AXA UK completes £3bn longevity swap with Hannover Re

The AXA UK Group Pension Scheme has entered into a longevity swap with Hannover Re to protect £3 billion of mostly deferred pension liabilities held in its Defined Benefit plan.

The arrangement provides long-term protection to the Scheme against the costs associated with pensioners living longer than expected once they come into payment. The coverage of a material number of deferred members is thought to be a first within the UK pensions market.

The swap, which closed on 27 February 2021, will form part of the scheme’s investment portfolio, building upon previous transactions undertaken to protect pensions that had already come into payment by 31 March 2019.

The Trustee and AXA appointed Willis Towers Watson and Linklaters as lead advisors to the transaction.

Stephen Yandle, chair, AXA UK Pension Trustees, said: “I am happy that the AXA UK Group Pension Scheme has taken a further important step to ensure that our scheme members’ benefits are strongly secured against improvements in life expectancy. De-risking the scheme will benefit all of our DB scheme members and will not affect any payments to members as they will continue to receive their pension as normal. This is a very positive step in providing additional security of members’ pensions.”

Vikram Chatrath, head of Pension Strategy, AXA UK, added: “We are pleased to continue to support the AXA UK Group Pension Scheme by leveraging our internal technical and operational expertise to secure members’ benefits. The collaboration with Hannover Re in implementing a deferred longevity swap, believed to be the first transaction of its type entered into by a pension fund trustee, assists in stabilising the capital position of AXA UK and furthers our commitment to proactively managing our non-core business risks.”

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