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31 May 2016

Interest in pension risk transfers rising among finance executives

PhotoThe number of companies that have executed a pension risk transfer has risen from 3 percent in 2010 to 15 percent in 2015, according to a new report from Prudential in collaboration with CFO Research. There has also been a large increase in the number of finance executives who report they would be "very likely" to purchase a pension annuity buyout within the next two years, according to the research.

"The results of this survey underscore the appetite U.S. companies have for pension de-risking," explains Scott Kaplan, head of Pension Risk Transfer at Prudential Retirement. "I think we'd be hard pressed to find a board room in large and mid-size firms where they are not discussing de-risking their pension obligations."

Since 2012, a number of prominent U.S. companies have executed pension risk transfers, including General Motors, Verizon, Kimberly-Clark, Motorola and J.C. Penney. The transactions made headlines because of the size of the benefits obligations that the companies transferred.

The insurance industry has also seen a sharp increase in the number of risk transfer transactions designed for smaller, more narrowly defined populations of defined benefit plan participants, Kaplan notes.

Pension risk transfers and other strategies to manage pension plan risk will likely escalate in the years to come. A clear sign of this is the fact that a large majority of finance executives (73 percent) who indicated that their companies purchased an annuity for a portion of plan participants say they are likely to transfer additional liabilities to a third-party insurer sometime over the next two years.

"Pension Risk Transfer: Annuities Getting Increased Attention" is the fourth in a series of five reports based on the 2015 results of an annual survey on the retirement and benefits landscape.

Want more information? Read the report. Want to speak with Scott? Contact Josh Stoffregen.

Josh Stoffregen
phone: 973-802-3996
mobile: 973-204-2540
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