- Persistent asset-related volatility, often driven by low interest rates.
- Sharply rising premiums to the Pension Benefit Guaranty Corp., which insures corporate pensions against default.
- Growing life expectancies of beneficiaries, which increase payout.
Finance chiefs who have already transferred pension risk report broad satisfaction with the outcomes, according to the survey, with 72 percent saying they are very likely to transfer additional liabilities in the years ahead.Moreover, 83 percent of these respondents say they are "completely satisfied with all aspects" of their group annuity purchase. Meanwhile, 81 percent agreed that their beneficiaries are happy to receive their pension checks from an insurer, while 86 percent agreed that having executed such an agreement helps their company keep their promises to employees and retirees. Among respondents who have not yet transferred pension liabilities, 21 percent indicated that they plan to purchase a group annuity within the next two years. And among all senior executives in the survey, 36 percent said that the recent increases in PBGC premiums make it much more likely that their companies will purchase a group annuity in the near term. Nearly as many respondents—33 percent—said recent changes in mortality assumptions and the prospect of future changes make it much more likely that their companies will consider a pension risk transfer. Finally, the study shows how tax and regulatory proposals from the current administration and Congress could serve as additional motivators for considering such a move. Among respondents who have not yet completed a group annuity purchase, 55 percent agreed that lowering the corporate tax rate in 2017 would "very likely" motivate their companies to increase pension plan funding (often a precursor to purchasing a group annuity) in the next year, while 40 percent agreed that lower taxes would lead them to execute a full or partial pension liability transfer. "This survey shows how important the topics of interest rates, tax policy and longevity—and their interactions—are for the future of companies that offer traditional pension plans." says Prudential's Kaplan. "Such issues are clearly top of mind among finance executives who are responsible for fulfilling pension promises."
About CFO ResearchCFO Research, an Argyle company, has been a trusted source of insight into the business issues that matter most to finance professionals since its founding in 2000. CFO Research is the sister firm of CFO Magazine, and relies on senior finance executives to share their experiences, insights, and observations on critical business issues. This cutting-edge research supports critical business decisions by our sponsors, as well as their thought leadership positioning and marketing efforts. About Prudential Retirement Prudential Retirement delivers retirement plan solutions for public, private, and nonprofit organizations. Services include defined contribution, defined benefit and non-qualified deferred compensation recordkeeping, administrative services, investment management, comprehensive employee education and communications, and trustee services, as well as a variety of products and strategies, including institutional investment and income products, pension risk transfer solutions and structured settlement services. With more than 85 years of retirement experience, Prudential Retirement helps meet the needs of 4.2 million participants and annuitants. Prudential Retirement has $401.3 billion in retirement account values as of June 30, 2017. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, Connecticut, or its affiliates. About Prudential Financial, Inc. Since 1928, Prudential Financial, Inc.'s businesses have offered pension solutions to companies and organizations. Each year, Prudential makes more than $10 billion in pension payments to more than 1 million retirees and their beneficiaries. Prudential is also the global leader in pension risk transfer solutions. Prudential has led several prominent pension risk transfer agreements, including those with General Motors, Verizon, Motorola, Bristol-Myers Squibb, Kimberly-Clark, JCPenney, WestRock and United Technologies. Prudential Financial, Inc. (NYSE:PRU), a financial services leader, has operations in the United States, Asia, Europe and Latin America. Prudential's diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential's iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com/ 0308370-00001-00