Co-operative is second firm to ditch longevity swap deal

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The Independent Online

The Co-operative has become the second company in a week to ditch plans, through a so-called longevity swap deal, to insure itself against the risk of pension fund members living longer than anticipated.

Premier Foods recently spiked a plan to offload risk on a £2bn scheme, after the firm's finance director, Jim Smart, a former finance director at Friends Provident, claimed such contracts didn't represent value for money.

The Co-operative had been considering a new deal three years after it insured £2bn worth of pension fund assets through Swiss Re. But a spokesman for Co-operative Financial Services said such plans had been shelved: "Recently, we considered a potential longevity swap, but are not currently progressing this option."

According to a recent report from the consultants Lane Clark and Peacock, the price of longevity swaps is likely to increase, as the demand to ditch such risk outweighs supply.

Meanwhile, it's believed Prudential is looking to offload billions of pounds worth of longevity risk, too. The Pru, which has traditionally taken on pension fund risk through its annuities arm, has drastically cut back on writing new business because of the onerous capital requirements needed.