Energy organisation SSE has hedged pension longevity risks of £1.2 billion across two of its defined benefit (DB) pension schemes through the completion on one longevity insurance and two buy-in transactions.
The two buy-in transactions, conducted with Pension Insurance Corporation (PIC), totalled £350 million. This included a buy-in for SSE’s Scottish Hydro-Electric pension scheme (SHEPS), which covers £250 million of scheme liabilities and approximately 800 pensioners, as well as a buy-in for its Scotia Gas Networks pension scheme (SGNPS). This SGNPS buy-in covers £100 million of pensioner liabilities and 600 pensioners of the scheme’s 2,000 members.
The longevity insurance, provided by Legal and General, covers a further £800 million of pensioner longevity risk for SHEPS, and transfers the risk to the end reinsurer. This covers around 2,400 pensioners. SHEPS has approximately 5,800 members in total.
Hymans Robertson advised the organisation on all areas of the project, CMS offered legal advice to trustees, Club Vita provided longevity analytics, and Eversheds Sutherland gave legal advice to Legal and General.
Tony Fettiplace, chair of trustees for the Scotia Gas Networks pension scheme, said: “This deal is great news for the scheme. Reducing risk over time is an absolute priority for us and it is important to do this in the most cost effective way.”
Graham Laughland, chair of trustees for the Scottish Hydro-Electric pension scheme, added: “I am delighted to have taken this positive step in reducing risk and improving the security of members’ benefits.”