2013 State of the US Pension Risk Transfer Marketplace (INFOGRAPHIC)

state of the union

Article II, Section 3 of the United States Constitution, states the President shall, ” from time to time give to Congress information of the State of the Union and recommend to their Consideration such measures as he shall judge necessary and expedient.” With the broader national discourse consumed with a louder debate on important items like gun control and “Sequestration”, I thought I would exercise my executive privilege as the imaginary and “self-appointed” Commander-in-Chief of the US Pension Risk Transfer Marketplace to deliver my own State of the Union.

As the good folks at Kodak might say…a picture is worth a thousand words.  In the spirit of brevity, I thought I would let the above image do most of the talking here. My executive summary would be that I believe a paradigm shift is clearly underway and pension de-risking is poised to continue to deliver tremendous value to corporate pension programs which are focused on controlling volatility and preparing for their pension end game.

If I were to highlight one conclusion from the above illustration, it would be to note the level of 2012 Terminal Funding Group Annuity marketplace sales. While still relatively modest in absolute terms, the marked increase in 2012 sales (excluding GM & Verizon) came absent a material rise in interest rates and plan funding levels. It appears that increasingly companies are willing to pay to transfer benefit obligations to an insurer, in order to achieve complete cost certainty.

In closing I’d like to echo the immortal words of perhaps our nation’s most beloved former President, JFK from a 1961 speech in Germany…..Ich bin ein Berliner (I am a jelly doughnut)! Thanks for taking the time to read this. Let me know what you think!

  1. De-risking of pension plans will have to continue and the biggest need is in the public sector. States, etc. are estimated to be $3.2 trillion underwater and they haven’t even resolved to lower their expected returns or seriously consider modification of the Sec. 457 laws. The result could be a disaster in which promises fail to be kept and private pensions are taxed to offset the shortfall.

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