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CMS advises FTSE100 pension scheme on ground-breaking £800m longevity swap with Zurich and Hannover Re

17 December 2019

CMS in London has acted for a FTSE100 pension scheme on the completion of a longevity swap transaction with Zurich and Hannover Re, covering around £800 million of pensioner liabilities. The transaction includes a significant proportion of non-UK overseas lives and will protect the Scheme from the risk of rising costs as a result of pensioner and dependent members living longer than expected.
CMS was appointed by the Scheme as legal counsel for this specific project following a competitive tender process and worked closely together with Hymans Robertson, the lead adviser to the Scheme. In a market first, the transaction optimised efficiencies for the Scheme through a combination of the following:

  • allowing the Scheme to have exposure to Hannover Re’s credit risk;
  • allowing the Scheme to benefit from Zurich retaining a substantive minority share of the longevity risk (in a product known as “Enhanced Pass Through”); and 
  • providing the Scheme the benefits of transacting with a UK regulated insurance company. 

The CMS team was led by Pensions Partner, James Parker, with assistance from Maria Rodia, Alex Tomlinson and Laura Clarke. 

Commenting on the transaction, James Parker said: “We are delighted to have been able to assist the trustees to significantly reduce the longevity risk in their scheme and improve the security of members’ benefits. This is one of a series of high-profile transactions on which we have acted as transaction legal counsel this year, underlining CMS’ market-leading reputation in the pensions de-risking market.”
This transaction concludes a busy year for the CMS Pensions Team with highlight transactions including acting for Stanhope Pension Trust, trustee of the GEC 1972 Plan, on a £4.7 billion buy-out transaction with Rothesay Life – the UK’s biggest ever pension transfer deal.