The BBC Pension Scheme has completed a longevity swap that covers more than £3bn (€3.3bn) of pensioner liabilities, while the Aon Retirement Plan has completed a £510m pensioner buy-in, according to a pair of risk transfer announcements today.
Zurich Life was the insurer in the BBC transaction, with reinsurance provided by Canada Life Reinsurance. The longevity insurance policy, the first the BBC scheme has entered into, relates to around one-third of the scheme’s pensioner and dependent liabilities.
It is the seventh longevity swap to have been announced this year, according to IPE, and comes after the announcement of a £5bn deal for Barclays Bank yesterday. The largest longevity swap of 2020 for a UK pension fund remains Lloyds Banking Group’s £10bn deal from January.
Catherine Claydon, chair of the BBC scheme trustee board, said: “The trustee is pleased to have been able to take this important step in our risk management strategy and significantly reduce one of the key risks that all pension schemes face, namely the uncertainty in relation to how long members will live, and pensions will have to be paid for.
“We appreciate the support of our sponsoring employer and our advisers.”
According to Greg Wenzerul, Zurich’s head of longevity risk transfer, the deal was “an example of how large pension schemes can successfully hedge longevity risk in a cost-effective and low risk way”.
Martin Bird, senior partner and head of risk settlement at Aon, added: “At a time of exceptional volatility, it’s great that we have been able to support the scheme trustees with the successful execution of this important transaction to further protect against future funding risk and safeguard members’ interests.”
Barnett Waddingham recently said it expected at least a further £15bn of longevity swaps this year; it was commenting before the Barclays and BBC deals were announced.
Aon expands de-risking
Separately, the Aon Retirement Plan has completed a £510m pensioner buy-in with Scottish Widows for the Aon Bain Hogg Pension Scheme section.
The deal is the fourth buy-in for the pension plan and the second for that particular section.
The trustee was advised by Aon and CMS, and Scottish Widows was advised by Herbert Smith Freehills.
“The trustee has been working with our advisers over a number of years to manage risk in the Plan and enhance the security of members’ benefits,” said Andy Kieran, chair of the trustees of the Aon Retirement Plan.
“We are very happy to have formed this partnership with Scottish Widows and this buy-in, completed in a very short timeframe in what has been a challenging year in financial markets, is another important step in the Plan’s de-risking journey.”
Lara Desay, co-head of origination and structuring, bulk annuities at Scottish Widows, added: “Working in partnership with the trustee and our respective advisers was key to quickly developing and executing a clear timetable through a volatile period and we look forward to becoming a long-term partner.”
According to Mike Edwards, partner at Aon, the transaction was “enabled by the clear objectives set by the trustee and a bespoke process we designed to enable the trustee to achieve those aims by taking advantage of current bulk annuity market dynamics”.
The bulk annuity market is on track to accomodate some £25-30bn of deals this year, according to recent tallies.