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UK roundup: L&G enters longevity swap market for small schemes

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UK insurance giant Legal & General (L&G) has entered the longevity swap market for small pension schemes with a £300m (€334m) transaction.

The deal – with an unnamed “mid-tier” UK pension scheme – made use of a “streamlined” derisking structure, L&G said in a press release. The swap was fully reinsured with SCOR, and means the scheme is protected against the risk of its members living longer than expected.

Chris DeMarco, managing director for UK pension risk transfer at L&G Retirement Institutional, said: “Smaller pension schemes often feel that the only insurance options they have are traditional buy-in or buyout structures.

“This transaction demonstrates that longevity insurance is a realistic option for most pension schemes, including for trustees whose schemes are not quite at the point they can enter into buy-in or buyout but want to manage their longevity risk.”

Longevity insurance has typically been available chiefly to larger schemes. In the past 12 months, MercerBritish Airways and National Grid have sealed multi-billion-pound longevity derisking transactions, while insurance companies PICAviva and Scottish Widows have also offloaded longevity risk attached to their bulk annuity books.

This year has been widely predicted to be a record-breaking year for pension risk transfers, including buy-ins, buyouts and longevity swaps.

LGPS pool signs PRI code

The £15.1bn Local Pensions Partnership (LPP) has signed up to the UN’s Principles for Responsible Investment (PRI).

LPP – which manages the assets of three Local Government Pension Scheme (LGPS) funds – said the decision reflected a “continued commitment to integrating environmental, social and corporate governance (ESG) considerations” into its investment operations.

The company has put in place shareholder voting and responsible investment policies detailing its principles and guidelines for governance and stewardship of assets.

Susan Martin, LPP chief executive, said: “Since our inception we have worked closely with our partner funds to help them achieve their ESG investment objectives and this is the natural next step for us.

“As we continue to seek the best possible long-term outcomes for our clients and their pensions, we see ESG as an integral part of the investment decision-making process and will continue to develop our focus on the best governance and stewardship practice.”

LGPS Central agrees to cost transparency guidelines

LGPS Central, the asset pool for nine UK local authority funds running £44.3bn, has become the latest pooling body to sign up to LGPS’s cost transparency code.

It follows fellow asset pools LPP, Brunel Pension Partnership and Border to Coast Pensions Partnership in pledging to comply with the code.

Wolverhampton Cathedral

Source: Paul Cosmin

LGPS Central’s office is in Wolverhampton, England

The cost guidelines were set up by the LGPS’s advisory board and will be updated when new templates are published by the Institutional Disclosure Working Group, an industry body that is drawing up disclosure templates for a range of asset classes.

The advisory board’s standard has been adopted across the LGPS for more than a year, and most schemes only hire new managers that are signed up to code.

According to the board’s website, 78 asset managers and other service providers have signed up to the code.

Andrew Warwick-Thompson, CEO of LGPS Central, said the code “reflects our objective to demonstrate that we are open and transparent in everything that we do, particularly when it concerns investment management costs and fees”.

He added that one of the pool’s core objectives was to “demonstrate cost savings on our investment management activities”.

“By signing up to the code we know that our partner funds will have full transparency relating to our costs and fees based upon a methodology that we expect to see become industry best practice,” Warwick-Thompson said. “That can only be a positive for everybody involved.”

LGPS Central has launched three equity funds since opening for business in April, with £13bn under management. It plans to open at least two more funds later this year. 

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