Pensions longevity swaps deals could treble this year as market barriers broken down, says PwC

More companies can now afford to remove the risks associated with their pension scheme members living longer than expected due to innovative new structures developed in the pension and insurance sectors.

PwC has developed a platform with Artex Risk Solutions, one of the leading global captive managers, to lower the cost of a longevity swap.

This new structure, Iccaria, provides pension funds with direct access to reinsurers and will open up the longevity market to pensions schemes with liabilities as low as £250 million. As opposed to other models in the market, Iccaria gives pension schemes a choice over who operates the contract, potentially leading to lower costs overall.

Paul Kitson, partner in PwC’s pensions team, said:

"Since the first pension scheme longevity swap in 2009 there have only been around four to five deals each year. Innovative new captive vehicles, such as Iccaria, mean that deal volumes could treble this year. Pension schemes that previously viewed longevity swaps as too expensive, or who thought they were too small to access this market, are likely to re-think their options given the changes in the market.

"PwC’s pensions and captive experience, together with Artex’s new captive vehicle, allows our pensions clients to transfer longevity risk at a much lower cost while retaining the flexibility over how the longevity hedge is administered.

"Now is a great time for any company looking to remove risk from their pension scheme due to the new longevity swap structures and attractive reinsurer pricing. Our experience on deals in 2014 shows that the cost of hedging longevity can often be lower than the funding reserves calculated by pension schemes. In addition to this, the door to the longevity swap market is now fully open for smaller pension schemes and in 2015 we expect a number of sub £100m transactions to take place for the first time."

For further information please contact Claire Truscott, media relations: [email protected], 0207 213 3688.

ENDS

Notes to Editors:

1. Iccaria gives the pension fund free choice over the service providers used to administer the insurance contract.
2. For further commentary on market issues, visit our pensions blog: pwc.blogs.com/pensions
3. Skyval and Skyval Insure can be used to support effective pensions risk management transactions. Skyval is a real-time web-based pensions platform which sponsors, trustees and their advisers can use as a common and confidential tool for their valuation, analytics and benchmarking requirements. It is the only system of its kind which other advisers can use to privately access information and sign off formally on output. Skyval has its functionality on one single system, so once it is set up for one purpose it is available for other uses (eg actuarial valuations, risk management, accounting disclosures, asset-liability modelling, benchmarking and Skyval Insure). Skyval is being deployed for over £125bn worth of pension schemes. For more information please visit www.skyval.com
4. This content is aimed only at defined benefit pension schemes with in-payment pensioner liabilities in excess of £250 million, but, in any event, is for general information purposes only, and should not be used as a substitute for consultation with professional advisers.
5. PwC refers to the PwC network and/or one more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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