LONDON 4 July 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has announced that it advised BT Plc on the £16 billion longevity insurance arrangements carried out by the BT Pension Scheme. The scheme is transferring longevity risk to a wholly-owned insurance company which has in turn entered into a reinsurance arrangement with the Prudential Insurance Company of America. This transaction, the latest in a line of multi-billion pound pensions de-risking transactions in the UK, has a number of unique features as a result of the size of the transaction. The arrangement provides hedging against over 25% of the scheme's overall exposure to improvements in longevity.

Martin Bird, senior partner and head of Risk Settlement at Aon Hewitt said:

“This transaction is the largest single UK pension de-risking deal to date and represents another step forward in terms of innovation.  Together with recent large buy-in transactions for ICI and Total, the BT longevity swap underlines the continued focus on pensions de-risking and demonstrates that the market is open to the ‘mega-funds’.

“As pension schemes continue to focus on reaching a position of stability there is significant demand for such large scale capacity – and we are seeing a rapid response from the provider market with a number of new solutions available. This includes the use of captive structures which enable even the very large schemes to make risk settlement secure and affordable on such a scale.”

Matt Wilmington, partner at Aon Hewitt, added:

“We have been talking for a number of months about the increasing capacity and appetite of the global reinsurance market to take on pension fund longevity risk.  Transactions like this and Total’s buy-in, where all of the longevity risk was immediately reinsured, serve to underline the scale of capacity available.  2014 has already been a record year for risk settlement transaction volume and we expect a number of further transactions to add to the growing list of those completed”

Media Contact: 
Colin Mayes                                      Marina Jane Sanchez
Aon Hewitt                                        Capital MSL
01372 733689                                    020 3219 8811
colin.mayes@aonhewitt.com               marina.jane-sanchez@capitalmsl.com

Notes to editors

What is a longevity swap?
A longevity swap is a mechanism that allows a pension scheme to offload the risk of its members living longer than expected (longevity risk) to a third party, usually an insurance/reinsurance provider or an investment bank.

Under the arrangement of a longevity swap, a pension scheme commits to making regular payments to a third party based on agreed expected mortality rates. In return, that party undertakes to service the payments to scheme members based on actual mortality rates. The structure of longevity swaps is similar to that of interest and inflation swaps.

About Aon Hewitt
Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

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About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global and principle partnership with Manchester United.