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The BT Pension Scheme has completed two longevity swaps of £5bn each, in part building on an existing captive arrangement.
The new longevity insurance and reinsurance arrangements cover BTPS pensioner liabilities of £5bn with Swiss Re, completed this year, and increased existing cover with Reinsurance Group of America by the same amount last year, following a £5bn transaction with the firm in mid-2023. The reinsurance “efficiently leverages the scheme’s existing infrastructure” via its existing captive insurer BTPSI.
The £36bn scheme said it signed the deals to further protect BTPS from the cost of unexpected increases in the life expectancy of its roughly 260,000 members. The transactions will not alter BT’s cash contributions.
BTPS spin-out Brightwell led the deal, supported by WTW and A&O Shearman – the same firms advising on the 2023 swap – with Swiss Re being advised by Willkie Farr & Gallagher.
“These transactions help to advance the development of the scheme’s long-term investment strategy, providing increased certainty for the scheme, our sponsor, and members,” said trustee chair Jill Mackenzie from Capital Cranfield Trustees.
Chief investment officer at Brightwell, Wyn Francis, said delivering two concurrent longevity swaps demonstrated the value in a fully integrated fiduciary manager such as Brightwell.
“These transactions will be onboarded to Brightwell’s automated, efficient and low-cost operating platform, reinforcing our experience and capability in managing all scheme risks to achieve market leading outcomes for a scheme in run-on,” Francis said.
The insurers expressed satisfaction at being chosen, with Emma Ferris, managing director at RGA UK, saying the firm is “delighted to have once again partnered with BTPS” and Kerry McMullan, head L&H structured solutions at Swiss Re, stating the reinsurer is “grateful for the opportunity” to make the scheme more resilient to uncertain future life expectancies.
BTPS first completed a longevity swap with Prudential Insurance Corporation of America in 2014, covering £16bn of pensioner liabilities.
According to WTW, the two new swaps are in the top 10 largest ever completed, while the BTPS' 2014 transaction remains the largest to date. Other schemes that have large longevity swaps in place include several high street bank and insurer pension schemes.
The formerly contracted-out BTPS had a £3.85bn shortfall at its interim valuation last year, recording a 90% funding level – slightly lower than in 2023 – which it attributes to the performance of its equity holdings. It enjoys a Crown guarantee.
The scheme closed to new members in 2001, and to accrual in 2018. It currently pays out about £2.8bn in benefits to around 212,000 pensioners and their beneficiaries.
