The BBC Pension Scheme has added new benefit security for members with the completion of a UK £3 billion plus longevity swap transaction, with the assistance of global insurance firm Zurich and global reinsurance firm Canada Life Re.
The longevity swap arrangement will cover over £3 billion of pensioner liabilities for the BBC Pension Scheme, effectively transferring the risks of pensioners living longer than anticipated to the global reinsurance market.
The longevity swap covers a subset of pensioners, but its benefits will apply across the pension scheme, meaning all members benefit from the added security over their benefits, while the BBC Pension Scheme transfers out the risks most likely to affect its funding in years to come.
Catherine Claydon, Chair of the BBC Pension Scheme Trustee Board, commented, “The Trustee is pleased to have been able to take this important step in our risk management strategy and significantly reduce one of the key risks that all pension schemes face, namely the uncertainty in relation to how long members will live, and pensions will have to be paid for. We appreciate the support of our sponsoring employer and our advisers.”
Greg Wenzerul, Zurich’s Head of Longevity Risk Transfer, added, “We are delighted to have helped minimise the longevity risk of the BBC Pension Scheme. We are also grateful to Canada Life Re for their flexible approach. This is an example of how large pension schemes can successfully hedge longevity risk in a cost‐effective and low risk way. We set out to lower the perceived barriers for pension schemes seeking longevity‐only de‐risking and using a UK regulated insurer to structure the deal offers trustees a secure, simple and flexible solution.”
Jeff Poulin, Global Head of Canada Life Reinsurance, also said, “Congratulations to all teams involved in executing this significant new transaction with the BBC Pension Scheme. Canada Life Reinsurance has been active in the UK longevity reinsurance market since its inception and have looked to support our clients with pragmatic and flexible solutions. We are pleased to have been able to build on our existing relationships with Aon and Zurich in order to support the Trustee on its de‐risking journey.”
Martin Bird, Senior Partner and Head of Risk Settlement at Aon, who acted as the lead advisor and brokered the reinsurance for the longevity risk transfer arrangement, commented, “At a time of exceptional volatility, it’s great that we have been able to support the Scheme Trustees with the successful execution of this important transaction to further protect against future funding risk and safeguard members’ interests.”
We now have over UK £24 billion of longevity swaps listed in our deal directory for 2020, making this the biggest year in the longevity swap market for some time.
Today’s BBC longevity swap follows a £5 billion transaction revealed yesterday for the Barclays Bank UK Pension Fund that was backed by Reinsurance Group of America.