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Linklaters has launched a new cross practice initiative to support pension schemes and pension solution providers on their longevity solutions. The Longevity Solutions Initiative brings together in legal expertise in pensions, insurance, derivatives and other areas.
With people living longer, pension providers are facing the issue of paying pensions for longer than they had originally expected. Linklaters’ pensions, insurance and derivatives teams have been at the forefront of devising and advising on innovative solutions to hedge this longevity risk.
The firm has been advising both pension trustees on hedging this risk, for example advising the trustees to the Rolls-Royce Pension Fund on a £3bn longevity swap entered into with Deutsche Bank. Linklaters also advises banks who take on this risk by way of both insurance and derivatives, for example Credit Suisse on the £1.7bn ITV Pension Scheme. These two deals are the largest longevity risk transfer swaps to date.
Related to this, Linklaters advises on bulk purchase annuity work. This is where companies, running final salary pension schemes, buy annuities from an insurance company to provide an income for those who retire which could ultimately lead to the insurer issuing annuities to the pension scheme members itself. Linklaters’ longevity team recently advised Legal & General in relation to the T&N pension scheme and, separately, the Uniq plc pension scheme trustees on their bulk annuity policy issued by Rothesay Life. This included the novel feature of being within the Pension Protection Fund (PPF) assessment period, which secured a guaranteed level of benefits.
Isabel France, Linklaters pensions partner, said:
"We are increasingly seeing longevity as an issue high on pension trustees' agenda. As life expectancies continue to improve, there is the inevitable pressure on pension schemes to realistically and effectively manage their liabilities. Longevity transactions can provide a mechanism for achieving greater certainty in the future funding requirements of pension schemes."
Victoria Sander, Linklaters insurance sector partner, said:
“The need to manage longevity risk is a high priority for pension schemes but also for life insurers which have significant annuity books. At the same time, longevity is a core business line for a number of our clients who are facing various challenges, including regulatory change and the need to adapt product offerings for an increasingly diverse client base. The firm’s insurance lawyers are renowned for devising innovative restructuring and financing techniques to advise on this growing issue.”
David Phillips, Linklaters capital markets partner, said:
“We have significant cross-practice experience in advising insurers, reinsurers, banks and pension schemes on the various types of longevity solutions available. The group formally brings together our longevity experts so we can continue to anticipate and advise clients across the piste in this expanding market."
