The pensions buy-in bonanza is over and longevity hedging the
way forward according to law firm Pinsent Masons LLP.
That's the view formed following a seminar held this week, at
which delegates indicated their preference for longevity hedges.
Sixty-eight percent of the audience, made up of senior figures from
the pensions industry, agreed that longevity hedging would become
more popular than buy-ins over the next twelve months as pension
schemes sought to secure certainty on future mortality risk.
But there was no clear preference over the structure of a
longevity hedge (given the choice of an insured product or a
capital-markets product), as long as the price was right, with 65%
saying price was more important.
Head of pensions Christopher Berkeley said, "With difficult
economic conditions continuing to cause headaches for both
businesses and trustees, some form of control over pension
liabilities is required by all parties. This week it's been
reported that pension shortfalls at FTSE250 businesses have doubled
to £12bn and, with life expectancy continuing to rise, many schemes
will be seeking to secure their future one way or another. Market
volatility and the changed economic conditions over the last 12
months have meant buy-ins are not as tempting to schemes as they
once were. Longevity hedges do not necessitate a cash payment
up-front from a business and are thus gaining popularity; we are
expecting the market to increase significantly and we understand
there are a number of deals in the pipeline following on from the
Babcock and RSA deals."
Pinsent Masons advised the trustees of one of Babcock
International Group PLC's pension schemes (the Devonport Royal
Dockyard Pension Scheme) on the first ever longevity swap with a UK
pension scheme earlier this year. It is currently working on two
further swaps for the group, which should be concluded shortly.
Pinsent Masons has one of the strongest pensions teams in
the UK. Spanning offices in London, Birmingham, Manchester
and Leeds we have over 50 highly trained lawyers, paralegals
and independent trustee administrators. For well over 20
years, the firm has been dedicated to providing clear, practical,
cost-effective advice for our clients.
Legal directories such as Legal 500 and Chambers consistently
rate us as a leading pensions firm. With fifteen partners and
no fewer than thirteen "leaders in the field" of pensions, no-one
has more expertise available than we do. Among our clients are
large global corporations, pension fund trustees, public
authorities, insurance companies and other financial
institutions.
Pinsent Masons is an established, full service law firm with
truly international reach, a reputation for delivering both world
class service quality and excellent value, providing a full range
of corporate, financial and commercial legal services to major UK
and international corporations, institutions and public bodies. The
firm ranks amongst the top 100 global law firms and has well over
1,000 partners and other lawyers worldwide.
Pinsent Masons office network includes the major international
business and financial centres of London, Dubai, Beijing, Shanghai,
Hong Kong and Singapore and the key business centres in the UK:
Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.
The firm also has a strategic alliance with Salans, a leading
international law firm with over 750 lawyers across 21 or more
locations in Western and Eastern Europe, Asia and the United
States.
Pinsent Masons LLP is a limited liability partnership registered
in England & Wales (registered number: OC333653) and regulated
by the Solicitors Regulation Authority. The word ‘partner’, used in
relation to the LLP, refers to a member of the LLP or an employee
or consultant of the LLP or any affiliated firm who is a lawyer
with equivalent standing and qualifications. A list of the members
of the LLP, and of those non-members who are designated as
partners, is displayed at the LLP’s registered office: CityPoint,
One Ropemaker Street, London EC2Y 9AH, United Kingdom.
We use ‘Pinsent Masons' to refer to Pinsent Masons LLP and
affiliated entities that practice under the name ‘Pinsent Masons'
or a name that incorporates those words. Reference to ‘Pinsent
Masons' is to Pinsent Masons LLP and/or one or more of those
affiliated entities as the context requires. For important
regulatory information please visit: http://www.pinsentmasons.com/
Questions asked of delegates at the 'Longevity Swaps - an
inside view' seminar were:
- Do you think that longevity hedging will become more popular
than buy-ins over the next 12 months?
- Given that there are both insured and capital markets longevity
hedging products on the market now, which of the following do you
think is more compelling to employers and trustees?
- insured products (with the benefit of the financial services
regulation and protection)
- capital markets derivatives (with the benefit of collateral
security)
- it doesn't matter which, as long as the price is right