ABOUT PRUDENTIAL A VOLATILE MARKET

Plan sponsors today must consider how their pension plans impact their business plans. Twice since 2000, pension funded status has fallen over 30%. When combined with asset/liability mismatch, escalating longevity, unpredictable funding requirements and ongoing market volatility, pension plans can contribute to significant business risk over the long term.

Source: Milliman 100 Pension Funding Index as of December 31, 2015
 

Illustration of funded status from 2000 to 2014.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
133% 123% 103% 83% 90% 90% 100% 106% 78% 82% 84% 79% 77% 88% 83% 83%

Increasingly, plan sponsors want to focus on their core competencies and what rewards them, their customers and their shareholders. Many are now viewing their defined benefit plans as legacy liabilities to be divested or de-risked accordingly. In fact, 48% of financial executives surveyed are considering transferring defined benefit plan liabilities within the next two years.1

More and more plan sponsors are looking to pension risk transfer as a means to achieve contribution certainty, financial statement stability, strategic flexibility and a stronger, more secure foundation to honor the promises they have made.

1 Managing Financial Risk in Retirement and Benefits Programs: Translating Awareness into Action, CFO Research in collaboration with Prudential Financial, Inc., June 2014.

Next: Why De-Risk?