Towers Watson has recently implemented an innovative solution addressing hundreds of millions of dollars of pension obligations in a single transaction with one of its clients.
Canada is the cheapest location to insure retiree DB pension obligations and the United Kingdom is the most expensive location, according to data produced by Mercer.
With 2013 well and truly over, a number of us begin to prepare for committee meetings—if they haven’t already been held—to discuss performance. Supported by extremely strong equity market returns during 2013, the average Canadian DB pension plan earned in excess of 14%. In combination with the increase in bond yields over the course of the year, this has many Canadian pension plans approaching funding levels not seen since before the financial crisis began. Suffice it to say, these will be pleasant meetings.
If you are a DB pension plan sponsor, your plan is likely invested in a traditional balanced fund structure. A mix of 60% public equities and 40% core fixed income has long been the recipe for achieving the required rate of return plan sponsors need to cover their benefit obligations. However, the current low-growth, low-yield environment is making it increasingly difficult to hit the mark, and this type of strategy completely ignores a plan’s unique liability profile.
Over the past few years, many plan sponsors have sought to de-risk their DB pension plans. This has manifested itself in different ways—from simply diversifying the return-seeking portfolio to purchasing more matching bonds in order to stabilize contributions and better match liabilities. The latter activity has often involved developing a journey plan—a pre-set range of actions or glide path that the plan sponsor will take when something happens. Usually, the triggers are related to an interest rate level, a funded ratio or a combination of both.
It was, literally, a big deal when the Canadian Wheat Board (CWB) off-loaded the risk of its underfunded DB pension plan to Sun Life Financial with a $150-million group annuity purchase. Steering this complex deal seemed impossible at times—no Canadian pension plan had bought an inflation-adjusted group annuity before. But the Winnipeg-based grain marketer plowed […]
With the end of 2013 in sight, I can safely say “de-risking” is this year’s hottest pension buzzword. What, though, do I mean by de-risking, and how new is it really?
While they’re increasingly interested in managing risk, DB plan sponsors in Canada still aren’t far along the de-risking continuum, experts explained in a recent Association of Canadian Pension Management webinar.
With market returns increasing, interest rates on the rise and funded status for DB plans improving, the environment may be right for de-risking
The Office of the Superintendent of Financial Institutions has issued a draft policy advisory that provides information and guidance to administrators of federally regulated pension plans considering entering into a longevity insurance or longevity swap contract.