Prudential Staff Pension Scheme enters a longevity insurance arrangement covering £3.7bn of liabilities

23 November 2020

The Prudential Staff Pension Scheme publishes on its website: The Trustee is responsible for setting the Scheme’s investment strategy. Our aim has been to limit risk while at the same time ensuring that the Scheme is sufficiently well funded to pay benefits. I’m pleased to report that our funding position remains healthy and we will report on the latest triennial valuation next year.

Looking ahead, there is no doubt that the nature of some of the challenges we face is changing. For example, one consideration for the Trustee is that the long-term trend is for people to live longer. While this is very welcome news, it does mean that unless we take steps to protect the Scheme, the cost to provide benefits to members and/or their Dependants may increase.

Longevity insurance arrangement

Today, I am pleased to announce that the Trustee has taken an important step forward in continuing to ensure the security of benefits paid to members and/or their Dependants by entering into a longevity insurance arrangement. The Scheme’s Principal Employer, The Prudential Assurance Company Limited, supports this transaction.

This arrangement will not affect the benefits provided by the Scheme or the support of the Scheme’s Principal Employer. Nor will there be any change to the approach to the provision of annual discretionary pension increases as a result of the arrangement. The longevity insurance arrangement will form part of the Scheme’s investment portfolio and will continue to provide income to the Scheme in the event that pensions need to be paid for longer than expected. This provides additional protection to the Scheme’s funding position.

£3.7bn of liabilities

The arrangement covers some £3.7bn of liabilities (the cost of providing members’ benefits), meaning that we have insured a significant portion of the Scheme’s exposure to improvements in longevity.

Pacific Life Re

The Scheme is transferring this longevity risk to Pacific Life Re through a captive insurance company established for this purpose by the Trustee. For large pension schemes such as the Scheme, a captive insurer is a well-established and efficient way to access the reinsurance market.

No action needs to be taken on your part. Your benefits will not be changed by this arrangement. All Pensioners will continue to receive their pensions from the Scheme each month as normal.

Source: Prudential