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Friends Life and Heineken agree £2.4bn longevity swap

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Friends Life has signed a deal with brewing giant Heineken that insures £2.4bn of longevity risk held by one of its pension schemes.

The contract, which covers around 19,000 pensioners of the Scottish & Newcastle defined benefit scheme, protects the firm against members living longer than expected.

The majority of UK DB schemes have a funding deficit. This has been caused by a combination of past contribution holidays, low interest rates and investment returns and life expectancy improvements.

Towers Watson advised on the deal.

Friends Life became part of Aviva in March, creating the UK’s largest insurance and savings business.

Aviva managing director for heritage David Still says: “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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