We are pleased to announce that Sun Life Financial completed a $45 million annuity buy-in deal with Husky Energy covering past and future benefits for active members, which we believe to be the first of its kind in Canada. The key challenge with transferring the risk of active members is the uncertainty around their benefits, as they are still accumulating them and have yet to begin receiving payments.
Husky Energy is considering winding up their plan in the next couple of years and wanted to buy annuities now to reduce their risk. We worked closely with Willis Towers Watson and the plan sponsor to develop a mechanism to cover future benefits.
"We were delighted to create an innovative solution for Husky Energy which achieved their objectives," said Brent Simmons, Senior Managing Director, Defined Benefit Solutions & Head, Sun Life Financial. "As more plan sponsors look to reduce their pension risk, the market is responding with creative ways to meet the sponsors' objectives and help them focus on their core business."
What does this deal mean for Canadian defined benefit plan sponsors?
- This same approach could help other plan sponsors looking to reduce the risk associated with their active or deferred members.
- Innovation continues to drive the Canadian de-risking market – so if you're a plan sponsor with any complex pension challenge, work with your consultant and insurer to explore your options.
What is an annuity buy-in?
An annuity buy-in is an investment that a pension plan makes to transfer investment, longevity and inflation risk to an insurance company, without any impact on plan members' pensions. It can increase benefit security by allowing the pension plan to better match its assets with the pension promises it has made. In exchange for a lump sum premium, Sun Life makes a monthly payment to the pension plan equal to the pension payments for the covered group, and the plan continues to pay each member directly.
Group annuities are provided by Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies.