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Deutsche bank strikes deal with BMW UK pension scheme

In what many believe will become a major sector in the pensions industry Deutsche bank has announced a deal to take on the longevity risks of nearly £3 billion connected to the BMW UK scheme. This is the largest deal of its kind to date and will see BMW transfer the risk that scheme members live longer than expected and the increased costs associated with this.

Using complicated insurance and investment tools Deutsche bank will itself limit its own liability with regards to the scheme and expects a number of new contracts to appear during 2010. It is believed that the sector could see up to £15 billion of "pension fund risks" transferred to financial outfits such as Deutsche bank in return for as yet undisclosed fees.

It is becoming more and more difficult to forecast pension fund liabilities or pension fund surpluses in the future which is causing concern for pension fund trustees around the world. It will be interesting to see which other companies step forward to offset their pension fund liabilities and take up these new services which are becoming more and more popular. As we have seen over the last few months many pension fund deficits have exploded during the recession, causing a significant increase in the contributions required from sponsoring companies.

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