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

Mizuho Bank London Implements Orchestrade to Enhance Risk Management

Orchestrade, a leading provider of trading, risk and operations solutions for capital markets, announced today that Mizuho Bank London has gone live on the Orchestrade system... Read more »

MUFG Europe Selects Wolters Kluwer for Regulatory Reporting and Risk Software in Germany and The Netherlands

MUFG Europe, the European subsidiary of Japan’s Mitsubishi UFJ Group, has chosen Wolters Kluwer’s OneSumX software to manage a number of regulatory and risk reporting... Read more »

Wolters Kluwer and CRMNEXT Form Expere Services Partnership

Wolters Kluwer’s Compliance Solutions business has formed a strategic partnership with CRMNEXT in the U.S.

Read more »

FICO Named Category Leader for Enterprise Fraud in Chartis Report

FICO, a leading analytics company, today announced that it has been named a category leader in enterprise fraud in the ... Read more »

Arachnys Unveils Customer Risk Intelligence Suite Transforming the Intersection of Entity Data and Investigative Intelligence

Arachnys, the leader in Customer Risk Intelligence (CRI) solutions for Client Onboarding, Know Your Customer (KYC),... Read more »

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