Companies end year by shipping off pension liabilities

Pension funds on both sides of the Atlantic offloaded $14.5 billion in liabilities through pension risk transfer deals this month alone, including two huge longevity swap announcements.

Most of the action took place with U.K.-based plans, but in the U.S., General Electric Co., Boston, announced it transferred $1.7 billion of its U.S. GE Pension Plan obligations to retirement services firm Athene Holding Ltd. through an annuity buyout.

As part of the transfer, Athene will provide payments to roughly 70,000 plan participants receiving less than $360 per month through one of the firm's subsidiaries, a news release said.

The pension risk transfer will not change the amount of the monthly payments being made to participants and will not affect the plan's funded status.

This transaction follows GE's announcement earlier this month that it had voluntarily prefunded $2.5 billion of estimated minimum ERISA GE Pension Plan funding requirements for 2021, 2022 and into 2023.

GE had $56.4 billion in U.S. pension fund assets as of Sept. 30. The company's U.S. plan for salaried employees will be frozen effective Jan. 1, as previously announced.

Last December, GE distributed lump sums totaling $2.65 billion to former employees who accepted an offer made in October 2019.

Two longevity swaps were announced this month covering more than $10 billion in pension liabilities.

• Barclays Bank U.K. Retirement Fund, Redhill, England, insured £5 billion ($6.6 billion) in liabilities through a longevity swap with Reinsurance Group of America Inc., a Barclays spokesman said.

In its first longevity swap, the fund protected participant benefits from the impact of an unexpected increase in the life expectancy of current retirees.

"In addition to the material reduction of deficit revealed at the 2019 actuarial valuation, the longevity swap is another significant step in our derisking journey for the UKRF, improving benefit security for all members," Peter Goshawk, chairman of the fund's trustees, said in a news release.

The deficit as of Sept. 30, 2019, was £2.3 billion. The plan's defined benefit assets were £34 billion. Barclays also sponsors a defined contribution section with £2.1 billion in assets.Consultant Aon and law firm Linklaters served as advisers on the deal to the trustee.

• BBC Pension Scheme, London, completed a £3 billion ($4 billion) longevity swap with Zurich and Canada Life Reinsurance.

The deal provides the pension fund and sponsoring employer British Broadcasting Corp. "with more certainty over future funding costs, and improves the security of all members' benefits," a notice posted on the pension fund's website said.

The fund had £17.3 billion in assets as of June 30. The deal covers about a third of retiree liabilities, the notice said.

"The trustee is pleased to have been able to take this important step in our risk management strategy and significantly reduce one of the key risks that all pension schemes face, namely the uncertainty in relation to how long members will live, and pensions will have to be paid for," Catherine Claydon, chairwoman of the trustee board, said in a Zurich news release.

A spokeswoman for the BBC Pension Trust confirmed the longevity swap transaction, which was agreed on Dec. 11.

There were also two buy-in deals in the U.K. covering another $2 billion-plus in pension liabilities.

• Maersk Retirement Benefit Scheme, Ware, England, insured £1.1 billion ($1.5 billion) in liabilities through a full plan buy-in with Legal & General Assurance Society, said a spokeswoman at Willis Towers Watson PLC, adviser on the deal.

In its first buy-in deal, the £1.1 billion ($1.5 billion) plan for shipping company Maersk secured the benefits of around 1,900 participants that are yet to retire and 3,000 retirees.

Law firm Travers Smith also advised the trustees."After many years of careful management and derisking, we have now secured our members' benefits through a buy-in with Legal & General. We were impressed with the flexibility and professionalism shown by Legal & General, alongside our advisers, to complete the transaction at a challenging time," Nigel Pusey, chairman of the trustees, said in a news release Dec. 16.

• Aon Retirement Plan, Farnborough, England, insured £510 million ($675 million) in liabilities for its Aon Bain Hogg Pension Scheme section, through a buy-in transaction with Scottish Widows, a spokeswoman said.

The percentage of liabilities covered by the deal was not available.

The Aon Retirement Plan has £4 billion in assets, while the Aon Bain Hogg Pension Scheme section has £1 billion.

"The trustee has been working with our advisers over a number of years to manage risk in the plan and enhance the security of members' benefits. We are very happy to have formed this partnership with Scottish Widows and this buy-in, completed in a very short time frame in what has been a challenging year in financial markets, is another important step in the plan's derisking journey," Andy Kieran, chairman of trustees at the Aon Retirement Plan, said in a news release.

The trustees were advised by Aon and law firm CMS Cameron McKenna Nabarro Olswang. Scottish Widows was advised by law firm Herbert Smith Freehills.

The overall Aon plan has now conducted four retiree buy-ins in total, including two for the Aon Bain Hogg Pension Scheme section.

In 2016, the plan secured a £900 million buy-in with Pension Insurance Corp. The plan also conducted a buy-in with Rothesay and a buy-in with Just Group. Further details of the previous transactions, including dates, were not disclosed.