Each defined benefit (DB) plan has a different journey towards achieving their objectives. Addressing pension risk can have a significant impact for plan sponsors. We’re committed to developing innovative solutions to help you achieve benefit security for your members.
If you think of your DB plan as an underperforming division of your company – what would you do?
You would either put it into run-off or you would divest it.
In the pension de-risking world, putting a plan into run-off is like using a liability driven investment (LDI) solution, as you maintain the pension plan until it finishes paying your plan members. Divesting your plan is like purchasing an annuity buy-out or an annuity buy-in, which transfers the liabilities, along with pension risks, to an insurance company.
Many plan sponsors are using innovative de-risking solutions.
Too high of a funding level can pose a risk to DB plan sponsors, as surplus can become trapped in the plan. DB plan sponsors can mitigate that unfavorable outcome by taking appropriate de-risking action.
Managing a DB pension plan requires management’s time and attention. De-risking allows management to focus more of their resources on the organization’s core business.
Insurance companies are experts at managing risk in order to meet their obligations to pay benefits to annuitants. In addition to low-risk investment strategies backing the benefits, insurers have several additional layers of protection that provide members with enhanced benefit security.
Changes in a plan’s funding levels could require the plan sponsor to make cash contributions towards the plan. De-risking reduces the risk of cash needing unexpectedly to be diverted to the DB plan.
DB plan sponsors financial, demographic, regulatory and geopolitical risks.
Many Canadian companies in different industries have taken action to de-risk their DB pension plan.
