Longevity hedging is the way forward

But there was no clear preference over the structure of a longevity hedge, given the choice of an insured product or a capital-markets product, as long as the price was right, with 65 per cent saying price was more important.

Pinsent Masons advised the trustees of one of Babcock International Group’s pension schemes (the Devonport Royal Dockyard Pension Scheme) on what it says is the first ever longevity swap with a UK pension scheme earlier this year. It is currently working on two further swaps for the group, which should be concluded shortly.

Head of pensions Christopher Berkeley says: “With difficult economic conditions continuing to cause headaches for both businesses and trustees, some form of control over pension liabilities is required by all parties. It has recently been reported that pension shortfalls at FTSE250 businesses have doubled to £12bn and, with life expectancy continuing to rise, many schemes will be seeking to secure their future one way or another.”

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