Nationwide Pension Fund has completed a £1.7bn longevity risk transfer transaction with Zurich Assurance and Prudential Financial Inc (PFI), covering the longevity risk for around 7,000 in-pay members in the UK.
Under the transaction, which closed in May, the longevity risk of the pension scheme relating to these members will be passed through Zurich UK, to an insurance subsidiary of PFI as the reinsurer, with a limited recourse mechanism protecting Zurich UK against exposure under the transaction.
It comes as the market continues to see strong demand for de-risking solutions.
Rohit Mathur, head of international reinsurance for the Retirement Strategies business at PFI, commented: “The recent rise in interest rates have resulted in improvements in pension plan funded status, accelerating derisking plans for many sponsors.
“Pension Trustees can consider a few different options to manage risk including a pension buy-out or a longevity risk transfer transaction. We are pleased to offer reinsurance that helps clients meet their objectives.”
Greg Wenzerul, head of longevity risk transfer for Zurich UK, said “This solution represents a simple approach for pension fund trustees to manage their exposure to longevity risk. In a rapidly changing pensions de-risking market, with increased pension scheme focus on leverage, longevity swaps continue to represent a sophisticated and valuable de-risking approach. We are pleased to count the Trustee of the Nationwide Pension Fund as a customer, and to build on our existing transactions involving PFI.”
For this transaction Aon served as the lead adviser to the Nationwide trustee, and Insight Investment was appointed to provide ongoing longevity-related services in support of the trustee. Legal advice was provided by Sacker & Partners LLP.
PFI was advised by Willkie Farr & Gallagher LLP, and Zurich was advised by Slaughter and May.
Catherine Redmond, Chair of the Fund’s Trustee Board and Trustee Executive for BESTrustees Limited, said: “This transaction is an important step in ensuring that members’ benefits are secured against unexpected increases in life expectancy.
“This is great news for the Fund and its members, transferring risk and helping to further protect our members’ pensions. We as a Trustee Board are delighted to have taken this additional step on our long-term de-risking journey. The Trustee is grateful to Aon and Sackers for their support and looks forward to working closely with the Zurich and PFI teams.”
