OSFI permits annuity buy-ins

The Office of the Superintendent of Financial Institutions (OSFI) has issued a draft policy confirming that pension plans are permitted to invest in annuity buy-ins issued by life insurance companies.

Such buy-in annuity policies would be similar to traditional annuities, but instead of issuing individual certificates to the covered retirees, the policy would pay the aggregate pension amount to the pension fund. The plan administrator would be responsible for administering benefits to the retirees. Through this, plan sponsors of under-funded plans would be able to hedge against investment, longevity and inflation risk for any liabilities covered by the policy.