What You Need to Know
- Catalysts for initiating a pension risk transfer to an insurer include interest rates, 61%; market volatility, 47%; and increased volume of plan retirees, 37%.
- The pandemic does not appear to be negatively influencing plan sponsors’ desire to move forward with a pension risk transfer.
- The poll’s findings also highlighted the importance of stability and financial strength in the eyes of plan sponsors.
Pension risk transfer transactions will remain robust for the time being, MetLife reported Tuesday.
Ninety-three percent of plan sponsors with de-risking goals in a new poll say they intend to completely divest all of their company’s defined benefit pension plan liabilities at some point in the future, up from 76% in 2019.
The poll found that among those plan sponsors that plan to fully divest their DB plan liabilities, 32% have DB plan assets of $1 billion or more, 35% have assets in the $500 million to $999 million range and 33% have assets in the $100 million to $499 million range.
“The PRT pipeline remains very active, and we anticipate this will continue in the near future and beyond, with 2021 potentially being another record year for the industry,” Melissa Moore, senior vice president and head of annuities at MetLife, said in a statement.
MMR Research Associates fielded the MetLife 2021 Pension Risk Transfer Poll in July among 253 DB plan sponsors, including 68% that reported DB plan assets of $500 million or more. Only those plan sponsors with de-risking plans involving pension risk transfer could participate in the research.
Catalysts for Pension Risk Transfer
The poll found that 91% of plan sponsors are weighing their DB plan’s value against the risks to which it exposes their organization.
Asked about the primary catalysts for initiating a pension risk transfer to an insurer, 61% cited interest rates, 47% market volatility, 37% an increase in volume of a plan’s retirees and 35% favorable annuity buyout market pricing.