Locking the potential of future benefits
The last couple of years have seen an increase in pension funds and corporate pension schemes being transferred to insurance companies. These transfer deals, known as buy-outs or buy-ins, offer companies the opportunity to reduce their exposure to pension liabilities. Evolving accounting regulations, volatile equity markets and a transfer of risk from corporates to individual participants have increased the speed of this process.
Employee benefits have turned into a financial liability for corporates, with limited upside. Depending on their risk appetite, it can be very attractive for a pension fund or corporate to transfer some of the risks to third parties—especially for companies seeking to reduce balance sheet exposure and small pension funds with high individual longevity risks or high operating cost levels. In making such an important decision, it is advisable to use a roadmap and monitor the different risks, while at the same time, it is important to ensure an optimal outcome for stakeholders and lock the potential of future benefits.
Performance issue 16 - January 2015
Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.