RiskFirst: Nearly a third of US pension plans are now within striking distance of a buyout

RiskFirst: Nearly a third of US pension plans are now within striking distance of a buyout
09.08.2018 11:00 am

RiskFirst: Nearly a third of US pension plans are now within striking distance of a buyout

Risk Management

Latest figures from RiskFirst reveal that approximately 30% of US pension plans may now have a funded status of 95% or more, making a buyout or significant risk-transfer deal a feasible option.  

30% of US plans analyzed by fintech company RiskFirst have assets equal to or exceeding 95% of their liabilities on an accounting basis, according to RiskFirst data. Analysis of some 500 plans with assets of over $100bn highlights that the number of plans within this funding level band – which arguably puts them within reach of a buyout or termination (given the premium required to match current annuity pricing, offset by the increasing costs of plan management) – has increased by 50% in the first half of 2018.

Further analysis of the portfolio reveals that this figure increases to 40% in the event of a further 50bps increase in long-term yields, and to a staggering 46% with only a 75bps increase in yields.

Michael Carse, DB Pensions Product Manager, RiskFirst, says “The pension plans modelled on our platform – which range in size from smaller plans to those with $8bn in assets – are relatively typical of US plans as a whole, so these findings can be regarded as being fairly representative of the market. 30% is certainly a sizeable number, and while risk transfer will, of course, only be the right option for some of those plans within striking distance, it wouldn’t take much of a change in sentiment to impact the appetite for bulk annuities in the current climate.”

With market factors presenting particularly favorable conditions to de-risk – including accounting reforms, a strong performance in equity markets combined with reductions in liabilities, increased PBGC premiums, and the incentive for additional pre-funding in 2018 ahead of upcoming corporation tax changes – there is the potential for risk transfer rates to rise considerably.

Matthew Seymour, CEO, RiskFirst, adds: “For plans that are looking to transfer risk, those equipped with the tools to regularly and accurately monitor their funding levels and the broader market situation will be best positioned to capture the opportunities to de-risk as they arise.”

Related News

Studio Bank Selects Baker Hill’s Statement Spreading Solution as Building Block for Future Growth

Baker Hill, a leading provider of technology solutions for common loan origination, risk and relationship management, CECL... Read more »

Al Rajhi Bank selects Murex for its Islamic finance business

Murex, a global leader in trading, risk and back-office solutions for the capital markets and Al Rajhi Bank, the largest Islamic bank in the world, are pleased to announce that... Read more »

LexisNexis Risk Solutions and iMeta Technologies Join Forces to Reduce Financial Crime Risk for Financial Institutions

LexisNexis® Risk Solutions, a part of RELX Group (LSE:REL/NYSE: RELX), today announced an alliance... Read more »

Belgium’s bpost bank Selects Wolters Kluwer to Provide AnaCredit and Regulatory Reporting Software

Belgium-based bpost bank has chosen Wolters Kluwer’s Finance, Risk & Reporting business to provide its regulatory reporting and AnaCredit software for its operations in the... Read more »

Customer Risk Intelligence Provider Arachnys Secures $10 Million in Series A Funding

Arachnys, the leader in Customer Risk Intelligence solutions for Know Your Customer (KYC), Anti Money Laundering (AML)... Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App