WTW unveils simpler pension risk tool for smaller schemes
WTW has introduced a new longevity swap solution aimed at defined benefit (DB) pension schemes, lowering the barriers that have kept many from accessing reinsurance markets. The product, named Longevity Stream, is tailored to address the operational and financial hurdles schemes face when attempting to hedge longevity risk. Historically, these schemes have been excluded from the market due to the high costs and detailed processes involved in traditional longevity swaps, which often require bespoke legal agreements, extensive due diligence, and ongoing administrative oversight. By standardising key components of the transaction, WTW aims to make reinsurance more accessible, allowing a broader range of pension funds to manage their exposure to increasing life expectancy without the prohibitive expenses that have previously acted as a deterrent.
Streamlined access for schemes
The service targets schemes with liabilities between £100 million and £1 billion. It offers a fixed-fee structure, pre-negotiated contracts, and a simplified operational process to reduce costs and complexity. The pre-negotiated contractual framework was developed with CMS and is intended to reduce the implementation and ongoing management costs that have historically made longevity swaps more difficult to access. Zurich will act as intermediary, connecting trustees to a panel of global reinsurers.
The contractual framework was developed with law firm CMS to cut implementation and ongoing management expenses. CMS’s involvement ensures that the legal documentation is both robust and adaptable. This flexibility is particularly valuable for schemes pursuing “run-on” strategies, where the goal is to manage liabilities independently rather than offloading them entirely to an insurer.
Rhys Mellens, a senior director at WTW, said the solution addresses concerns about cost and complexity that have historically limited participation. “We’re seeing increased interest from schemes that want to hedge longevity risk but have been held back by perceived barriers,” he said. “This gives them a more efficient route while keeping future options open.”
Market demand and shifting risks
More than £170 billion in longevity risk has been transferred to reinsurers in the UK since 2009, with WTW advising on over £100 billion of those transactions. But until now, the market has been dominated by the largest schemes. The concentration of activity among the biggest pension funds reflects the economies of scale that make longevity swaps viable for schemes with liabilities exceeding £1 billion.
The launch comes as pension funds reassess longevity risk in light of recent mortality projections and record-low death rates expected in 2026. WTW warned that further improvements in life expectancy could significantly impact scheme liabilities and the cost of future buy-ins.
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Amanda Chammings, a partner at CMS, said Longevity Stream provides “great flexibility” for schemes that previously struggled to access the market, allowing them to reduce risk and strengthen security for members. The flexibility she highlights is particularly relevant for schemes that are not yet ready to commit to a full buy-in or buyout. Many pension funds are adopting “run-on” strategies, where they continue to manage assets and liabilities in-house rather than transferring them to an insurer.
The solution is designed to support schemes pursuing “run-on” strategies—continuing to manage assets and liabilities independently—while retaining the option to transition to a bulk annuity transaction later.
For schemes, the ability to hedge longevity risk without the high costs of traditional swaps could change how they plan for the long term. The traditional longevity swap market has been characterised by high minimum transaction sizes, which have excluded all but the largest schemes.
WTW’s move reflects a broader trend: as pension funds grapple with longer lifespans and volatile markets, tools that simplify risk management are becoming more critical. The challenges facing DB schemes have intensified in recent years, driven by a combination of low interest rates, rising life expectancy, and increased regulatory scrutiny.
But adoption will depend on how well the service delivers on its promise of efficiency and flexibility. The success of Longevity Stream hinges on its ability to balance standardisation with customisation, ensuring that schemes receive the benefits of a streamlined process. Trustees will need to be convinced that the fixed-fee structure genuinely reduces costs. They will also assess whether the pre-negotiated contracts provide sufficient flexibility to adapt to changing market conditions or scheme-specific developments.
