Nine in 10 (89 per cent) U.S. defined benefit pension plan sponsors say they’re expecting to completely divest their plan liabilities in roughly four years, according to a new survey by MetLife Inc.
The survey, which polled 250 DB plan sponsors, found nearly all (94 per cent) said the financial impacts of volatility and related risks on their balance sheets and income statements have them weighing their DB plan’s value against the cost of the benefit.
Read: Vast majority of DB pension plan sponsors say inflation impacting decision to de-risk: survey
Respondents cited inflation (49 per cent) as the No. 1 market force driving de-risking efforts, followed by market volatility (42 per cent), an increase in the volume of retirees (42 per cent), rising interest rates (42 per cent), favourable annuity buyout market pricing (35 per cent), a looming recession (31 per cent), mortality changes due to the coronavirus pandemic (14 per cent) and the geopolitical environment (10 per cent).
More than half (58 per cent) of respondents said they’d most likely use an annuity buyout — either on its own or in combination with a lump sum — to achieve their de-risking goals. Among this group, 33 per cent said they’d use a combination of a lump sum and an annuity buyout and 24 per cent said they’d use an annuity buyout. Just 18 per cent said they’d use an annuity buy-in.
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