The Canadian Wheat Board (CWB) has purchased a $150-million annuity policy from Sun Life Financial that transfers investment and longevity risk from its DB plan to the insurer.
“The deal is a ‘win-win’ for the Canadian Wheat Board and its plan members,” says Andrea Carlson, vice-president, corporate finance and strategy, with the CWB. “Sun Life is now managing all of the market-related risks of our pension plan through an annuity buy-in, providing an indexed solution that others in the market told us couldn’t be done.”
The agreement is unique in the Canadian market because it involves pension income that grows with inflation as well as the annuity buy-in solution.
Read: More de-risking needed for Canadian DB plans
An annuity buy-in is an investment that a pension plan makes to transfer investment and longevity risk to an insurance company, without any impact on plan members’ pensions. It increases benefit security by allowing the pension plan to better match its assets with the pension promises it has made.
“It is a game-changing transaction for our industry….Our agreement is designed to provide long-term security to the Canadian Wheat Board’s pension plan members,” says Brent Simmons, senior managing director, DB solutions, with Sun Life.
In the United States, both General Motors and Verizon struck similar deals with Prudential Financial last year.
The CWB was advised by Aon Hewitt and Dentons Canada LLP.
This article first appeared on BenefitsCanada.com