The BBC Pension Scheme has completed a longevity swap with Zurich, in the sixth largest transaction of its kind.
Aon advised on the deal which sees Zurich, and reinsurer MetLife, cover £6bn of liabilities in the scheme, covering around 21,000 members.
This is the second longevity that the BBC schemes has executive with Zurich, following a £3bn transaction in 2020.
The transaction will provide the scheme, and the BBC as sponsor, with protection against the risk of rising costs due to members living longer than currently expected. The two transaction combined, hedge the risk associated with nearly all of the scheme’s pensioner and dependant liabilities.
This is the sixth biggest longevity swap to be arranged in the UK. The biggest was for the BT pension scheme, back in 2014, for £16bn. The next biggest longevity swaps were all for the pension schemes of UK banks: £10bn for Lloyds, £7bn swaps for the pension schemes of both Barclays and HSBC, a £6bn swap for Santander, and a £5.5bn swap with another Lloyds Bank pension scheme.
Under the terms of the BBC transaction, the trustee retains future flexibility, control and security, while minimising cost, governance and operational burden through Zurich’s solution.
Aon acted as sole transaction adviser for this longevity swap, negotiating the terms with Zurich and broking the reinsurance with MetLife.
Legal advice was provided to the trustee by A&O Shearman, to Zurich by Slaughter and May and to MetLife by Eversheds Sutherland and Debevoise & Plimpton.
Catherine Claydon, chair of the ccheme trustee board says: “The trustee is pleased to have further mitigated the scheme’s exposure to longevity risk, through a second transaction on highly attractive terms for the scheme.”
Tom Scott, risk settlement partner at Aon adds: “This transaction is further evidence of the vibrant longevity insurance and reinsurance markets which continue to offer attractively priced and structured solutions in various forms to UK pension schemes, in this case in the form of a ‘longevity swap’ which means the scheme retains investment control and flexibility.”
