mast image

Special Report

Impact investing

Sections

BA pension fund completes second longevity risk transfer with Rothesay

Related images

  • BA pension fund completes second longevity risk transfer with Rothesay

UK - One of British Airways' pension funds has completed its second buy-in, doubling its level of insurance in a £1.3bn (€1.5bn) transaction.

The deal, agreed with Rothesay Life, was seen by one observer as proof the pension risk transfer market had "come of age", being the fourth sizeable transfer announced in recent months.

At the end of March, the Airways Pension Scheme (APS) reported assets under management of £6.7bn, with the most recently reported deficit from a year earlier standing at £554m.

Commenting on the deal, Rothesay chairman Keith Satchell said: "We are very pleased that we have been able to work with the trustees again to insure additional benefits against increasing life expectancy."

Last year, APS agreed a £1.3bn buy-in with Rothesay, at the time covering 20% of its pension liabilities.

Combined with the new agreement, 40% of the scheme's liabilities have now been insured.

Paul Spencer, chair of the scheme's trustees, said: "One of our principal objectives is to make members' pensions more secure. Most of our investments aim to produce an income that closely matches the pensions we expect to pay, but this still leaves the risk that longevity could improve faster than we have budgeted for."

He added that, after "thoroughly" reviewing all possibilities, Rothesay Life was again identified as the best option.

Commenting on the deal, Towers Watson senior consultant Colette Christiansen pointed out that it was the fourth large transaction in as many months.

"It is a sign of how the pension risk transfer market has come of age that we are now seeing schemes take their second major step toward de-risked pensions," she said.

Last week saw the former pension scheme of sandwich-maker Uniq agreed an £830m transfer with Rothesay, while the Rolls-Royce Pension Fund last month completed a £3.5bn deal, and broadcaster ITV insured £1.7bn of risk in August.

According to its most recent annual report, APS returned 7.8% in the 12 months to March, slightly outperforming its benchmark.

The majority of its assets were invested in fixed income and cash, with a 54.4% exposure to index-linked gilts and an overall allocation of 77% to the asset class.

The remainder of its assets were invested in equities, accounting for 11.3% of assets, and property, with 4.6% and 1.9% invested in alternatives and private equity, respectively.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<