The Airways Pension Scheme hedges longevity risk

The Airways Pension Scheme is hedging longevity risks relating to more than £1 billion of pension liabilities.

The transaction between the pension scheme and Rothesay Life is in respect of pensions payable to current pensioners with a total value of £1.3 billion, in addition to the £1.3 billion longevity hedge that was agreed in June 2010.

According to Towers Watson, the transaction is part of a recent surge in pension risk activity. Among the schemes to announce large risk transfer deals during the past few months are: the ITV Pension Scheme, the Turner and Newall pension Scheme and the Rolls-Royce Pension Fund.

Pension trustees and sponsoring employers are increasingly focused on how they can best reduce risk in their schemes and enable a smooth transition towards a long-term goal of being self-sufficient or buying out the scheme.

Colette Christiansen, a senior consultant at Towers Watson, which advised the Airways Pension Scheme trustees, said: “This is the fourth time in as many months that a large UK scheme has hedged risks relating to £1 billion or more of pension liabilities.

“It is a sign of how the pension risk transfer market has come of age that we are now seeing schemes take their second major step towards de-risked pensions.”

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