Energy giant SSE has hedged £1.2bn of longevity risk in its defined benefit (DB) schemes after completing a trio of deals.
Two buy-ins with Pension Insurance Corporation (PIC) and a longevity swap with Legal & General have improved the funding position of the FTSE company’s retirement schemes.
PIC has assumed £350m of the sponsor’s risk covering around £250m of Scottish Hydro-Electric Pension Scheme’s liabilities and £100m of those in the Scotia Gas Networks Pension Scheme.
In a separate deal, other liabilities in the Scottish Hydro-Electric scheme were transferred to life insurance group Legal & General in an £800m deal.
Scottish Hydro-Electric is believed to be the first DB scheme to hedge its longevity risk through a combination of a buy-in and an insurance swap.
Scotia Gas Networks Pension Scheme trustee chair Tony Fettiplace welcomed the successful completion of these deals.
“Reducing risk over time is an absolute priority for us and it is important to do this in the most cost effective way,” he added.
Legal & General’s head of pension risk transfer, Chris DeMarco, said: “Our UK-based, longevity pass-through offering enabled the trustees to manage down this risk, while allowing them to benefit from cost efficiencies through our economies of scale and giving them the peace of mind that we will support them well into the future.”
