Nationwide Pension Fund completes £1.7 billion UK longevity risk transfer transaction with Zurich Assurance Ltd and Prudential

Nationwide Pension Fund Trustee Limited, Zurich Assurance Ltd (Zurich UK), and Prudential Financial, Inc., of the United States today announced the completion of a longevity risk transfer transaction.

The transaction, which closed in May 2023, transfers the longevity risk of approximately £1.7 billion ($2.0 billion) of Nationwide’s pension scheme liabilities covering approximately 7,000 in-pay members in the United Kingdom. Under the transaction, the longevity risk of the pension scheme relating to these members will be passed through Zurich UK to an insurance subsidiary of Prudential, as the reinsurer, with a limited recourse mechanism protecting Zurich UK against exposure under the transaction. It comes as the market continues to see strong demand for de-risking solutions.

Catherine Redmond, chair of the Fund’s Trustee Board and trustee executive for BESTrustees Limited, said: “This transaction is an important step in ensuring that members’ benefits are secured against unexpected increases in life expectancy. This is great news for the Fund and its members, transferring risk and helping to further protect our members’ pensions. We as a Trustee Board are delighted to have taken this additional step on our long-term de-risking journey. The Trustee is grateful to Aon and Sackers for their support and looks forward to working closely with the Zurich and Prudential teams.”

Rohit Mathur, head of international reinsurance for the Retirement Strategies business at Prudential, said: “The recent rise in interest rates have resulted in improvements in pension plan funded status, accelerating de-risking plans for many sponsors. Pension trustees can consider a few different options to manage risk including a pension buy-out or a longevity risk transfer transaction.  We are pleased to offer reinsurance that helps clients meet their objectives.”

Greg Wenzerul, head of longevity risk transfer for Zurich UK, said: “This solution represents a simple approach for pension fund trustees to manage their exposure to longevity risk. In a rapidly changing pensions de-risking market, with increased pension scheme focus on leverage, longevity swaps continue to represent a sophisticated and valuable de-risking approach. We are pleased to count the trustee of the Nationwide Pension Fund as a customer, and to build on our existing transactions involving Prudential.”

Independent U.K.-regulated insurer Zurich Assurance Ltd acted as insurer on the transaction. Aon PLC (NYSE: AON) was the lead adviser to the Nationwide trustee, with legal counsel provided by Sacker & Partners LLP. Prudential was advised by Willkie Farr & Gallagher LLP, and Zurich UK was advised by Slaughter and May. Insight Investment was appointed to provide ongoing longevity-related services in support of the trustee, including that of collateral manager.

Tom Scott, partner in the Aon Risk Settlement Group, said: “This transaction provides cost-effective and practical risk mitigation to the Fund. It further improves members’ benefit security and reduces risks to the Fund and Nationwide Building Society as sponsor. It is a further example of the ability and capacity of the insurance and reinsurance markets to work in partnership with pension funds of different shapes and sizes to manage risks.”