How do annuity buy-ins work?
In exchange for a lump sum premium, Sun Life makes a monthly payment to the pension plan to cover pension payments to the covered members. This includes retirees as well as deferred and active members. The pension plan (not Sun Life) continues to pay each member directly. An annuity buy-in can therefore be considered as an investment of the plan.
Advantages for plan sponsors
Annuity buy-ins provide most of the same great benefits as annuity buy-outs, along with added flexibility for plan sponsors.
- No- top-up contribution
- No accounting settlement1
- Option to convert to an annuity buy-out in the future
- No change to how covered group of members receive pensions
- Flexibility to purchase during wind-up process
1 Plan sponsors should confirm the need for an accounting treatment settlement with their own auditors.
What affects the pricing of an annuity buy-in?
- Data quality and the longevity profile of plan members
- Quality of assets available for insurers to invest in and deliver ongoing payments
- Market competitiveness
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An annuity buy-out policy transfers all pension risks from the plan sponsor’s balance sheet to the insurers balance sheet.
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