Energy organisation National Grid has agreed to an intermediated longevity swap for its Electricity Group’s UK pension scheme, to counteract the cost risks associated with pensioners and future dependent members having longer life expectancies.
The longevity swap, which has been completed with Zurich, has been arranged to cover the pensioner liabilities of the National Grid Electricity Group of the Electricity Supply Pension Scheme (ESPS).
The transaction will cover around 6,000 current and future pensioners, with a total liability of more than £2 billion.
Aon acted as lead advisor on the transaction. Zurich has reinsured a significant proportion of the longevity risk with Canada Life Reinsurance.
Andrew Bonfield, finance director at National Grid, said: “We are very pleased to announce the completion of this longevity insurance, which covers around two-thirds of the liabilities of the National Grid Electricity Group pension liabilities. This demonstrates our ongoing commitment to the security of our pension arrangements, and represents a significant step in our long-term strategy to manage down the level of pensions risk for National Grid shareholders and electricity consumers.”
Jon Carlton, chair of the group trustee, added: “The group trustee is pleased to have been able to significantly reduce one of the key risks that any pension scheme faces, namely the uncertainty on how long members will actually live in practice.
“By working in close partnership with National Grid and our advisers, we have successfully put in place this insurance policy with Zurich. The policy will provide increased certainty on the cost of providing current benefits, which will therefore reduce the funding risks faced by the group trustee and National Grid in the future.”
