Its cashflow exchange longevity product allows a scheme to offload pension risk in return for a monthly premium. Credit Suisse will then pay the scheme’s pensioners from the age of 60 for a maximum of 50 years.
Nigel Bodie, a director in the investment bank’s life finance group said longevity trading had already found success in the US, and was being prepared for a launch across Europe and Asia within the next two years.
“Where our product differs from some others is they only pay out for 10 to 15 years and are linked to population mortality. Ours runs for 50 years and matches the scheme’s own experience,” Bodie said.
He continued: “It is simply an agreement to exchange a fixed series of cash flows from the pension fund for a floating series of payments from Credit Suisse in respect of the actual pensioners. No upfront payment is required, as in the case of many buyouts, and the scheme can continue to manage its own assets if it wishes.”
Alan Smith, director of First Actuarial, cautiously welcomed the news, but stressed the price was crucial.
“The only things that concern me are the price for the service and what happens if the scheme’s circumstances change dramatically five or 10 years into the agreement.
“Let’s suppose that your scheme’s shrunk, and as a result you now have enough money to be able to consider buyout.
How easy will it be to trade the existing arrangement with Credit Suisse? This may complicate matters,” Smith added. CT
