Group Pension Buyouts Break $1 Billion Threshold
Again
For the fifth consecutive quarter, group pension
buy-outs have surpassed the $1 billion mark, reports the LIMRA
Secure Retirement Institute. By
Javier Simon | August 22, 2016
Group pension buyout sales exceeded $1 billion for
the second quarter of 2016, according to the LIMRA Secure
Retirement Institute.
“Pension buyout activity for the first six months of
this year is higher than it has been in the last five years,”
says Michael Ericson, analyst for LIMRA. “More companies of all
sizes are looking to transfer their pension risk, which has
increased sales activity in the first half of the year.”
Traditionally, buyout sales have had a strong
seasonality with most sales occurring in the fourth
quarter. Activity in the first six months of 2016 is up 22%
compared with the first half of 2015. Through the second
quarter of this year, 131 plan sponsors have converted their
defined benefit (DB) pension plans to group annuity contracts,
surpassing the previous high-water mark of 107 contracts sold in
the first six months of 2015.
The second quarter results of $1.03 billion are less
than the $3.8 billion in sales for second quarter 2015 primarily
because of one “jumbo” deal. Last year, Kimberly-Clark transferred
it's pension into group annuity contracts with two insurance
companies.
Several years of low interest rates and a volatile
market have made it difficult for plan sponsors to keep their DB
plans properly funded, LIMRA argues. In addition, the Pension
Benefit Guarantee Corporation (PBGC) has significantly increased
its premiums and is using new mortality tables, which are less
favorable to plan sponsors.
“All of these factors have made DB plans more
expensive and burdensome,” says Ericson. “That’s why an
increasing number of companies are transferring their pension
risk to an insurer by purchasing a group annuity.” Click Here to
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