The deal covers £2.8bn of pension liabilities relating to approximately 11,000 existing members, and protects their payments against the costs resulting from the impact of continuous improvements in life expectancy.
Under the terms of the longevity swap, the risk that members of the defined benefit (DB) scheme, which guarantees a monthly income throughout retirement, will live longer than expected and thus receive greater benefits has been passed on to two subsidiaries of RGA.
RGA is an international global life and health reinsurance company with assets of $44.7bn (£28.7bn, €40.5bn) and approximately $2.9trn of life reinsurance in force.
The swap, which covers around half of the scheme’s liabilities, will form part of the pension plan’s investment portfolio and will provide income to the scheme in the event that members live longer than currently anticipated.
“By significantly de-risking the scheme, this will benefit all our DB scheme members and will not affect any payments to members as they will continue to receive their pension as normal,” said Stephen Yandle, chairman of AXA UK Pension Trustees.
AXA UK said the scheme’s trustees had used Towers Watson and Linklaters LLP as lead advisors on the deal with RGA.
“RGA is delighted to support AXA in reducing risks within their pension obligations through this transaction,” said Cormac Galvin, vice president of RGA UK.
