Hymans Robertson advises the RAC Pension Scheme on longevity swap:

• £600m bespoke swap removes a quarter of the Scheme’s longevity risk
• First longevity swap to bring the benefits of avoiding intermediary costs to smaller scale transactions

Hymans Robertson, the independent pensions and risk consultancy, acted as lead advisor to the trustee of the RAC (2003) Pension Scheme on its £600 million longevity swap. The swap transfers the risk of scheme members living longer than expected from the pension scheme to SCOR SE.

Having previously advised the trustee of the Aviva Staff Pension Scheme on their £5bn longevity swap in 2014, Hymans Robertson worked with the Aviva Group, which sponsors the RAC pension scheme, to implement the longevity swap. Both of these transactions were brokered directly with the reinsurance market via Aviva Life rather than through a traditional intermediary.

Commenting on the swap, Richard Whitaker, chair of trustee of RAC (2003) Pension Scheme said:

The trustee is delighted to have captured this opportunity to address one of the key risks facing the scheme in an efficient and cost effective manner, supporting our wider risk management strategy. Hymans Robertson, Club Vita and Linklaters, working with Aviva, have brokered a transaction that would otherwise not have been available without the blueprint of the Aviva Staff Pension Scheme transaction, helping us remove a substantial risk from our scheme, at what the trustee believes is a good price. The clear advice provided by Hymans Robertson’s risk transfer team, in partnership with Club Vita and Linklaters enabled the trustee to make positive informed decisions throughout the process.

Richard Wellard, lead advisor and partner at Hymans Robertson commented:

The Aviva transaction in 2014 represented a step change in the market as pension schemes and their advisors innovated alternative structures to reduce overall costs. Having supported this ground breaking transaction, we are delighted to have extended this to the RAC (2003) Pension Scheme so that they have been able to remove a significant risk on terms that wouldn’t have otherwise been available. The strong relationship between the trustee and company was crucial to achieving this successful transaction.

Jason Windsor, Aviva Group Chief Capital and Investments Officer (our Group sponsor):

We are pleased to be able to support the trustee and the members to further reduce risks in the pension scheme.

James Mullins, head of risk transfer and partner at Hymans Robertson added:

The team is delighted to have brought such an innovative structure to a sub £1bn longevity swap transaction and to achieve a great price for the trustees and sponsoring employer. This transaction is part of a trend whereby structures developed for the very largest pension schemes become more accessible for smaller pension schemes. We expect the level of innovation to continue to develop as longevity swaps become increasingly more common and attractive for a much wider range of pension scheme sizes.