The UBS (UK) Pension and Life Assurance Scheme is extending its longevity hedge by £0.5bn, and Mercer will continue to act as the lead commercial and investment adviser to the scheme’s Trustee.
The Canada Life Assurance Company is acting as the reinsurer on the deal, which was arranged by Zurich Assurance Ltd. Allen & Overy LLP acted as legal advisers to the Trustee.
This transaction adds to the £1.4bn longevity swap transacted in July 2020 and the extended swap now covers roughly two-thirds of its defined benefit liabilities. Around half of the new tranche of the longevity swap relates to deferred members.
Under the terms of the extension, 100% of the longevity risk will be reinsured by Canada Life Re.
The longevity swap was adapted to cover the Scheme’s defined benefit (DB) deferred members over age 60, which the company says is a market first, as well as the unhedged DB current pensioners. The swap will protect the scheme against the risk of the covered members or their covered dependents living longer than expected.
Suthan Rajagopalan, a Partner at Mercer and lead adviser to the Trustee, said: “This transaction follows the original pensioner-only £1.4bn longevity swap in 2020 and we are proud to have advised on this innovative £0.5bn extension, around half of which relates to deferred members.”
“This transaction was the result of ongoing review of the Scheme’s broader strategic de-risking and long-term journey plan; through close collaboration with the Scheme’s existing counterparties we were able to secure attractive pricing and terms in what is a quickly-developing longevity swap market for deferred members.”
Richard Hardie, Chair of the Trustee to the UBS (UK) Pension and Life Assurance Scheme, said: “This transaction is a significant milestone in our plan to reduce the uncertainties facing the DB section of our Scheme as it approaches maturity. It adds considerably to the security of all DB members’ pensions; the longevity risk attaching to now approximately two thirds of the Scheme’s DB liabilities has been removed.”
“We are delighted to have extended our agreement on terms satisfactory to all parties with the continuing excellent support from the sponsor, UBS, and the strong relationship with our existing counterparties Zurich and Canada Life. The Trustee is very grateful to its advisers for seeing the market opportunity.”
