Is 2026 the right time to de-risk your jumbo DB pension plan?
The Canadian pension risk transfer (PRT) market is evolving rapidly and for sponsors of large defined benefit (DB) plans, the timing may never be better. With a lighter transaction pipeline currently forecasted by Sun Life estimates in 2026, insurers may have more capacity to handle sizable pension de-risking deals. If you manage a plan that could contemplate a jumbo transaction – one exceeding $800 million in liabilities – now is the time to explore whether transferring your pension risk makes sense.
Understanding the opportunity
A significant shift is happening in Canada's PRT market with deal sizes increasing over the past several years. According to Sun Life estimates, eight jumbo transactions have occurred since the first one in 2017, with the largest to date by General Motors of Canada Company for $1.8B announced in 2021.
In 2024 alone, jumbo transactions represented one-third of the total market volume – approximately $3.6 billion according to Sun Life estimates. In 2024:
- IBM Canada transferred $1.5 billion,
- Bombardier transferred around $900 million, and
- an undisclosed organization completed a $1.2 billion inflation-linked transaction – the largest of its kind by a single insurer in Canadai.
This can be of interest to you, plan sponsors with large DB plans. When you transfer pension liabilities to an insurer through a group annuity purchase, you evacuate both investment risk and longevity risk. The impact can be substantial. For example, if your $1 billion plan experiences just a one-year increase in life expectancy for its members, Sun Life estimates an increase of $30 to $40 million to a plan sponsors DB liabilities based on today’s economic environment. Group annuity transactions eliminate this uncertainty while allowing your organization to focus on its core business.
Learn about the ‘Billion Dollar Club’
Why jumbo deals are attracting more interest
In recent years, the PRT market dynamics have shifted significantly in favour of larger transactions. Insurers have been actively expanding their capacity to handle these deals. WTW says, “We estimate that the market would now be able to absorb transactions up to $4 billion in size in a single day with the appropriate strategy and planning.”
Insurers have been working to expand market capacity by sourcing assets to accommodate these larger transactions. Sun Life is ready to transact on $2 billion or more in a single day – and we’re diligently working to increase this amount.
Larger deals tend to attract multiple insurers, which could lead to better pricing and terms. Over the past two years, jumbo transactions that Sun Life participated in were priced well ahead of the collar-adjusted Canadian Institute of Actuaries (CIA) annuity proxy – meaning better value for plan sponsors.
Beyond competitive pricing, according to WTW, insurers are now willing to customize solutions that would be impractical for smaller transactions. This might include specialized administrative services after selection or unique structural arrangements tailored to your plan's specific needs.
A favorable financial environment
Several factors are aligning to make 2026 particularly attractive for jumbo plan sponsors.
Strong plan funding
After nearly 20 years of deficits, since 2022 many DB plans – including jumbo plans – are now well-funded. As of March 31, 2026, according to the Mercer Pension Health Pulse the median solvency ratio across DB plans was 123%, with 87% of plans exceeding 100% solvency.
The current surplus in DB plans is a result of risks sponsors have taken, which created favourable outcomes. Maintaining the same approach moving forward may not be ideal. With surplus levels high, sponsors can consider de-risking to secure gains. For many plan sponsors that have already de-risked their asset mix, selling accumulated bonds to purchase a group annuity can effectively lock in gains from those assets.
Surplus opportunities
A PRT transaction can help plans access "trapped" surplus and improve cash flow. In Ontario, for example, plans typically need to maintain a 5% solvency buffer before contribution holidays are permitted. When you reduce plan size through a group annuity purchase, you proportionally reduce the size of this buffer, freeing up surplus.
The math works in different ways depending on your transaction structure. For a buy-in, if annuity purchase yields exceed the yield of bonds being replaced in your portfolio, you may see a net reduction in liability. For a buy-out, the net reduction in liability comes from remaining members, thanks to higher discount rates from a larger allocation to return-seeking assets.
Additionally, annuity market pricing can sometimes deviate favourably from theoretical estimates, potentially confirming a clearer – and larger – pension surplus than anticipated.
Making jumbo deals work: a timeline reality
You might think a $800M+ PRT transaction will take years to execute, but with the right preparation, timelines can be much shorter than many expect. With a slower market this year, many insurers are willing to work faster to help plan sponsors transact in 2026.
Bringing a large or jumbo transaction to market requires close collaboration and coordination between your organization, your consultant and your insurer. Engaging insurers early can help work through any unique considerations and avoid timing conflicts with other large deals. Having a clear plan, defined roles and agreed‑upon decision criteria can also make the process feel more manageable from start to finish.
What's now possible: The Innovation Toolbox
Pension de-risking has evolved far beyond simple "plain vanilla" transactions. The market now offers flexible, customizable solutions that can provide execution certainty – regardless of transaction size. Pension risk transfer solutions have recently solved for:
Complex plan provisions
- Solutions now exist to address multiple benefit structures, varied retirement ages, or different pension forms in a single transaction.
Inflation protection
- Insurers can competitively price inflation risk at scale, including 100% uncapped CPI adjustments or capped provisions – so plan sponsors can help give retirees protection while managing costs.
Deferred member inclusion
- Transferring deferred liabilities earlier supports balance sheet stability and cost certainty while reducing long-term administrative burden.
Active member inclusion
- Rather than taking a piecemeal approach over several years, insurers can now structure holistic solutions that include active members.
Member portability options
- Portability options, like lump sum alternatives, can coexist with PRT transactions through experience-based pricing that avoids overly conservative assumptions.
Key considerations for success
As you evaluate a jumbo transaction, several factors will influence timing and structure:
Detailed project governance including a robust project plan, a strong project manager, clearly identified decision-makers and defined ‘go or no-go’ criteria are essential. Unclear decision-making has derailed transactions in the past.
Life expectancy assumptions can move pricing by several percentage points. A longevity study can help reduce insurer risk margins and improve your pricing.
Work with your asset managers to review and prepare the pension plan assets supporting an annuity purchase. Consider reaching out to your consultant and prospective insurers for special considerations like illiquid assets or preparing for an in-kind transfer.
Consider using high-quality bond portfolios for in-kind asset transfers rather than all cash – this approach reduces trading costs and can improve pricing. For inflation-linked liabilities, even transactions involving smaller amounts of real return bonds could benefit from the approach. Share portfolio lists with insurers at least six weeks in advance to understand the value and role of in-kind transfers in your transaction.
For jumbo plans, consider splitting quotes into tranches to take advantage of different insurers' appetites and capacities. You might tranche by longevity profile, plan provisions, or other considerations like horizontal or vertical tranching.
The 2026 window
The confluence of factors – strong plan funding, record insurer capacity, lighter market pipeline, and proven solutions – make 2026 an excellent time to consider large or jumbo PRT transactions.
If you manage a large DB plan and haven't recently evaluated whether a PRT transaction aligns with your organization's goals, now is the time to start the conversation. With the right consultant and insurer, you could secure your members' pension benefits, eliminate investment and longevity risk, and free up time and energy to focus on your core business – all before the end of this year.
Note: All figures listed are in Canadian dollars.
i “Sun Life reports second quarter 2024 results” Sun Life Financial Inc., August 12, 2024.
