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The Actuary The magazine of the Institute & Faculty of Actuaries

ITV enters into £1.7bn pensions swap with Credit Suisse

ITV trustees have entered into a swap with Credit Suisse, which fully hedges the longevity risk of 12,000 pensioner members, in a deal that will increase the scheme’s deficit by £50m.

Raj Mody, head of pensions, PwC – whose firm advised ITV on the deal – believes 12 swap deals would finalise in the coming 18 months as large firms become more analytical in their approach to pensions risk management.

Andrew Ward, principal and head of longevity swap consulting at Mercer, who advised the ITV trustees, predicted an annual amount of £10bn to £20bn of deals could soon be the norm.

“A year or two ago people didn’t want to be the first mover, but now schemes can see that the market works and we have a number of cases at different stages many of which will complete in Q4 this year or early next year,” he said.

It has been noted, however, that there is a finite market for longevity swaps.

Mr Ward suggested that schemes with a budget to address risk were looking at longevity swaps as an alternative to more established markets such as gilts, while Mody said schemes and sponsors should assess whether they could bear an unexpected three to four-year increase in life expectancy.