Sackers advises on £340m longevity transaction for Airways Pension Scheme

Airways Pension Scheme today announced a longevity swap transaction to transfer longevity risk in relation to £340m of the Scheme’s liabilities. The arrangement will provide long term protection to the Scheme against costs resulting from members living longer than currently expected, enhance security for Scheme members, and transfer longevity risk in respect of active and deferred members of the Scheme in addition to members with pensions in payment. Sackers is the legal adviser to the Trustees of the Scheme and advised them throughout the project.

The longevity insurance policy is structured as an insurance arrangement between the Trustees of the Scheme and Zurich UK, and a back-to-back reinsurance arrangement between Zurich UK and MetLife using Zurich UK’s pass-through solution.  Under this pass-through structure, MetLife assumes 100% of the longevity risk associated with around 1,100 members of the Scheme, and the Trustees and MetLife take on mutual credit risk exposure to each other.  The arrangement will form part of the Scheme’s investment portfolio and will provide income to the Scheme in the event that members live longer than currently expected.

Ralph McClelland, partner at Sackers, said: “We worked collaboratively with the Trustees, Zurich and MetLife, and their respective advisers, to deliver a fantastic outcome for the Scheme and its members, insuring both pensioner and non-pensioner liabilities.  This deal demonstrates that longevity transactions are an increasingly practical and viable solution for schemes including in relation to smaller tranches of liability. We provided legal support throughout the process, drawing on our knowledge of the Scheme and combining it with our experience of working on multiple longevity transactions. This transaction demonstrates yet again the depth of our experience in complex risk transfer transactions.”

The Sackers team comprised partners Paul Phillips and Ralph McClelland, associate director Liam Goulding, senior associate Paige Lury and associate Susan Oakley with legal project management support from Nadia Krasteva.