Heineken has announced a longevity transaction with Friends Life Limited, now part of the Aviva Group, to insure the longevity risk in respect of £2.4bn of its defined benefit pension liabilities. The deal, which covers approximately 19,000 pensioners of the Scottish & Newcastle Pension Plan, provides funding security and protection against the financial risk of pensioners living longer than originally expected.

Having conducted an extensive process for selecting a partner to transfer the risk to, the Plan identified capacity within the insurance industry that had not previously been accessed.

Towers Watson led the transaction as adviser to the joint Trustee and Company working group.

Travers Smith acted as legal adviser to the working group.

Linklaters LLP acted as the legal adviser to Friends Life, now part of the Aviva group, on the transaction.

Friends Life

Neil Parfrey, UK Head of Pensions at HEINEKEN, said: “By hedging against longevity, we have reduced a significant amount of the Plan’s risk should the overall life expectancy of members exceed our projections. This should help bring peace of mind to Plan members, and we are delighted that it has been achieved in a cost efficient manner.”

Ian Aley, Head of Pension Transactions at Towers Watson, said: “This transaction is a further example of how innovation and excellent market relationships can lead to significant cost efficiencies. Heineken has broken new ground with this transaction, identifying a new longevity counterparty in Aviva, who provided additional market capacity on this occasion.”

David Still, Managing Director for Heritage at Aviva, said: “This transaction further demonstrates Aviva’s commitment to working with corporate clients to provide solutions that manage their pension scheme risks. Leveraging the strong partnership we forged with the Trustees and with Swiss Re, our reinsurance partner on this transaction, we are delighted to have been selected as the insurer for a transaction of this scale, which provides greater certainty for the Scottish & Newcastle Pension Plan in relation to its longevity risk.

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