L&G in £1bn pensions transfer deal

LEGAL & General has become the latest City firm to offset the cost of paying out to pensioners who live longer than expected.

L&G has agreed to take on the cost of unexpected increases in the lifespan of 11,500 retired workers from glassmaker Pilkington in return for an undisclosed fee, and transferred 90 per cent of the risk to Hannover Re under a separate reinsurance contract. ITV and Rolls-Royce have struck similar deals to Pilkington in the last year.

L&G boss Tim Breedon said: “In 2011 we completed our first £1bn pension buy-out, and today we have announced our first ever longevity insurance swap. These transactions leverage our expertise in investment management and longevity risk pricing.” Hannover Re said the deal, which covers about £1bn of pension liabilities, should provide it with total premium income of £800m. Hannover is not assuming any investment or inflation risk.