Market Overview

Nearly a Third of US Pension Plans Are Now within Striking Distance of a Buyout, Says RiskFirst Analysis


Latest figures from RiskFirst reveal that approximately 30% of US
pension plans may now have a funded status of 95% or more, making a
buyout or significant risk-transfer deal a feasible option.

30% of US plans analyzed by fintech company RiskFirst have assets equal
to or exceeding 95% of their liabilities on an accounting basis,
according to RiskFirst data. Analysis of some 500 plans with assets of
over $100bn highlights that the number of plans within this funding
level band – which arguably puts them within reach of a buyout or
termination (given the premium required to match current annuity
pricing, offset by the increasing costs of plan management) – has
increased by 50% in the first half of 2018.

Further analysis of the portfolio reveals that this figure increases to
40% in the event of a further 50bps increase in long-term yields, and to
a staggering 46% with only a 75bps increase in yields.

Michael Carse, DB Pensions Product Manager, RiskFirst, says "The pension
plans modelled on our platform – which range in size from smaller plans
to those with $8bn in assets – are relatively typical of US plans as a
whole, so these findings can be regarded as being fairly representative
of the market. 30% is certainly a sizeable number, and while risk
transfer will, of course, only be the right option for some of those
plans within striking distance, it wouldn't take much of a change in
sentiment to impact the appetite for bulk annuities in the current

With market factors presenting particularly favorable conditions to
de-risk – including accounting reforms, a strong performance in equity
markets combined with reductions in liabilities, increased PBGC
premiums, and the incentive for additional pre-funding in 2018 ahead of
upcoming corporation tax changes – there is the potential for risk
transfer rates to rise considerably.

Matthew Seymour, CEO, RiskFirst, adds: "For plans that are looking to
transfer risk, those equipped with the tools to regularly and accurately
monitor their funding levels and the broader market situation will be
best positioned to capture the opportunities to de-risk as they arise."

–END –

About RiskFirst

RiskFirst is a financial technology business that provides
intuitive, user-friendly risk analytics and reporting. Its core product
PFaroe® is web-based, available anytime and anywhere, and allows users
to evaluate risk from multiple perspectives and to perform real-time
scenario stress testing. Initially targeted to defined benefit pension
plans, it is now the market leader in the UK, and firmly established in
the US. Over 2300 plans with more than $1tn in assets are now modelled
on the PFaroe platform. RiskFirst has also recently launched PFaroe
Attribution, a global fixed income attribution solution that brings
together intelligent, modern technology and flexible attribution for
portfolio managers and asset owners.

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