ITV has partnered with Credit Suisse to protect its pension scheme from increasing longevity.
Under the contract, the ITV pension scheme will make fixed monthly payments to Credit Suisse. In return, Credit Suisse will make payments to the scheme that broadly match the value of benefits being paid out.
The fixed payments have a present value of approximately £1.7 billion. Benefits due to just under 12,000 retired members and dependants are covered by the transaction.
The contract, on which Towers Watson, PricewaterhouseCoopers (PWC) and Mercer advised, covers a large majority of the scheme’s existing pensioner and dependant members, will allow new pensioners to be added in future.
Graham Parrott, chairman of the ITV Pension Scheme Trustee, said: “By removing a significant risk from the pension scheme, this contract enhances the security of all members’ benefits and dovetails with the other steps we have taken to achieve that goal.
Paul Kitson, senior consultant at Towers Watson, said: “Typically, pension schemes expect today’s pensioners to live two or three years longer than they budgeted for a decade ago.
“Longevity swaps allow schemes to make one further adjustment and then nail down what they will be paying out.
“Because the payments stretch so far into the future, arrangements for posting collateral are essential. A good governance structure is needed to make this work.”
Mark Duke, head of settlement consulting at Towers Watson, added: “Protecting a pension scheme against increasing longevity is attractive for trustees and finance directors that are used to seeing life expectancy as a one-way street, with each review bringing additional costs.
“Also, as schemes take more cautious views about the rate of improvement, the price of buying protection looks better value for money.
“Recent market turbulence has highlighted the need for pension schemes to have a clear risk management strategy. Knowing what risks to eliminate and when, is going to be central the way pension schemes are run.”
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