Scottish Widows has facilitated a £10bn longevity swap which covers three separate pension schemes run by Lloyds Banking Group.
This is the second largest deal of its kind in the UK. The transaction transfers these pensioner liabilities to Scottish Widows, with the risk then passed on to Pacific Life Re.
This is the first longevity swap carried out by the Lloyds Banking Group Pension Trustees, and is designed to help protect members’ benefits. It covers the Lloyds Bank Pension Scheme No.1, Lloyds Bank Pension Scheme No.2 and HBOS Final Salary Pension Schemes.
The transaction will protect these schemes against the risk of rising costs as a result of pensioner and dependant members living longer than expected.
To help set up this deal the trustees of these schemes received advice from Willis Towers Watson and Allen & Overy. In addition, Scottish Widows was advised by Eversheds Sutherland, and Pacific Life Re by CMS.
Scottish Widows director of individual and bulk annuities Emma Watkins says: “We are delighted to have worked with the trustee on their first transaction of this type, which reflects the increasing demand in the market for strategies to mitigate funding volatility associated with changes in life expectancy.”
Eversheds Sutherland partner Hugo Laing adds: “This transaction has helped remove a significant amount of longevity risk for the schemes involved.
“A transaction of this size and nature requires a committed, collaborative approach from all sides involved. We are thrilled that Scottish Widows has once again looked to Eversheds Sutherland to support it on this transaction, helping it to further grow in this market and execute larger and more complicated deals.”