Lloyds ringfences £5.1bn with two longevity swaps

The deals cover liabilities of £2.1bn in the Lloyds Bank Pension Scheme No.2 Scheme and £3bn of liabilities in the HBOS Final Salary Pension Scheme.

Rothesay Life is the insurer for both deals, with reinsurance provided by Pacific Life Re and an insurance subsidiary of Prudential Financial.

The deals followed prior insurance and reinsurance arrangements agreed by the trustee in 2020 and 2022, which covered liabilities of £10bn and £5.5bn respectively across the Lloyds Banking Group schemes.

“Within a busy pension risk transfer market, the transactions demonstrate the continued high demand for longevity protection for UK pension schemes as part of their wider strategy to mitigate potential funding volatility,” said Rothesay head of reinsurance Ben Howe.

Matt Wiberg, a senior director at WTW, which was the lead adviser to the Lloyds trustee board, added: “These transactions were completed with separate reinsurers in a very short space of time and demonstrates continued improvements in the efficiency of contracting in the longevity swap market, particularly for schemes that have previously completed longevity swaps.”

Several large pension schemes have conducted longevity swap deals in the last six months. The deal was announced days after the BT Pension Scheme revealed two longevity reinsurance deals worth a combined £10bn.

The £36bn pension scheme announced a pair of £5bn longevity swaps on 21 March with Swiss Re and Reinsurance Group of America (RGA). The transactions built upon a £5bn deal with RGA completed in 2023, and a £16bn longevity swap with Prudential Insurance Company of America in 2014.

Other recent longevity swap deals include a £340m insurance deal between the Airways Pension Scheme and insurers Zurich and MetLife, which was announced in December. In November, the Merchant Navy Ratings Pension Fund agreed a deal with MetLife to manage longevity risk in relation to around £450m worth of pensioner and dependent liabilities.