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UK roundup: Longevity swap 'unwound' in landmark move

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Consultancy Aon Hewitt has helped the PGL Pension Scheme unwind a longevity swap, the first time such a transaction has been completed.

It paved the way for a £1.2bn (€1.4bn) bulk annuity transaction with Phoenix Life, agreed in December but only made public this week.

The PGL scheme orginally struck the £900m longevity swap in 2014, also with Phoenix Life as the insurer. Phoenix Life’s parent company is the sponsor of the PGL scheme.

The bulk annuity was the largest completed in 2016, and the fourth-largest buy-in in the UK to date.

“Favourable asset performance, together with a successful liability management programme, led to the scheme making 2016’s largest bulk annuity purchase,” Aon Hewitt said in a statement. “Crucially, by arranging the longevity swap in advance, the trustee was able to agree beneficial pricing for the annuity conversion.”

PPF consults on latest levy

Roughly two-thirds of UK private sector defined benefit (DB) schemes could see a reduction in the amount they pay to the Pension Protection Fund (PPF), under new levy proposals.

The PPF – the lifeboat fund for DB schemes – this week published a consultation on its levy structure for the three years beginning April 2018. The levy is calculated based on each firm’s likelihood of insolvency.

The latest proposals are likely to mean reduced payments for schemes linked to small- and medium-sized businesses and not-for-profit groups, the PPF said. This would be achieved through the introduction of two new “scorecards” – the method by which solvency risk is calculated – and changes to existing scorecards.

The PPF is also consulting on the use of credit ratings for large employers, and a “specific methodology” for financial serivces firms. 

“This will ensure the best possible assessment of insolvency risk for some of the largest levy payers,” the fund said.

The consultation is open for responses until 15 May.

The PPF earlier this month finished consulting on a temporary levy for schemes without a “substantive” sponsor, paving the way for innovative restructuring plans for schemes such as BHS and – potentially – the British Steel Pension Scheme. The PPF’s decision is expected by the end of this month.

University seeks fiduciary manager

Elsewhere, the University of Bristol’s pension scheme trustees are seeking a fiduciary manager for its entire, £300m portfolio.

According to the tender notice, the successful applicant will “decide on, oversee, execute, or advise” on strategic and tactical asset allocation, portfolio construction, hedging, liquidity management, reporting, setting objectives, trustee education, and risk budgeting.

The tender notice is available here, and bids for the mandate should be registered by midday on 24 April.

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