The Barclays Bank UK Retirement Fund has completed a £5bn longevity swap with Reinsurance Group of America (RGA).
The scheme said the longevity swap helps protect it from the financial risk of an unexpected increase to life expectancy for current pensioners.
It said this was another important step in the trustee's journey to reduce risks in the scheme, and makes the fund more secure for the benefit of all members - adding that members would see no changes to their benefits, which will continue to be paid directly by the scheme.
Barclays Bank UK Retirement Fund trustee chairman Peter Goshawk said: "In addition to the material reduction of deficit revealed at the 2019 actuarial valuation, the longevity swap is another significant step in our de-risking journey for the UKRF, improving benefit security for all members. I would like to thank Barclays for their support on this project and also to thank the Barclays' pension team, RGA and our advisers, for helping us to complete a successful transaction."
RGA executive vice-president of global financial solutions Larry Carson added: "RGA is delighted to partner with the trustee of the Barclays Bank UK Retirement Fund on a transaction that demonstrates RGA's dedication to working with clients in the UK, and around the world, to meet their risk management objectives."
Aon was lead adviser to the scheme - and a multi-disciplinary team from the firm,, led by senior partner Martin Bird and including members of the firm's UK-based risk settlement group and insurance team, advised on all aspects of the transaction, including risk analytics, design and structuring, reinsurance selection and operational establishment.
Commenting on the deal, Bird said: "It's great that Aon was able to bring together all the necessary expertise - including our market-leading demographic analytics, our diverse experience of the risk settlement market and insurance capabilities - to support this significant transaction. We worked closely with the Trustee of the UKRF in tailoring an insurance structure solution to hedge the fund's specific longevity risk profile following a competitive reinsurance selection process."
Aon principal consultant Tom Scott added: "This transaction, along with others in the pipeline, demonstrates the capacity and appetite of the global reinsurance market to take on pension fund longevity risk, even in these challenging times. Despite the current economic climate, pension schemes can still successfully access the reinsurance market in an effective manner."
Linklaters was legal adviser to the trustee. Its team was led by pensions partner Rosalind Knowles and pensions managing associate Sarah Parkin, and included Duncan Barber, partner in the firm's insurance practice as well as banking partner, Tom Wells, and counsel, Andrew Forde.
Insight Investment has been appointed as collateral manager for the transaction.
"We are very pleased to partner with the Barclays Bank UK Retirement Fund as it takes the next step on its de-risking journey," said Insight Investment group head of client solutions Serkan Bektas. "This transaction is particularly timely given that longevity risk is receiving increased focus among pension schemes and we are well positioned to work closely with our clients who are seeking to maximise certainty of outcome and achieve greater overall investment efficiency in their risk management frameworks."
The deal takes the total volume of longevity swaps for 2020 to £21.3bn, with six now having been announced this year. These include the £10bn swap with three Lloyds Banking Group schemes conducted with Pacific Life and the £3.7bn deal with the Prudential Staff Pension Scheme, also conducted with Pacific Life.
There have now been a total of 31 longevity swaps over £1bn publicly announced. The full list, provided by Willis Towers Watson and through PP research, is as follows...
