

The deal is the third buy-in that PIC has executed for Scottish & Southern Energy, the sponsor of the scheme, having insured £250m of the scheme’s pensioner liabilities in 2016 and £100m of pensioner liabilities in the Scotia Gas Networks Pension Scheme.

The trustee of the scheme had also previously completed a £800m longevity insurance deal with Legal & General.

PIC says that the conversion confirms the trend within the market for trustees to seek guarantees for all of their risks.

PIC head of pricing, Tristan Walker-Buckton, said: “Converting a longevity swap into a buy-in is not straightforward but it is an increasing trend.

"It shows that trustees are keen to extend their de-risking programme beyond longevity risk and into a buy-in or buyout, giving them fuller coverage and a simpler proposition to manage long-term.”

Scottish Hydro Electric Pension Scheme chairman of trustees, Graham Laughland, said that the conversion process went very smoothly, adding: “This buy-in extends the insurance we have in place and provides the scheme with an income stream that matches in all material respects the pensions currently being paid.”

Hymans Robertson was lead adviser on the transaction, with Shepherd and Wedderburn advising on the structure and providing legal advice on the transaction to the Trustees.

According to Hymans Robertson partner, Richard Wellard, one of the scheme trustees’ advisers, the transaction is now the fifth occasion that a longevity swap has been converted in a buy-in.

The process of converting a longevity swap to a buy-in is more complex than implementing a buy-in from scratch, but Wellard expects more schemes to follow suit as they become better funded and look to “lock down risk”.

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