Members secured

25,000 (44% of benefits)

Value

£3bn

Type

Synthetic buy-in & longevity swaps

Impact

  • Innovative structure allowed the Scheme to take advantage of market dislocation and volatility
  • Transactions avoided immediate additional funding requirements on the corporate sponsor

  • The trustees, working with their appointed advisers conducted a thorough market review process and selected Rothesay to deliver a bespoke solution to the scheme. Our selection was based on the insurer's creativity and structuring abilities, the robustness of the security package underlying the insurance contract and the execution certainty, which gave us the ability to deliver this solution at a pre-agreed price level.

    PAUL SPENCER, CHAIRMAN OF THE TRUSTEES OF THE AIRWAYS PENSION SCHEME

Highlights

Innovative structure

The transaction structure removed all longevity, inflation and interest rate risk associated with 20% of the pension benefits in exchange for a series of pre-determined regular premium payments
Regular premium payments are in line with the cash flows on specific index-linked gilts that the Trustees invested in to take advantage of the then-existing dislocation in the gilt market

Execution occurred only when it could be achieved without requiring an additional contribution from the corporate sponsor

Dislocation and volatility in the index-linked gilt markets provided an opportunity to de-risk using Rothesay’s innovative structure

Repeat transaction to increase the proportion of benefits covered

Further transaction in December 2011 covering a further 20% using a pure longevity swap arrangement
Subsequent transaction with Rothesay in December 2013 to increase the insurance of pension payments from 40% to 44%

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