BMW is to update its UK operations pension scheme as changing demographics come increasingly to the fore.
The scheme, using specialist pensions insurer Paternoster, with a hedge for life expectancy risks associated with nearly GBP3bn of liabilities, covers about 60,000 pensioners.
“Trustees of this particular scheme are reducing future funding volatility as they can fix the assumed life expectancy,” a BMW spokeswoman told just-auto.
“There is no change to what happens if you are a pensioner or still a contributing member of the scheme. This hedge makes it easier to budget for future pension payments and makes future funding more secure.”
The spokeswoman insisted the initiative was not about moving the scheme elsewhere but rather using the transaction as a way to hedge for life expectancy.
A BMW statement said: “The trustees of the BMW (UK) Operations Pension Scheme have entered into a longevity hedge with Abbey Life.
“There will be no direct impact on members of the scheme who will continue to receive their pensions directly from the scheme in the normal way. The longevity hedge simply makes it easier to budget for future pension payments and makes scheme funding more secure overall which benefits everyone in the scheme.”
Through the transaction, wholly-owned Deutsche Bank insurance company Abbey Life will insure longevity risks of the BMW pension scheme while spreading a proportion of the risk to a consortium of reinsurers including Hannover Re, Pacific Life Re and Partner Re.
“In bringing this leading solution to BMW and its UK pension scheme, we have demonstrated our ability to combine our balance sheet strength and internal expertise with the specialist pensions and longevity know-how at Paternoster to bring about a landmark transaction,” said Abbey Life CEO Nardeep Sangha.