Lloyds Banking Group Pensions Trustees Limited has entered into its third and fourth longevity hedging insurance and reinsurance transactions, protecting in aggregate a further £5.1 billion of liabilities.
This arrangement will further protect the Lloyds Banking Group pension schemes from the financial impact of increasing life expectancy among its members.
The new insurance and reinsurance agreements cover £2.1 billion of pensioner liabilities in the Lloyds Bank Pension Scheme No.2 and £3.0 billion in the HBOS Final Salary Pension Scheme.
Notably, the members’ pension benefits will not be affected by the decision to proceed with these transactions. The Schemes will continue to make monthly pension payments to all pensioners as usual.
Both transactions are structured as insurance policies with Rothesay as the insurer, with reinsurance provided by Pacific Life Re and an insurance subsidiary of US-based PFI, a large, multi-national financial services company, for Lloyds No.2 and HBOS respectively.
Vicky Paramour, Trustee Director and Chair of the Investment & Funding Committee, stated: “We are pleased to have successfully completed these transactions which further reduce the Schemes’ exposure to longevity risk and make the Schemes more secure to the benefit of all members.
“The selection of Rothesay, Pacific Life Re. and PFI followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market.”
Matt Wiberg, WTW, lead adviser to the Trustee, said: “The transactions with Pacific Life Re and PFI represent a further significant step in the Trustee’s strategy to reduce longevity risk and it has been a pleasure to advise the Trustee on this strategy over many years, including working closely with the Trustee and the team at A&O Shearman to negotiate the latest transactions.
“These transactions were completed with separate reinsurers in a very short space of time and demonstrates continued improvements in the efficiency of contracting in the longevity swap market, particularly for schemes that have previously completed longevity swaps.”
These recent transactions follow previous longevity hedging arrangements undertaken by Lloyds Banking Group Pensions Trustees Limited in 2020 (£10 billion) and 2022 (£5.5 billion) across the Lloyds Banking Group pension schemes.
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