ScottishPower U.K. PLC completed a longevity insurance swap with Abbey Life Assurance Co., a Deutsche Bank subsidiary, for its ScottishPower Pension Scheme, Lanarkshire, Scotland.
The deal covers about £2 billion ($3 billion) of liabilities for the £2.5 billion defined benefit fund, covering about 9,000 members and dependents, said a statement by ScottishPower. ScottishPower is a subsidiary of Iberdrola SA.
The longevity insurance swap removes the risk of increases in liabilities for the pension fund, should members live longer than expected.
“The trustee is delighted with the outcome of this transaction after months of work with Iberdrola, our advisers led by Mercer, and Abbey Life,” said Peter Thompson, chairman of the trustee, in the statement. “We are pleased to protect against this uncertainty in the scheme, thus providing increased security to our members.”
Sheila Duncan, human resources director at ScottishPower, added in the statement that the longevity swap was part of an “ongoing strategy of pension risk management. We are particularly pleased that the transaction was concluded within the provisions of the scheme's existing funding reserves, thus not requiring additional cash contributions.”
Executives at the pension fund and ScottishPower were not available to comment by press time.