Babcock International Group conducts first pensions longevity swap

International law firm Pinsent Masons has advised the trustee of one of Babcock International Group’s pension schemes on the first ever longevity swap with a UK pension scheme.

The longevity swap is in the form of a derivative contract, with Credit Suisse, to provide longevity protection for certain of the scheme’s pensioners and their dependants. The contract for this innovative measure was signed after the trustee had considered the advice of its professional legal, actuarial and investment advisers.

Last month Babcock and the trustee reached agreement in principle for the Scheme to enter into the swap agreement with Credit Suisse. The trustee and Credit Suisse have now agreed terms.

The implementation of the longevity swap has real benefits for both the scheme and the scheme’s employer. It is a key part of the ongoing risk reduction strategy, enhanced member security arrangements and the evolving investment strategy which the Scheme’s trustee and employer are jointly seeking to improve.

Commenting on the transaction, national head of pensions Christopher Berkeley said: “Pinsent Masons has long been involved with Babcock International Group’s pension schemes and we are delighted to be assisting it and its pension scheme trustees with the reduction of pension risk. It has been very exciting and challenging for us to be involved with such an innovative and ground-breaking project.”

Watson Wyatt was the lead advisor on this transaction with the Government Actuary’s Department, Bond Pearce LLP and Mercer also advising the scheme’s trustee.