British Airways Airways Pension Scheme has announced a further £1.3bn longevity insurance contract - taking its hedge on increasing life expectancy to 40% of pensions in payment...
APS has entered into the buy-in deal with Rothesay Life to insure against scheme members' increasing benefits
It is the second time Rothesay has insured APS longevity risk, after it originally provided a further £1.3bn insurance in June 2010 for 20% of the scheme's pensions in payment.
Airways Pension Scheme trustee chairman Paul Spencer said: "One of our principal objectives is to make members' pensions more secure.
"Most of our investments aim to produce an income that closely matches the pensions we expect to pay, but this still leaves the risk that longevity could improve faster than we have budgeted for.
"We identified an opportunity to further protect the scheme against some of these extra costs and, after thoroughly reviewing options with our advisers, selected Rothesay Life again based on their ability to structure a contract around our needs."
Rothesay Life chairman Keith Satchell said: "This is the second repeat trade for Rothesay this year, which we believe is a real endorsement of the team."
Towers Watson advised APS on the longevity strategy and this afternoon said the deal was part of a bigger surge in recent pension risk transfer activity.
Senior consultant Colette Christiansen said: "This is the fourth time in as many months that a large UK scheme has hedged risks relating to £1bn or more of pension liabilities.
"At the same time, we are helping an increasing number of smaller schemes to purchase insurance through deals that are often executed quickly and with no fanfare. In the past week alone we have helped clients complete three relatively small bulk annuity transactions, with more expected before the year end."