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BAE Systems agrees pension funds longevity swap

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BAE Systems and the Trustees of the Royal Ordnance Pension Scheme and the Shipbuilding Industries Pension Scheme today announce that they have agreed longevity swaps

The longevity swap arrangement with Legal & General insures two of BAE Systems’ pension plans against the risk of increases in pension liabilities that might arise from any increase in life expectancy. Approximately 17,000 pensioners are covered by the arrangement which reduces the risk on £1.7bn of the plans liabilities.

Peter Lynas, Group Finance Director BAE Systems said: “We seek to mitigate pension liability volatility where we can.  This arrangement provides us with a greater degree of certainty as to future pension scheme cash-flows as we continue to make provisions for our pensioners.  This is another proactive measure we have taken as part of our strategy to manage risk associated with our pension schemes.” 

Today’s announcement follows an arrangement with Legal & General announced in February 2013 when the longevity risk on £2.7bn of pension scheme liabilities for the 2000 Plan were transferred to the insurance market.

Notes to editors:

1.    The pension schemes will undertake to make pension payments to Legal & General for an agreed term, in exchange for Legal & General making pension payments into the schemes for the remaining lifetime of the pensioners. 
2.    The fee for the transaction will be paid by the pension schemes and will not have a material effect on the funding arrangements.
3.    Aon Hewitt was the lead advisor to BAE Systems and the Trustees of the Royal Ordnance Pension Scheme and the Shipbuilding Industries Pension Scheme.


For more information, please contact:

Lindsay Walls, BAE Systems
Mob: +44 (0) 7793 427582
lindsay.walls@baesystems.com

Leonie Foster, BAE Systems
Mob: +44 (0) 7525 080099
leonie.foster2@baesystems.com