Berkshire’s pension fund undertakes longevity risk transfer

The Royal County of Berkshire Pension Fund (RBPF) has become the first government body to undertake a pure longevity risk transfer.

The transaction, which is also the first longevity swap for global reinsurers Swiss Re, will provide RBPF with protection against the uncertainty associated with longevity risk on £1.7 billion Swiss Francs (£1.01 billion) of pensioner liabilities.

The Royal County of Berkshire Pension Fund (RBPF) is part of the Local Government Pension Scheme (LGPS) and is administered by the Royal Borough of Windsor and Maidenhead (RBWM) on behalf of the six unitary authority employers and nearly 100 other employers.

Christian Mumenthaler, Swiss Re’s head of life and health, said: “We are very proud to announce this innovative transaction, because it is not only Swiss Re’s first longevity protection written for a pension fund, but the first pure longevity risk transfer written for any governmental body worldwide.”

The longevity contract transfers the longevity risk for RBPF’s existing pensioners through a straightforward insurance policy.

It covers 11,000 pensions of the fund that were in payment on 31 July 2009.

The RBPF pension fund pays regular premiums to Swiss Re according to a fixed schedule.

Swiss Re insures the actual ‘floating’ annuity benefits to members, the cost of which depends on how long those pensioners live.

The net result is that the RBPF continues to honour pension payments to its pensioners, but any future positive or negative deviation due to uncertain longevity is absorbed by Swiss Re.

RBPF retains legal ownership of its assets and complete control over its investment strategy.

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