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Record Level of Pension Buy-Outs

By Andrew Rickard | August 27 2015 08:50AM

According to a survey conducted by the LIMRA Secure Retirement Institute, sales of group pension buy-outs reached a record level in the second quarter of 2015.

LIMRA says that pension buy-out sales came to $3.8 billion USD in the second quarter of this year, which is the highest amount recorded since the industry research group started collecting data in the early 1990s.

ericson_michael_articleSome of the gain was due to Kimberly-Clark’s arrangement with Prudential Insurance Co. of America and Massachusetts Mutual Life Insurance Co., in which the company purchased annuity contracts for about 21,000 of its retirees; the deal closed in June, helping to bring total group annuity sales for the quarter 700% higher than they were in Q2 2014.

Pension buy-out sales are usually seasonal, with most of the activity occurring in the fourth quarter. However, LIMRA notes that over the last five years the first two quarters have seen more buy-out activity; 107 plan sponsors converted their defined benefit pension plans into group annuity contracts in the first six months of this year.

“We’ve seen a big increase in small and medium sized companies that are looking to convert their pensions. As a result, there is much more activity throughout the year, not just the fourth quarter,” comments Michael Ericson, research analyst at the LIMRA Secure Retirement Institute. “Even without jumbo deals, there are just more plan sponsors looking to convert their pensions to group annuities. All this activity suggests that 2015 will be another strong year for pension buy-outs.”

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