UK - Babcock International has completed a second tranche of longevity swap arrangements with Credit Suisse, but this time relating to the Rosyth Royal Dockyard Pension Scheme.
Babcock confirmed in June it had agreed the first of three proposed longevity transactions to cap the liabilities relating to life expectancy with the Devonport Royal Dockyard Pension Scheme.
(See earlier IPE article: Babcock confirms longevity deal with Credit Suisse)
Under the arrangements, the schemes will swap pre-agreed monthly payments to Credit Suisse in return for monthly payments dependant on the longevity of the schemes retired members.
Babcock is responsible for four UK defined benefit (DB) pension schemes - Devonport Royal Dockyard Pension Scheme, the Babcock International Group Pension Scheme, the Rosyth Royal Dockyard Pension Scheme and the First Engineering Shared Cost Section of the Railways Pensions Scheme.
As of the end of March 2009, the group's DB liabilities and assets were valued at around £1.7bn (€1.86bn), of which around £800m of the liabilities related to pensions in payment. Under the first of the longevity swaps around £300m of this amount was capped by the arrangement, and the confirmation of a similar deal with the Rosyth trustees has capped a further £250m of liabilities.
Babcock also said "a further transaction for the Babcock Group scheme is expected to complete shortly. We are now assessing options for reducing risk on the remaining liabilities".
Figures from the group's annual reports for 2009 showed at the last formal actuarial valuation in 2006 the Rosyth scheme had assets of £448.3m and a funding level of 98%, while the Devonport scheme at its valuation in March 2008 had assets of £850m and a funding level of 95%.
The Babcock International Group Scheme, which is believed to be the next plan to engage in longevity swaps, was last valued formally in April 2007 when its assets reached £468.9m with a funding level of 103%.
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