Pension funds are facing up to their increasing longevity risks by seeking new ways to transfer their risks to other parties, the capital markets or into investments. GlaxoSmithKline are the latest to enter into a deal which sees them enter into bulk annuity contracts with Prudential to pass on the risks for 15% of their pension benefit liabilities.
Prudential UK has initiated two bulk annuity buy-in contracts with the two of the GSK pension schemes trustees, the GlaxoSmithKline Pension Scheme and the GSK Pension Fund. These transactions cover around 15% of GSK’s UK defined benefit pensioner liabilities and have an aggregate value of approximately £900 million.
We expect to see these types of deals increasing along with longevity hedging and pension buy-outs.