Yesterday broadcaster ITV closed a deal with Credit Suisse a deal to limit its costs of paying defined benefit annuities to pensioners, in the event they live longer than expected.
According to PwC, which advised on the deal, the he announcement yesterday by ITV of its pension scheme longevity hedge is "indicative" of how the pension market is developing.
PwC predicts unbundled transactions such as this, will overtake traditional packaged solutions such as buy-outs or buy-ins. In particular, it forecasts a dozen further longevity deals over 2011/2012.
Raj Mody, head of PwC's pensions practice and adviser to ITV, said: "Reducing pensions risk remains a priority for organisations, with risks such as inflation or longevity largely beyond a company's control.
"Companies are realising that a more selective and analytical approach to the management of pensions risk can often be significantly more cost-effective than bundled solutions, which inevitably carry a hefty premium.
"For longevity hedging, market capacity is finite and some deals will have better prospects than others. Competition is fierce amongst the banks and insurers seeking to gain a foothold, but attractive terms and pricing on a deal that can actually close will only be secured by those who can successfully negotiate complex structured financial trades.
"In our experience, while recognising that scheme trustees will be the signatories to the transaction, the nascent nature of this market means that the sponsoring company must play a central role in the negotiation process with potential counterparties. The high-profile and complex nature of these transactions means that senior management at the product providers are key decision-makers and the company's relationships with these individuals can make a positive difference to the terms of the deal."
