Two more major companies are planning to transfer some of their pension fund risks through longevity swaps in the coming weeks. Longevity risk transfer is becoming a really popular and much more accepted way to take some of the risk out of your pension scheme and enable you to plan your cash flow better and budget for pension payments more accurately.
BMW are planning to shift a £2.5b portion of their pension fund to specialist reinsurers. They’re working with Deutsche Banks Abbey Life and Paternoster to structure a longevity swap. BMW haven’t confirmed this deal but it’s all over the press so we expect to hear more about its completion by the end of the month.
Premier Foods are looking at a similar transaction to transfer the risks of the pension fund of one of its subsidiaries Rank Hovis McDougall to reinsurers and the capital markets. This deal is said to be around the £2b mark.
The longevity market seems to be picking up speed and we expect that to increase as it becomes more organised and accepted. Most major players are showing an interest and the creation of an association to help market it should see many more deals and new entrants to the market this year.
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