Insurers start picking up pension deals

Employers turn to de-risking deals as insurer competition offers keen pricing

Insurers start picking up pension deals

Insurance News

By Terry Gangcuangco

It looks like de-risking is now the name of the game for employers when it comes to their pension liabilities.

Scottish and Southern Energy (SSE) has completed three deals to pass on £1.2 billion of responsibility to insurers Legal & General (L&G) and Pension Insurance Corporation (PIC).

Here are the numbers, according to Professional Pensions:
  • £250 million buy-in between Scottish Hydro-Electric Pension Scheme (SHEPS) and PIC covering 800 pensioners
  • £800 million longevity swap between SHEPS and L&G covering 2,400 pensioners
  • £100 million buy-in between PIC and Scotia Gas Networks Pension Scheme (SGNPS) covering 600 pensioners
“There is massive pent-up demand for pension de-risking,” said Hymans Robertson partner James Mullins, as quoted by the Financial Times. The consultancy was the lead adviser on the three deals.

Mullins continued: “More and more DB scheme members are reaching retirement and drawing on their pensions, which will bring a greater focus on the benefits of transferring this liability to an insurer, rather than leaving it on the balance sheet of a company.”

He described the pricing for such transactions as very keen amid stiff competition among insurers. According to the report, L&G completed 16 de-risking deals last year.

Tony Fettiplace, chairman of trustees for SGNPS, commented: “Reducing risk over time is an absolute priority for us and it is important to do this in the most cost-effective way.”

As for the SHEPS deals, Professional Pensions reported that the combination of a buy-in and a longevity swap is believed to be a first.

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