The trustees of construction organisation Skanska’s pension scheme have agreed a longevity hedge for the scheme, covering £300 million in member liabilities.
The hedge has been agreed between the Skanska Construction Services Trustees for the Skanska Pension Fund and insurance organisation Zurich. Zurich has reinsured 75% of the hedge with reinsurance organisation SCOR, and retained 25%. Consultancy organisation Mercer advised the pension trustees on the arrangement.
The named life hedge arrangement, which is structured as a whole of life insurance policy, covers approximately 1,000 named pensioners and future dependents, with liability for these members totalling £300 million.
The streamlined longevity hedge is designed to help mitigate the risks of rising costs associated with longer life expectancies of current pensioners in the scheme
Harvey Francis, chairman of the trustees at Skanska, said: “The trustee is pleased to take this opportunity to hedge longevity risk for its pensioners and their dependents. This transaction helps to improve the security of benefits for all members by removing the uncertainty of future costs to the fund arising from existing pensioners living longer than forecast.”