Widows in £10bn Lloyds pensions longevity swap

Scottish Widows said it has facilitated a longevity swap between the Lloyds Banking Group Pensions Trustees Limited and Pacific Life Re Limited.

“The transaction transferred longevity risk in relation to £10 billion of pensioner liabilities to Scottish Widows (part of Lloyds Banking Group), with the risk then passed on to Pacific Life Re Limited,” said Scottish Widows.

“The transaction will protect the group’s schemes against the risk of rising costs as a result of pensioner and dependant members living longer than expected.

“This is the first longevity swap carried out by the Trustee which will help protect members’ benefits andcovers the Lloyds Bank Pension Scheme No.1, Lloyds Bank Pension Scheme No.2 and HBOS Final Salary Pension Schemes.”

Scottish Widows was advised by Eversheds Sutherland.

Lloyds Banking Group Pensions Trustees Limited received transaction advice from Willis Towers Watson and Allen & Overy. Pacific Life Re were advised by CMS.

Emma Watkins, director of individual and bulk annuities at Scottish Widows, said: “We are delighted to have worked with the Trustee on their first transaction of this type which reflects the increasing demand in the market for strategies to mitigate funding volatility associated with changes inlife expectancy.”

Harry Baines, chair of the Trustee, said: “We are delighted to have successfully completed these longevity insurance and reinsurance arrangements with Scottish Widows Limited and Pacific Life Re Limited.

“This will protect the schemes from the financial risk of an unexpected increase in life expectancy and make the schemes more secure to the benefit of all members.

“The selection of Scottish Widows Limited and Pacific Life Re Limited followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market andtheir respective propositions delivered the best combination of benefits to meet our brief.”

Hugo Laing, partner at Eversheds Sutherland, said: “This is a fantastic transaction that has helped remove a significant amount of longevity risk for the schemes involved.

“A transaction of this size and nature requires a committed, collaborative approach from all sides involved, and we have thoroughly enjoyed working with Scottish Widows, the Trustee, Pacific Life Re and the respective advisors to get this deal done.

“We are thrilled that Scottish Widows has once again looked to Eversheds Sutherland to support it on this transaction, helping it to further grow in this market and execute larger and more complicated deals.”