Plan Sponsors Forecast Robust Pension Risk Transfer Activity This Year
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The Poll found over half of plan sponsors (57%) say they will use an annuity buyout to de-risk, including 43% who plan to use a combination of a lump sum and an annuity buyout. An annuity buyout allows companies to transfer pension liabilities from their balance sheets to an insurer, while at the same time ensuring that pension benefits for current and future retirees - and their beneficiaries - are properly protected.
"Plan sponsors are showing growing interest in PRT transactions and are looking to move sooner rather than later," says
As was seen in 2015, the Poll shows the top catalyst for pension risk transfer remains
"While plan sponsors recognize that insurance companies' core business is risk management, there are some areas where plan sponsors may need additional education," notes Daniel. "According to the Poll, only 61% of plan sponsors are aware that a risk transfer to an insurance company does not represent a risk transfer to plan participants in any way. It is critical that sponsors understand that the only thing that changes for the participant (or beneficiary) in these transactions is the entity from which payments are sent." Trends in PRT While there is a growing awareness of emerging trends in PRT, including split deals and assets-in-kind (AIK) transactions, the Poll shows they have not necessarily gained traction at this point. Over two-thirds of plan sponsors (69%) are aware that it is possible to split an annuity buyout transaction with two or more insurers. However, today, only one in five (21%) say that they would be likely to split a PRT transaction, with the largest plans being the most likely to contract with two or more insurers. Forty-four percent of plan sponsors say they would be unlikely to split the transaction, primarily for reasons of perceived complexity-they believe it would cause additional administrative burden. Smaller transaction size was another reason cited.
While the ability to transact in AIK is relatively new to the
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