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Interest in Pension Risk Transfer Growing

Interest in pension risk transfer (PRT) grew markedly in just two years, says a recent report. The higher interest comes against the backdrop of rising Pension Benefit Guaranty Corporation (PBGC) premiums.

The LIMRA Secure Retirement Institute says it found in a recent report that 81% of the 258 employers that sponsor a traditional defined benefit plan that it surveyed in October 2016 are at least somewhat interested in PRT. Interest was stronger among employer that have frozen their DB plans than among those that have not — 84% and 69%, respectively.

LIMRA found that 2016 outstripped previous years. The interest in PRT that it found in 2016 was 2 percentage points higher than the percentage that in 2014. And 42% of those employers were very interested in 2016, 10 percentage points more than were in 2014.

And LIMRA says that 2016 PRT buy-out sales, which came to $13.7 billion, also stacked up well against previous years — sales in 2016 were almost 1% higher than those in 2015 and were the second highest it has recorded for a single year.

Lack of knowledge about PRT was the biggest reason employers with DB plans were not interested in PRT, and explained 40% of those responses according to LIMRA. Twenty-five percent were not interested in PRT because they addressed pension risk in other ways, the most common of which is liability-driven investing.