A New Arrow For The Pension Practitioners Quiver              Pension Risk Transfer                                       ...
The Typical Pension Plan                         50%                    private sector DB plans frozen                    ...
Insured Pension Risk Transfer Solutions                        are an Attractive Fixed Income AlternativeGuaranteed insura...
Pension Risk Transfer Solution Spectrum                                                 Higher Cost                       ...
Retiree Benefit Payments Create                                       Significant Challenges for Pension Plans            ...
Pension Risk Transfer ‐ Retiree Annuitization                              Different Structures for Different Client Circu...
Pension Risk Transfer ‐ Indexed Guaranteed Investment Contract                                    Unable or Unwilling to L...
5 Important Questions To Consider1.  Is your pension program  frozen?2. Is plan termination the ultimate pension objective...
Question and Answer Session*Any questions not answered during the Q & A session will be answered individually after the we...
Thank you for attending     Visit www.dietrichassociates.com for more information.         Connect with Mr. Annuity and Co...
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A New Arrow for The Pension Practitioners Quiver: Pension Risk Transfer


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Gone are the days of group annuity contracts only being able to satisfy the plan termination objectives of a pension plan sponsor. Today, there are a wide variety of useful applications for guaranteed institutional annuity contract structures to provide an alternative to traditional fixed income investments. Are you or your pension clients:

•Struggling with cost and volatility issues surrounding a defined benefit pension plan?
•Considering a liability driven investment strategy that will de-risk the plan investment and allow for stable, predictable funding?
•Limited by fixed income funds that only allow for simple duration matching, and expose the plan to cash flow mismatch risks?
•Unaware of the variety of customized institutional insurance contract structures available?
•Lacking a fiduciary process for evaluating and monitoring the attractiveness of insured pension solutions?

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A New Arrow for The Pension Practitioners Quiver: Pension Risk Transfer

  1. 1. A New Arrow For The Pension Practitioners Quiver  Pension Risk Transfer Jay Dinunzio  Senior  Consultant ©2012 Dietrich & Associates, Inc.. All Rights Reserved. 
  2. 2. The Typical Pension Plan 50% private sector DB plans frozen private sector DB plans frozen78% funded Asset Liability Mismatch Employer Contributions 60/40 equity/debt 17 years  liability duration 30% retiree obligations Funded Status Volatility ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  2
  3. 3. Insured Pension Risk Transfer Solutions  are an Attractive Fixed Income AlternativeGuaranteed insurance contractsCustomizable to sponsor objectives  Reduce plan size Immunize plan liabilities Plan terminationsVariety of different structuresV i t f diff t t tProvide certainty to risk focused pension sponsorsBacked by the largest and most well capitalized US life insurance carriers who meet Department of Labor I.B. 95‐1 criteria ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  3
  4. 4. Pension Risk Transfer Solution Spectrum Higher Cost Buy‐out  Annuity Buy‐in  AnnuityLess  Risks  More Risks Transferred Transferred Fixed Crediting  Insured  Rate Guaranteed LDI Lower Cost ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  4
  5. 5. Retiree Benefit Payments Create  Significant Challenges for Pension Plans Largest plan  g p Negative cash  g Near zero cash  expense flow returns Consistent  Consistent Mortality  investment  improvements income The typical pension plan has  20‐Annual benefit payments can  What approaches can  50% of its pension obligations total 5‐10% of  plan assets be used to insure  owed to currently retired  participants against these risks? ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  5
  6. 6. Pension Risk Transfer ‐ Retiree Annuitization Different Structures for Different Client Circumstances Buy‐out vs. Buy‐in Group Annuities Sponsor Circumstances Sponsor Circumstances•Well funded plan •Plan is less well funded•Shorter termination horizon Shorter termination horizon •Longer termination horizon Longer termination horizon•Access to cash for full funding •Company  cash not available to fund•Pension plan small part of P&L •Pension plan large part of P&L•Exit strategy is objective •Immunization strategy is objective Retiree Buy‐out Annuity Retiree Buy‐in Annuity • Plan Size Permanently Reduced • Liabilities hedged with guaranteed  • P&L Impact annuity contract • Participants Paid Directly By Insurer • No P&L impact • Participants paid by Plan Trust Participants paid by Plan Trust Removes Plan’s largest ongoing expense Reduces plan’s negative cash flow  One time payment includes embedded  costs 5‐10% premium over GAAP Liability Value Mortality guarantee ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  6
  7. 7. Pension Risk Transfer ‐ Indexed Guaranteed Investment Contract Unable or Unwilling to Lock‐in Annuity Costs ‐ Insured LDI• Insurance contract guarantees  • Fee Based (pay as you go) same pension discount curve used  Insured LDI • Plan retains risks of actual flows  to value liability vs. expected cash flows• No financial penalties to exit  No financial penalties to exit Tailored specifically to plan liability cash flows Tailored specifically to plan liability cash flows Insurance contract alternative to market valued bond  funds Precise hedge against asset/liability movements Fully transparent with no embedded costs Guarantee Solves Key Challenges Associates With Investing to  Match Pension Liability Indexes ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  7
  8. 8. 5 Important Questions To Consider1.  Is your pension program  frozen?2. Is plan termination the ultimate pension objective?3. Are you concerned with pension funding volatility?4.  . Are you looking to de‐risk the plan investments via liability driven investing?5.  . Are you unfamiliar with insured pension risk transfer solutions? If the answer to one or more of the  questions above is “YES” then a  Pension Risk Transfer specialist      Pension Risk Transfer specialist may be able to help you  ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  8
  9. 9. Question and Answer Session*Any questions not answered during the Q & A session will be answered individually after the webinar concludes. ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  9
  10. 10. Thank you for attending Visit www.dietrichassociates.com for more information. Connect with Mr. Annuity and Connect with Jay Follow Mr Annuitys TweetsStay tuned for our upcoming webinar on The Dietrich (k) Annuity™.  ©2012 Dietrich & Associates, Inc.. All Rights Reserved.  10
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