Evolving the Canadian group annuity market: 15 years of innovation to help DB plan sponsors
Celebrating 15 years in the group annuity market
The Canadian group annuity market has grown exponentially over the last 15 years.
Back in 2008, only terminating DB pensions plans used group annuities. It was rare for consultants to talk to plan sponsors about how annuities could help manage pension risk. At that time, pension risk management often meant changing a pension plan’s investment portfolio from 60% equities to 55% equities. A rather limited change compared to today’s many options! The only solution to transfer pension liabilities from a plan sponsor’s balance sheet to an insurer’s was for retirees in the form of a buy-out annuity policy.
Today, the landscape looks very different. The popularity of group annuities has grown as their benefits have become better understood. Pension risk management is now mainstream. In fact, in a recent report by WTW, 87% of annuity purchases were for ongoing plans1. Consulting firms now have specialized annuity teams to work with DB plan sponsors and insurers. This enabled the development of customized solutions for pension plans of all sizes and characteristics. Pension risk transfer solutions now include buy-out and buy-in policies for active, deferred, and retired plan members.
A quick comparison between 2008 and 2022 shows the evolution of the Canadian group annuity market.
2008
- Almost all purchases were by terminating plans
- Consultants rarely talked about annuities
- Pension risk management often meant being 55% equities instead of 60%
- Buy-outs, retirees
- $50 million was a “big deal”
2022
- 87%1 of purchases were by ongoing plans
- Consultants have specialized annuity teams
- Pension risk management is mainstream
- Buy-outs/buy-ins, actives/deferreds/retirees
- $500+ million is a “big deal”
1 Willis Towers Watson Group Annuity Market Pulse, 2022 Annual Review.
Sun Life’s DB Solutions team started 15 years ago with only a single person. This team of pension experts has now grown to over 40 people, assisted and supported by many other teams at Sun Life. DB Solutions applies a client-focused lens to meet the unique needs of Canadian DB plan sponsors. The team works tirelessly to innovate and advocate for market growth and advancement.
Above all else, our priority is to protect member pension benefits so that plan sponsors can focus on their core business.
Explore the innovation milestones below to learn:
- why these advancements are important to DB plan sponsors, and
- how DB Solutions helped drive the market forward to meet plan sponsors’ needs.
1st modern Canadian annuity buy-in solution
2011-2012
OSFI issued policy advisory on annuity buy-ins
1st Canadian in-kind transfer
2014
OSFI issued policy advisory on longevity insurance
2016
Completed three cost-effective inflation-linked annuity deals
1st annuity deal for active members
2018
Lead insurer for $750M annuity buy-out insuring $500M of this transaction
2019
Largest same-day single insurer annuity deal $560M
