Club Vita is targeting smaller and medium-sized DB schemes with a new automated longevity insurance pricing service, launched in partnership with Legal & General. Called VitaHedge, the service automatically delivers tailored indicative pricing to each of the 200-plus schemes supporting Hymans Robertson’s specialist longevity service Club Vita.
Club Vita argues trustees of mainstream pension schemes are overlooking longevity insurance because of the need to create complex legal agreements, the need to manage collateral and the cost of obtaining competitive insurance quotations.
Club Vita says the new service makes derisking solutions more accessible to the mainstream DB market at a time when longevity risk is increasing as schemes mature and investment risk is dialled down.
Club Vita founder Douglas Anderson says: “There are good reasons to anticipate an upswing in longevity management deals. With negative real yields on UK gilts, the impact of longevity risk – i.e. the cost of continuing to pay pensions when people live longer than expected – has risen by 50 per cent. This is in the context of the risk of yields staying low or getting lower increasing following the Brexit vote.
“This comes at a time when schemes are maturing and reducing their exposure to investment risk. Consequently longevity risk now represents a larger slice of the risk pie than ever before. It’s therefore inevitable that longevity risk management will move higher up the agenda for those running DB schemes.
“VitaHedge is a natural extension of Club Vita’s existing data services. Until recently, insurers have only been confident to offer attractive prices to the biggest schemes, but that’s now starting to change. Club Vita is proud to be opening up the benefits of longevity hedging to a wider audience of pension funds.
L&G’s Phill Beach says: “Longevity insurance has an important role to play in pension de-risking journey plans and has historically been utilised by only the largest pension schemes and insurance companies in the UK. We believe VitaHedge will help smaller and medium sized pension scheme overcome the barriers they have historically faced. We are delighted to work with Club Vita to help improve the accessibility of longevity management solutions at a time when the costs of this risk are increasing for pension schemes.”