BT Pension Scheme longevity arrangements

4 July 2014 - Hogan Lovells has advised the trustee of the BT Pension Scheme (the "Trustee" and the "Scheme") on the pension aspects of the longevity insurance and reinsurance arrangements that the Trustee has entered into to protect the Scheme against costs associated with potential increases in life expectancy.

The Trustee has set up a wholly owned insurance company and has entered into an insurance agreement with that company to cover over 25% of the Scheme's total exposure to improvements in longevity, covering some £16bn of the Scheme’s liabilities (measured on an economic basis at October 2013, the date the insurance and reinsurance commences).  The insurance company has in turn reinsured this longevity risk with The Prudential Insurance Company of America (PICA), a U.S. based life insurance company.

The longevity insurance policy will provide long term protection and income to the Scheme in the event that members live longer than currently expected.  By using a wholly owned insurer, the Trustee was able to access capacity in the global insurance and reinsurance market directly and achieve the best value for the Scheme.

The Trustee is a longstanding client of the firm, and is advised by a pensions team based in the London office led by Jane Samsworth (Client Partner) and
Edward Brown (Partner).  Edward Brown, who advised the Trustee on this transaction commented:

"Longevity is an increasing risk for occupational pension schemes generally.  We are delighted to have helped the Trustee on this innovative and significant transaction, which builds on Hogan Lovells' experience advising employers and trustees on longevity risk solutions."

Hogan Lovells worked with the Trustee's other advisers, including Allen & Overy LLP (who advised on the insurance aspects of the transaction) and Towers Watson, and with Willkie Farr & Gallagher and Clifford Chance who advised PICA.


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