Lloyds Banking Group pension schemes have agreed a longevity swap deal which covers £10bn of pensioner liabilities.

The deal is the second largest in UK history and covers members in the Lloyds Bank Pension Scheme No.1, Lloyds Bank Pension Scheme No.2 and HBOS Final Salary Pension Scheme.

It is structured as an insurance with Scottish Widows as the insurer and corresponding reinsurance with Pacific Life Re as the reinsurer, which means that the schemes’ longevity risk is passed on to Pacific Life Re.

Willis Towers Watson acted as the lead adviser to the trustee on the deal, while Allen & Overy acted as the legal adviser.

Commenting, Lloyd Banking chair of the trustee, Harry Baines, said: “We are delighted to have successfully completed these longevity insurance and reinsurance arrangements with Scottish Widows Limited and Pacific Life Re Limited.

“This will protect the Schemes from the financial risk of an unexpected increase in life expectancy and make the schemes more secure to the benefit of all members.

“The selection of Scottish Widows Limited and Pacific Life Re Limited followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market and their respective propositions delivered the best combination of benefits to meet our brief.”

This is the second largest longevity swap in UK history after the £16bn deal between the BT Pension Scheme and PICA in 2014.

Pacific Life Re head of longevity, Andy McAleese, commented: From our first discussions with them, the Trustee had a clear plan, and this gave us the confidence to work closely with them to offer significant capacity in supporting their objective.

“This shows that even against the backdrop of a very buoyant bulk annuity market, there is plentiful capacity and a range of solutions available to support the management of longevity risk for pension schemes.”

Lloyds Banking added that the longevity swap will not change the pension benefits that will be paid to members of the schemes.

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