The BT Pension Scheme (BTPS), one of the UK’s largest private sector pensions, has completed two longevity swap transactions, a £5 billion agreement with global reinsurer Swiss Re, and a £5 billion transaction with Reinsurance Group of America (RGA).
Both transactions will provide further protection for BTPS from the cost of unexpected increases in the life expectancy of its members.The new longevity insurance and reinsurance arrangements reportedly cover BTPS pension liabilities of £5 billion with Swiss Re, while also increasing existing cover with RGA by £5 billion, following a previous transaction completed using a similar arrangement in 2023.
Previously, the BT Pension Scheme had also secured longevity risk protection back in 2014, when it was the beneficiary of a landmark £16 billion longevity swap transaction.
Both of the new longevity swap transactions were facilitated through the Scheme’s existing captive insurer.
The captive structure allows BTPS to enter into longevity swaps directly, which are then seamlessly reinsured with Swiss Re and RGA, eliminating the need for a private insurer intermediary. This efficient access to reinsurance capital ensures cost-effective risk management for the pension scheme.
It’s important to note that both transactions will have no impact on BTPS’ cash contributions to the pension scheme.
Both of the new longevity swap and reinsurance transactions were led by Brightwell, BTPS’ primary services provider, and supported by broker WTW and A&O Shearman, while Swiss Re was advised by Willkie Farr & Gallagher.
Jill Mackenzie, Chair of Trustees, BTPS, commented: “These transactions help to advance the development of the Scheme’s long-term investment strategy, providing increased certainty for the Scheme, our sponsor, and members.”
Wyn Francis, Chief Investment Officer, Brightwell, said: “Brightwell’s leading role in delivering two concurrent longevity swaps demonstrates the value in a fully integrated fiduciary manager. These transactions will be onboarded to Brightwell’s automated, efficient and low-cost operating platform, reinforcing our experience and capability in managing all Scheme risks to achieve market leading outcomes for a Scheme in run-on.”
Emma Ferris, Managing Director, RGA UK, added: “We are delighted to have once again partnered with BTPS on this transaction, further supporting the Scheme’s aims of stability and financial security of retirement benefits for its members.”
Kerry McMullan, Head L&H Structured Solutions, Swiss Re, commented: “We are very grateful for the opportunity to bring our financial strength and longevity risk structuring experience to BTPS to make the Scheme more resilient to uncertain future life expectancies and helping it provide secure retirement benefits to its membership.”
View details of many longevity swaps and longevity reinsurance deals in our longevity risk transfer deal directory.
