WTW has launched a streamlined longevity swap solution, aiming to make longevity hedging more accessible, efficient and cost-effective for defined benefit (DB) schemes below £1bn.
While longevity swaps are a well-established path for schemes in the UK market, with over £170bn of longevity risk being transferred to reinsurers since 2009, smaller and medium-sized pension funds have historically found longevity swaps more difficult to access due to the implementation and ongoing management costs.
WTW aims to broaden access with Longevity Stream. The solution is aimed at pension funds with £100m to £1bn of liabilities, and it has been designed to support run-on strategies while making transition to a bulk annuity straightforward, WTW said.
The solution will provide a structured route to market, giving trustees access to a panel of leading global reinsurers, with Zurich as an intermediary.
Key features include pre-negotiated contracts, developed in partnership with legal advisers CMS, and a simplified operational structure, helping schemes to implement longevity swaps more efficiently under a fixed-fee arrangement.
Rhys Mellens, senior director at WTW, said: “Demand for longevity swaps has grown in recent years, with schemes increasingly looking to manage longevity risk, either as part of a run‑on strategy or to lock down a key driver of future buy‑in pricing.
“We are seeing increased interest from schemes that want to access this market but have been held back by the perceived complexity and cost. Longevity Stream removes those barriers, giving schemes a more efficient route to market whilst retaining future flexibility and enabling them to access the attractive pricing currently available.”
Helping smaller schemes towards endgame
Last year UK-based consultancy Isio developed the PenUltimate Micro solution to help smaller pension funds with fewer than 100 members progress efficiently towards buy-in, buyout and wind-up.
The solution, which caters to 20 pension schemes, has already completed two buy-in transactions – the Pension and Life Assurance Plan of the Godolphin Company Limited and The Graham Asset Management Pension and Life Assurance Scheme.
The remaining schemes, which range in size from under £1m to around £15m, are at various stages of their insurance journey, many expected to complete buy-ins before the end of the year.
The growth of PenUltimate Micro comes as insurer engagement with smaller schemes continues to increase. Having already completed transactions with two insurers, Isio said it is now seeing interest from six of the UK’s ten bulk annuity providers and expects to have transacted with four different insurers before the end of the year, reflecting a broader trend across the market as insurers expand their offerings for well-prepared smaller pension funds.
Isio added that recent developments, including the launch of a dedicated solution for smaller transactions, demonstrate the growing recognition of this part of the market.
Building on the solution, Isio has also developed PenUltimate Micro+ for schemes that require more time before they are financially ready to insure. The service enables Isio to support schemes earlier in their de-risking journey by providing administration, actuarial, investment and governance services to help them become operationally ready for insurance, before continuing to support them until funding levels and market conditions allow a transaction to proceed.
Christian Costi, insurance director at Isio, said: “Reaching 20 schemes in the first year of PenUltimate Micro shows that there is strong demand from smaller schemes for a structured route towards insurance. These schemes often face the same regulatory and governance challenges as much larger arrangements but have fewer resources available to manage them.
“We’re also seeing the market evolve. More insurers are engaging with smaller schemes and developing dedicated solutions, creating greater choice for trustees and making insurance a realistic option for more schemes than ever before.”
