Reducing Your Pension Risk

Awareness of pension risk is increasing, yet the number of large companies implementing risk transfer solutions remains modest. Contributing to this hesitancy are five key misconceptions impeding sponsors from divesting pension obligations. This paper explores these myths in detail, demonstrates why they are false, and provides clarity around each.

With the increase in life expectancy intensifying the pressure on global defined benefit pension plans, plan sponsors must now bear the burden of managing longevity risk while still providing employees with retirement security. This article explores the cause and effect of improving mortality and its significant impact on pension plans.

Improved market conditions and funded status levels have created attractive—yet potentially fleeting—opportunities for pension de-risking. Waiting for additional advancements in funded status is a flawed strategy, as sponsors aren’t compensated for bearing this risk. For firms with well-funded plans, the time to prepare to transfer risk is now.

Risk transfer agreements enable plan sponsors to mitigate or remove risk from their pension plans. Accomplishing a transaction can be a straightforward experience by following a structured process and partnering with an experienced insurer. This paper outlines the steps involved in the most comprehensive form of risk transfer: the buy-out.