Pension Risk Transfer Solutions: Adding Guarantees to the Defined Benefit Fixed Income Conversation
by Jay Dinunzio
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Ailing defined benefit pension plans poised to be rescued by insured pension risk transfer solutions, according to a new report by Dietrich & Associates ...
Ailing defined benefit pension plans poised to be rescued by insured pension risk transfer solutions, according to a new report by Dietrich & Associates
Pension cost and volatility issues have led to the "freezing" of benefits in almost half of corporate defined benefit pension plans. For this growing group of organizations, plan termination ( and the associated required annuitization) is a clear objective that is challenged by recent low interest rates and unfunded liabilities. For many sponsors the next few years will be focused on de-risking their pension program in order to predictably fund the plan over a series of years. Inevitably, this shift will lead sponsors to shorten investment horizons and associated asset return targets, which may result in higher costs as a required trade-off to arrive at more certain outcomes. This paradigm shift towards liability driven investing in defined benefit plans is creating a compelling opportunity for insured pension risk transfer solutions to add significant value to the conversations that pension committees and consultants are having regarding fixed income investments. "Pension Risk Transfer Solutions: Adding Guarantees to the Defined Benefit Fixed Income Conversation" provides an efficient introduction to a powerful new “guaranteed” asset class. The paper can be found at www.dietrichassociates.com.
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