Berkshire plans to hedge longevity
UK - Berkshire Pension Fund has confirmed it is in the process of completing a deal to hedge the longevity risk for its pensioners.
The £1.05bn (€1.16bn) pension fund, administered by the Royal Borough of Windsor and Maidenhead (RBWM), has 19,416 active members, 14,479 deferred members and 10,869 pensioners or dependents receiving continuing benefits from the fund.
A spokesman for Berkshire confirmed it is about to complete an insurance deal which will cover the 10,000 pensioners of the fund, and said it had decided to take the step for risk management reasons, "turning uncertainty into certainty".
Continued increases in life expectancies means longevity risk is one of the biggest issues facing pension funds, and an increasing interest in instruments such as longevity swaps to hedge this risk was demonstrated by Babcock, when it completed its first longevity deal with Credit Suisse in June, with two further tranches expected to be completed by the end of September. (See earlier IPE article: Babcock confirms longevity deal with Credit Suisse)
Nick Flint, chief executive of Club Vita, the longevity analytics service launched by Hymans Robertson, said: "Berkshire pension fund's pioneering move into longevity swaps, a form of insurance against increasing longevity is a bold one, which others should consider, at the right price."
However, he said Club Vita's research had shown life expectancy varies for different types of people across the country, and warned "only time will tell whether the people of Berkshire have paid too much in the pursuit of the financial certainty that all yearn for".
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